Investing in private
companies to generate
long-term growth
Annual Report 2022
01
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
STRATEGIC REPORT
03 Chairman’s statement
06 Private equity – accessing true alpha
08 Why invest in NBPE?
10 Our Manager
12 Our business model
13 Our investment strategy
15 Portfolio at a glance
16 Managers review
23 Top 20 companies
25 Neuberger Berman Market Review
27 Key Performance Indicators
29 Environmental, Social and Governance
34 Manager – people & culture
38 Stakeholder engagement
42 Risk management
43 Principal risks and uncertainties
45 Going concern and Viability Statements
GOVERNANCE
48 Governance overview
49 The Board
51 Governance
59 Directors’ Report
62 Investment Objective and Policy
63 Remuneration Report
66 Report of the Audit Committee
71 Statement of Directors’ Responsibilities
FINANCIALS
74 Independent Auditor’s Report
78 Consolidated financial statements
83 Notes to consolidated financial
statements
OTHER
98 AIFMD Disclosures
100 Schedule of Investments
104 Appendix
108 Glossary
110 Directors, Advisors and
contactinformation
111 Use ful informatio n
113 How to Invest
114 Endnotes
Annual Report 2022Our Purpose
To give shareholders access to the
long-term returns available from
a portfolio of direct investments
in highly attractive private
companies through leveraging
the strength of the Neuberger
Berman global platform, while
investing responsibly to create
value for our stakeholders.
-7.5%
1
NAV Total Return ($)
$0.94
Dividends per share
$142.9m
2
Announced realisations
-9.7%
1
Total Shareholder Return (£)
4.9%
Dividend yield on share price
2.7x
3
Return on cost
Performance highlights
12 months to 31 December 2022
NAV Total Return
Cumulative at 31 December 2022 (% total return)
%
100
NBPE NAV Total Return ($)
4
MSCI World Index (TR) $
7
50
One year Three year Five year
0
(7.5%)
62.7%
89.4%
(17.7%)
17.3%
38.2%
››
See footnotes on pages 114-115
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
02
NB Private Equity Partners (“NBPE”) invests directly in private
companies, alongside some of the world’s leading private
equitymanagers.
NBPE is managed by the private markets division of Neuberger Berman
(the “Manager” or the “Investment Manager”), a leading private
markets investor. NBPE leverages the strength of Neuberger Berman’s
platform, relationships, deal flow and expertise to access the most
attractive investment opportunities, providing shareholders with
accessto a portfolio of direct investments diversified by manager,
sector,geographyand size.
Chairman’s statement
With an increasingly uncertain
macroeconomic outlook, intensifying
geopolitical tensions and volatile equity
and bond markets, 2022 proved to be a
challenging year for investors generally.
Against this backdrop, NBPE’s performance,
especially for its direct private equity
investments wasresilient, with the 7.5%
decline in NAV, on a total returns basis,
driven by falls in the value of our quoted
holdings and foreign exchange headwinds.
NBPE’s private investments increased in
value by 4.4%, in aggregate, on a constant
currency basis, with strong operating
performance more than outweighing
thedecline in valuation multiples across
theportfolio.
This performance underscores the value of
NBPE’s investment strategy: a focus on two
key themes – businesses with long-term
secular growth and/or low expected
cyclicality. NBPE does this by combining
theflexibility ofits co-investment model,
with the strength of Neuberger Berman’s
private markets platform. By focusing
onour two key themes and building a
portfolio deal by deal rather than
throughfunds, Neuberger Berman has
built a portfolio with broad exposure
tocompanies operating indifferent
industries, but with similar characteristics:
resilient business models with high barriers
to entry and strong recurring revenue
streams with the potential to create strong
earnings growth. It offers shareholders
access to a well-diversified and carefully
constructed portfolio of attractive
maturing private companies with
significant long-term growth potential.
High-quality and well-
positioned portfolio
NBPE’s private portfolio continues to
navigate the economic environment well,
generating strong LTM Revenue and LTM
EBITDA growth of 14.4%and 11.9%
6
,
respectively, during 2022. This isdespite
continued elevated inflationary pressures,
supply chain challenges and a higher
interest rate environment. Despite some
margin compression in certain segments of
the portfolio as a result of the inflationary
environment, by the second half of the
year,portfolio companies had generally
mitigated these challenges through
operational enhancements as well as
priceincreases.
Our portfolio
isnavigating
achallenging
macroeconomic
environment well”
William Maltby Chairman
››
See footnotes on pages 114-115
03
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Private Portfolio
Fair value
+4.4%
Constant Currency Basis
Dividend growth $ per share
50
0
25
-25
20
21
MSI World
7
22 20
21
NBPE NAV TR
5
22
(18%)
22%
17%
(7.5%)
45%
21%
NAV Growth vs. MSCI World Index
Chairman’s statement
After a record year of realisations in 2021,
activity slowed in 2022. $143 million of total
announced realisations, of which seven
were full or partial exits, generated a 2.7x
gross multiple of invested capital and a 6%
uplift to 31 December 2021 value
8
. While
the level of realisation activity for the year
was 9% of opening portfolio value and
below our long-term average of 21%, we
are pleased by the level of cash returned to
the Company during a challenging year.
This demonstrates both the attractiveness
of the portfolio companies to acquirers,
and also the multiple liquidity routes
available to our underlying private equity
managers with whom we co-invest.
Strong balance sheet
andflexibility to make
newinvestments
Following $44 million of dividends paid to
shareholders and the repayment of the
2022 Zero Dividend Preference (ZDP)
Shares in September, NBPE ended the year
with $7 million of cash and no borrowings
drawn from its credit facility.
NBPE completed two new investments
totalling $41 million in 2022: one into a
wealth management technology platform,
and the other into an existing portfolio
company that has performed strongly,
whereby NBPE recycled some of the
proceeds from a liquidity event back into
the company. Our co-investment model
means we invest on a deal-by-deal basis,
and at 106% invested at 31 December
2022, we are under no pressure to make
new investments, and can therefore be
highly selective. Neuberger Berman
continues to review investment
opportunities from its active co-investment
pipeline. However, pricing for new
transactions remains competitive for
high-quality assets. Therefore, with the
exception of follow-on activity for accretive
acquisitions within our existing portfolio,
we do not expect the pace of new
investments to pick up materially in the
near term for NBPE.
Since the December 2022 year end, we
have received $37 million of proceeds (of
which approximately $10 million was
announced in 2022 but received in 2023),
and paid the first 2023 semi-annual
dividend. At 31 March 2023 we had cash
balances of $7 million and available
liquidity on our credit facility of $300
million. Weexpect a further $16 million of
distributions in the coming months from
announced but not yet closed transactions
and weremain committed to maintaining
our balance sheet strength .
Continued commitment
tothe dividend policy
The first 2022 semi-annual dividend
payment of $0.47 per share was made in
February, a 14.6% increase over the August
2021 dividend payment, reflecting the
strong growth in NAV in 2021. Despite the
decline in NAV during 2022, we maintained
our August dividend payment at $0.47 per
share, taking total dividends for the year
2022 to $0.94 per share, a yield of 3.4%
onNAV (above NBPE’s policy of annualised
yield of 3.0% of NAV) and a 4.9% yield on
the year-end share price.
Our February 2023 semi-annual dividend
of$0.47 per share was maintained in line
with the previous dividend. The Directors
recognise the importance of paying a
reliable dividend to our shareholders
andwe remain committed to the
Company’s policy.
Dividend growth
$0.94
Total dividends paid in 2022
1.00
0.50
0.75
0.25
18
19 20
21 22
0.94
0.72
0.58
0.57
0.53
Dividend growth $ per share
Summary balance sheet
$m
31 Dec 2022
(Audited)
31 Dec 2021
(Audited)
Direct equity investments $1,286.4 $1,430.2
Income investments $107.3 $125.1
Total investments
*
$1,401.4 $1,569.3
Investment level 106% 106%
Cash $7.0 $116 .5
Credit facility drawn
ZDPs ($72.8) ($162.0)
Other ($8.4) ($43.6)
Net Asset Value $1,327.3 $1,480.2
NAV per share ($) $28.38 $31.65
NAV per share (£) £23.59 £23.37
* Total investments include approximately $7.7 million of fund investments as of 31 December 2022 and
$14.0 million as of 31 December 2021
››
See footnotes on pages 114-115
04
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Chairman’s statement
Share price impacted by
market sentiment
Global markets faced significant challenges
during 2022, with sentiment impacted by
ongoing macroeconomic headwinds,
especially inflationary pressures. For the
listed private equity sector, this shift in
sentiment led to discounts widening
significantly across the sector as concerns
about the outlook for valuations of private
companies took hold. NBPE’s share price
was not immune. While the share price
recovered some ground from the lows in
June 2022, it ended the year at £16.00, a
decline of 9.7% on a total return basis for
the year, which compares to a small positive
return of 0.3% from the FTSE All-Share in
2022. Over three, five and 10 years the
shares continue to outperform materially
the FTSE All-Share.
Although the share price improved and
discount narrowed in the first few months
of 2023, the market turmoil in March,
following the failure of Silicon Valley Bank
(SVB) and UBS’s rescue of Credit Suisse,
impacted general investor sentiment
towards risk assets with share prices across
the listed private equity sector falling
significantly. Although NBPE and its
portfolio companies have no material
exposure to SVB, our share price retreated
to £14.70 with the discount widening to
37%
9
. The Directors believe this discount
materially undervalues our portfolio,
balance sheet strength and prospects. We
believe the share price represents a very
attractive entry point for investors to gain
exposure to high-quality private companies
and we continue to expand our investor
relations initiatives to increase NBPE’s
profile among existing and new investors.
Alongside this, in October 2022, we
entered into an agreement with Jefferies,
which allows them, in their sole discretion,
to repurchase NBPE shares based on certain
criteria. To date, no shares have been
repurchased and we will be renewing our
agreement with Jefferies.
Recognition of Neuberger
Berman’s ESG credentials
The Board remains focused on ESG and
responsible investing. We are pleased that
approximately 98% of NBPE’s portfolio
continues to have a positive or neutral
sustainability rating (please see page 31).
Ofcourse, none of this would be
possiblewithout the skills and expertise
ofNeuberger Bermans ESG team.
Weweredelighted that for the third year
ina row, Neuberger Berman was awarded
top scores (5 stars) across all categories
forits approach to ESG by the UN PRI.
Alongside this, NB Private Markets received
the BVCA’s Excellence in ESG Award
(LPCategory) for its commitment to
fostering innovation onESG objectives,
engagement with private equity managers,
and efforts related to ESGdata and climate
initiatives. Now in its third year, this
awardseeks to recognise outstanding
contributions to ESG and Impact Investing
across the private capital ecosystem.
Value of the private equity
model in a challenging
market environment
While there were significant
macroeconomic challenges and
heightened volatility across asset classes in
the first half of 2022, in the second half,
investors saw generally improving
conditions in equity and bond markets,
although the performance of major U.S.
indices remained deeply negative for the
year. The majority of NBPE’s portfolio is
invested in the U.S. By the end of the year,
U.S. inflation remained elevated, but overall
inflation measures were trending
downward and remained well below levels
in Europe. In general, throughout the year,
particularly in the second half, companies
had implemented operational changes and
were managing supply chain disruptions
better. Nevertheless, the tragic events in
Ukraine persisted and certain markets,
suchas energy, remained destabilised,
presenting challenges from elevated
pricing. Importantly, for NBPE, energy is not
a significant input cost across the portfolio.
The Federal Reserve continues to try to
fight inflation with successive interest rate
hikes, which started in March last year.
While long-term interest rates in the U.S.
have begun declining from their peak in
2022, relatively high inflation and rising
short-term interest rates have led some
investors to raise the prospects of a
recession in 2023. In this challenging
environment, we believe the private
equitymodel is highly advantageous.
Atitscore, private equity centres on
ownership - an ability to control and
guidebusiness strategy and direction.
Themanagers with whom we co-invest
havea number of tools at their disposal
tounlock and drive long-term value – the
hiring of management teams to execute
growth strategies, M&A, or operational
enhancements, away from the glare of
thepublic markets. Importantly, as owners,
private equity managers are also able to
adapt quickly to change, a great strength
inthe current environment.
Outlook
NBPE has a high-quality portfolio and,
despite the current headwinds, we
areoptimistic about its prospects. NBPE
isinastrong financial position and its
investment model enables it to be highly
selective about where and when it invests.
We believe NBPE is well positioned to
deliver long-term value for shareholders.
William Maltby
Chairman
24 April 2023
-9.7%
49.8%
0.3%
7.1%
One year
NBPE Share Price (GBP) Total Returns
FTSE All Share (GBP) Total Returns
Cumulative return as at 31 December 2022
over time periods shown
Three year Five year
Total Share Return (£)
vs. FTSE All-Share (cumulative)
15.5%
87.3%
››
See footnotes on pages 114-115
05
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Private equity – Accessing true alpha
Driving returns that outperform public markets
An active investment model
that offers the potential for
returns that outperform the
public markets.
Private equity managers as
owners, rather than minority
shareholders, can drive
strategy and change to build
long-term value.
Private equity
Accessing true alpha
Entering new markets or
products, accretive acquisitions
Strategic
change
Focus on increasing efficiencies
to enhance margins
Operational
change
Deep understanding of each company and
itsmarket informs investment decision
Due
diligence
Control
investors
Sustained
earnings growth
Management teams, private equity managers
and investors are fully aligned to achieve goals
Alignment
of interests
Prioritising fundamental value creation
over short-term profit targets
Long-term
investment horizon
10-year comparison of horizon returns for
publicly-traded indices versus private equity
30%
20%
10%
MSCI
World
Global PE
Pooled
Global PE
First
Quartile
27%
17%
9%
Source
10
››
See footnotes on pages 114-115
06
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Private equity – Accessing true alpha
We offer the best
ofbothworlds
Listed private equity funds
bridge the gap between
private and public equity,
andare typically split
between specialist direct
investors andhighly
diversified ‘fundoffunds’.
NBPEs co-investment
approach aims to combine
the best of both the direct
andfund of funds’ models.
Portfolio company
diversification
NBPE offers investors
exposure to a well-
diversified portfolio of
companies, with visibility
of key underlying
positions.
Number of
PE managers
Investing alongside
numerous leading private
equity managers limits
single manager and
strategy risk.
Over commitment
level
NBPE’s deal-by-deal
investment approach
means that it can be more
capital efficient and
remain fully invested
without taking on
over-commitment risk.
Fees
Around 97%
11
of the
direct investment
portfolio incurs neither
management nor
performance fees to
underlying third-party
managers.
Single manager
NB Private Equity
Partners
Fund of Funds
< 40 companies 1 Medium
Top 10 concentration
50%+
93 companies 56 Very Low
Top 10 concentration
33%
500+ companies
50+ High
Top 10 concentration
~10%
Single layer, higher
performance fee
1.0%-1.5%
vehicle management fee
15%-20%
performance fee
Double layer, higher
performance fee
0.8%-1.5%
vehicle management fee
1.5%-2.0%
underlying fund
management fee
20% performance fee
Single layer, lower
performance fee
1.5%
vehicle management fee
7.5%
performance fee
››
See footnotes on pages 114-115
07
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Why invest in NBPE?
Access to direct investments in high-quality private companies
Why invest in NBPE?
NBPE co-invests alongside top-tier managers in their core area of expertise,
witha focus on companies that benefit from long-term secular growth trends
and/or less cyclical industries.
Benefits of NBPE’s co-investment model:
Diversified
Fee Efficient
ESG
across sectors, private equity
managers and company size
a single layer of fees
ESG assessments made at both
manager and company levels
Dynamic
Focused
invest deal by deal so able to
respond to market conditions
on the best opportunities,
controlling the investment decision
››
See footnotes on pages 114-115
08
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Patricia Miller Zollar
Managing Director, Member
of Investment Committee
16.6%
Average gross IRR on direct
equity investments (5 years)
2.5x
12
Average multiple of cost on
realisations (5 years)
37%
13
Average uplift on
IPOs/realisations (5 years)
Strong long-term performance
Why invest in NBPE?
NBPE invests in companies
that benefit from two
keythemes
Resulting in a portfolio
with a focus on these
keysectors
Technology Consumer and
E-commerce
Industrial/Industrial
Technology
Financial and
BusinessServices
Other
Significant exposure
tosoftware across
industry verticals
Companies with
diversified end
markets/applications
Mission-critical
applications and sticky
customer bases
Companies with
large-scale competitive
positioning and strong
brands
Companies benefitting
from significant
e-commerce trends
Focus on ‘enabling’
businesses helping to
drive macro trends
Companies supporting
growth of e-commerce,
efficiencies and
automation
Differentiated,
technology-integrated
businesses
Sticky and diverse
customer bases
Other businesses that
exhibit our key themes
Long-term secular
growth trends
Businesses with
lowcyclicality
Companies that are
expected to benefit from
higher growth rates due
tolong-term trends or
behaviour changes
Often structural changes driven by
changes in customer demands
Creates new sources of demand, which
can often be sustainable over long
periods (versus more cyclical demand)
Not confined to any one type
ofbusinessorsector
These companies tend to
becharacterised by more
defensive sectors or
endmarkets
Generally companies which are less
susceptible to changes in overall GDP
May offer reasonable downside
protection during periods of
economiccontraction
Can often be ‘essential services’ or
quasi-infrastructure, such as waste
management, insurance or mobile
phonetowers
Building the portfolio from
the bottom up, investment
by investment, backing
companies with resilient
business models and the
potential to create strong
earnings growth
09
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Our Manager
Our Manager has over 30 years
experience in private equity investing
The Private Markets team
at Neuberger Berman is an
industry-leading private
markets platform, with robust
dealflow, demonstrated
access and selectivity, and a
vast network of relationships.
NBPE leverages the
strength of the Neuberger
Berman Private Markets
platform to seek the most
attractive direct investment
opportunities.
The strength and depth of the
relationships on Neuberger
Berman’s Private Markets’
platform are the principal
source of deal flow for its
co-investment programme.
+$110 bn
14
Private equity commitments
managed
650+
15
Fund commitments
265+
16
Limited partner Advisory
Committee seats
~25
17
Years average
experience among
Managing Directors
$36bn
18
Primaries
$31bn
18
Co-investments
566 opportunities
reviewed in 2022 from
320 unique managers
$17bn
18
Secondaries
$17bn
Direct private credit
$9bn
Direct specialty
strategies
››
See footnotes on pages 114 -115
10
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Anthony Tutrone
Global Head of NB Alternatives, Managing Director,
Member of the Investment Committee
Our Manager
A global leader in
ESG-integrated private
equity investing
Neuberger Berman has
been integrating ESG into
its investment process
since2007.
Neuberger Berman’s
approachtoESG
Neuberger Berman believes that
integrating ESG considerations throughout
the investment process can lead to more
consistent and better investment
outcomes—by helping to identify both
material risks and opportunities todrive
value. We are focused on long-term
partnerships, and engage with our
partners to promote best practices in
ESGintegration.
Deep resources
NBPE benefits from the ESG leadership
and resources of Neuberger Berman
Responsible & Sustainable Investment
Policy: Dedicated NBPE Responsible and
Sustainable Investment Policy formalises
NBPE’s commitment to integrating ESG
throughout its investment process
NB ESG Integration Framework:
Providesframework for ESG integration
(e.g. ‘Avoid, ‘Assess’ and ‘Amplify’)
Direct investments
NBPE invests directly into companies and
conducts ESG due diligence directly at
thecompany-level
Neuberger Berman’s materiality matrix:
identifies categories of factors likely to be
financially material to a company given
itsindustry/sector
Sustainability potential: Applies
a lens to understand a company’s
potential positive benefit to people and
the environment
5
19
100%
rating by PRI for
ESGintegration
of co-investments are
ESG integrated
An industry leader with an
integrated platform and
attractive market position
With over 300 private
marketprofessionals
across 14 global locations,
Neuberger Berman Private
Markets’ fully integrated
approach to private markets
investing provides robust
deal flow and enhanced
due diligence and execution
capabilities, resulting
in a longand successful
investment history.
Our integrated global
platform is one of the
broadest in the marketplace.
Our model affords us a
differentiated position in the
private markets ecosystem
that drives deep relationships
with leading private equity
managers globally.
David Stonberg, Deputy Head of
NBAlternatives and Global Co-Head
ofPrivate Equity Co-investments,
Managing Director, Member of the
Investment Committee
300+
team members
14
offices globally
99%
retention rate of Managing
Directors and Principals
U.S. Headquarters
New York City
European Headquarters
London
Asian Headquarters
Hong Kong
››
See footnotes on pages 114 -115
11
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Our business model
How NBPE creates value
Supported by the strengths
of Neuberger Berman
Investing globally,
with a focus on the U.S.
Our portfolio is geographically
representative of the global private equity
market, of which the U.S. is the largest and
deepest market.
Focusing on buyout transactions
Our primary focus is on buyout
transactions(acquisition of a controlling
interest in a company), for example,
take-privates, buyouts of family
businesses, carve-outs or divisional sales.
Growth strategies are usually through
some combination of organic revenue
growth, cost efficiencies or M&A.
Investing on a deal-by-deal basis
Investment decisions are taken on a
deal-by-deal basis. We can speed up
orslow down our investment pace,
depending onmarket conditions.
Prudently managed balance sheet
Disciplined capital allocation and access
to long-term credit facility ensure we can
be fully invested, without the need
forsignificant long-term off-balance
sheet commitments.
Co-investing alongside leading
private equity managers in their
core area of expertise
We generate long-term growth by
building a portfolio of direct investments
in high-quality private companies.
Building a resilient portfolio
We build our portfolio investment by
investment, rather than through funds.
Our co-investment approach allows
ustoinvest alongside a wide selection
oftop-tier private equity managers.
Wefocus on backing business models
that we believe will deliver sustainable
earnings growth from long-term secular
growth trends and/or from lower
expected cyclicality due to their sectors
orend markets.
Strength and depth of the team
Expertise and strong track record
Extensive insight into the private
equitymarketplace
Highly selective investment approach
Strong ESG credentials
Client-focused culture
Integrated private markets investment platform
Investing globally, with a
focus on the U.S.
… in a flexible and disciplined
way that builds resilience…
… and a co-investment
modelthat sets us apart.
12
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Our investment strategy
13
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
David Stonberg
Deputy Head of NB Alternatives and
Global Co-Head of Private Equity
Co-Investments, Managing Director,
Member of the Investment Committee
Focusing on resilience and earnings growth
A focus on…
Investing in high-quality
companies…
alongside premier private
equity managers…
in their core areas of
expertise
in companies with the
potential to create strong
earnings growth…
and prudent capital
structures.
Neuberger Berman looks to invest in
market-leading companies and those
with sustainable competitive
advantages, suchas:
Business models that are hard to
replicate
High barriers to entry
Recurring revenue streams
Ability to maintain revenue stability
inthe face of macroeconomic
headwinds
Strong management teams with the
resources and incentives to implement
the changes necessary to create value
Neuberger Berman has a deep
understanding of private markets.
Its strong relationships give access to
investment opportunities as well as the
ability to choose some of the best
managers alongside whom we work.
The team targets managers who have
demonstrated a track record of:
Investment discipline
Value creation
Generating strong performance
through changing investment
environments
Investing in high-quality
companies…
alongside premier private
equity managers…
93 56
portfolio companies underlying managers
in NBPE’s portfolio
1
1 2
2
3
4
5
Neuberger Berman aims to invest in
opportunities where private equity
managers can add value and generate
sustained earnings growth.
Examples of this include:
Introducing new products or entering
new markets or geographies
Finding efficiencies, or optimising
management teams and people,
suchas ramping up a sales force
Acquiring complementary businesses
through M&A to capture synergies,
increasing market share and overall
scale, as well as the attractiveness to
potential buyers
Neuberger Berman’s co-investment
strategy focuses on partnering with
theright private equity managers,
withthe right experience for the
rightopportunity.
This experience includes:
Deep sector expertise, such as
technology, industrials or
financialservices
Geographic focus
Ability and track record of investing
incomplex transactions
Generating value through accretive
bolt-on acquisitions
Investing in companies with prudent
capitalstructures is paramount.
Companies should have the ability to
support the investment thesis, without
raising concerns about managing
theirdebt.
Neuberger Berman looks for companies
that have:
Prudent absolute leverage level
Covenant-lite debt
Strong interest coverage
Investing in companies
with thepotential to create
strong earnings growth…
in their core area
ofexpertise.
with prudent capital
structures.
5.5x
20
14.4%
6
11.9%
6
net debt to
EBITDA multiple
(at December 2022)
LTM revenue growth
(at December 2022)
LTM EBITDA growth
(at December 2022)
43 5
Our investment strategy
Elizabeth Traxler
Managing Director, Member
of the Investment Committee
››
See footnotes on pages 114 -115
14
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Portfolio at a glance
A well-diversified portfolio
Our direct private
equityportfolio
With $1.4 billion invested
across 93 private companies,
NBPEs portfolio is well
diversified by company,
manager and sector.
Total portfolio composition
$1.4bn
value of direct equity investments
92%
of fair value invested in direct equity
93
portfolio companies
56
private equity managers
co-invested alongside
51%
fair value of top 20 companies
4.2
years private company average age
Investment type
Industry
Geography
Vintage Year
Equity 92%
Income 7%
Legacy Funds 1%
Tech, Media & Telecom 21%
Consumer/E-commerce 20%
Industrials/Industrial Technology 15%
Business Services 12%
Financial Services 14%
Healthcare 10%
Energy 1%
Other 7%
North America 73%
Europe 23%
Asia / RoW 4%
2014 & Earlier 4%
2015 3%
2016 7%
2017 25%
2018 19%
2019 17%
2020 11%
2021 11%
2022 3%
15
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Managers review
NBPEs NAV total return
declined by 7.5%
5
in 2022,
with performance impacted
by falls in the value of our
quoted holdings and foreign
exchange headwinds,
which together outweighed
an aggregate 4.4%increase
in the value of our private
investments (on a constant
currency basis).
Resilient performance against
a challenging backdrop
Peter von Lehe, Managing Director,
Head of Investment Solutions and Strategy,
Member of InvestmentCommittee
Paul Daggett, CFA, Managing Director,
Member of Investment Committee
4.4%
Aggregate increase in private
investments valuations (Ex-FX)
16
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
››
See footnotes on pages 114 -115
Managers review
of which is in companies that have IPO’d
inrecent years. Although these companies
are no longer inlock up, thetiming of sales
is controlled by the underlying private
equity managers.
The portfolio is built from the bottom up,
investment by investment and is focused
ontwo key themes: expected long-term
secular growth, and/or companies and
business models with lower expected
cyclicality. The underlying companies
sharecommon characteristics such as:
highbarriers to entry, strong market share,
recurring revenue streams, and the
potential for revenue and earnings growth.
We are sector agnostic, however, our focus
on two key themes and backing resilient
business models means that the portfolio
isweighted towards companies that
tendto operate in certain sectors or
sub-sectors. While no company or sector
isimmune to economic headwinds,
ourportfolio, as a whole, has been
constructed to perform across a range
ofeconomic environments.
During the year, while certain companies in
some sectors experienced challenges mostly
due to issues caused by supply chain pressures,
inflation or labour costs, this was offset by
resilient performance in other areas of the
portfolio, which we believe speaks to the
advantages of maintaining diversification and
investing across our key themes. In addition,
we saw the benefits ofprivate equity
ownership in the portfolio during the year,
with mitigating actions generally taken quickly
in many companies.
A well-diversified carefully
constructed portfolio
focused on two key themes
As of 31 December 2022, the portfolio
consisted of 93 direct equity investments
valued at $1.4 billion. Of these 93
investments, the vast majority
(75companies, or 80% of the portfolio),
isinvested in private investments, with
theremaining 18 companies (12% of the
portfolio) invested inpublic holdings, most
Software
49%
Technology services
22%
Telecom & media
11%
Fintech
8%
Hardware
7%
Consumer internet
3%
Tech, media & telecom
21%
Industrials
& industrial
technology
15%
Consumer &e-commerce
20%
Other
7%
Energy
1%
Business services
12%
Financial services
14%
Healthcare
10%
Industrial technology
44%
Distribution
15%
Specialty chemicals
14%
Manufactured products
& packaging 9%
Fleet & environmental
services and other 19%
Significant exposure to attractive sub-sectors
17
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Managers review
Valuation uplifts across a
range of companies in the
private portfolio
Our most material write-up in the year was
Action, with value appreciation driven by
strong operating performance . It is now
NBPE’s largest portfolio company holding
(see case study on page 19).
Elsewhere in the portfolio, in general,
underlying companies within the financial
services, healthcare, and the sub-sectors of
industrials focused on specialty chemicals,
manufacturing and distribution saw
positive valuation adjustments. In addition,
NBPE is invested in a number of profitable
technology companies, many of which
showed resilience during the year.
Manyofthese technology companies
provide mission critical software essential
to the customers’ business operations and
have attractive characteristics of high
switching costs, recurring revenue and
being a relatively low-input cost to the
buyer. Against this, companies within the
business services industry and certain
companies in the consumer and industrial
sectors more prone to supply chain and
input cost pressures saw negative valuation
adjustments during the year. Ingeneral,
thiswas largely attributable to earnings
pressure from higher input costs due to
inflation, supply chain issues and other
factors arising from changes in the
economic environment.
-160
-80
0
80
160
Total
Portfolio
Value Change
Impact
of foreign
exchange
Total value
change of
quoted
companies
Total value
change private
investments (LC)
All other
negative
value drivers
Top 5
negative
value drivers
All other
positive
value drivers
Top 10
positive
value drivers
Key performance drivers in 2022, $m
96
63
(78)
(25)
56
(88)
(119)
(25)
BothAutostore and GFL continue to report
strong revenue and EBITDA growth,
whereas Agiliti has reported revenue and
EBITDA contraction in the fourth quarter of
2022, relative to the same period one year
earlier. The impact from foreign exchange
on investments contributed to a decline of
$25 million during 2022, with the U.S. dollar
strengthening, particularly against Sterling
and the Euro.
Finally, of note, we saw particularly strong
revenue and EBITDA growth from many
ofour 2021 investments, which in turn
resulted in a number of write-ups, despite
falling multiples.
Looking at specific write-ups across the
private portfolio, excluding the impact
ofFX, there were a total of $159 million
ofpositive valuation gains across the
portfolio, with the largest 10 positive
valuation movements accounting for
$96million ofthese gains. Against this,
there were $103million of negative
valuation adjustments, resulting in a net
positive increase of $56 million. However,
these gains were offset by the negative
impact ofpublic valuations and foreign
exchange headwinds. In a period of
significant market volatility, NBPE’s
18public investments declined in value
byapproximately $119million in total
during 2022. Of this, the three largest
holdings, Autostore, Agiliti and
GFL,accounted for over 65% of this fall.
$56m
$(143)m
Aggregate increase in value ofthe
privatecompanies (excluding FX)
Negative impact of quoted
companiesand FX
18
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Managers review
A leading European
discount retailer
Action
21
is a leading European discount
retailer which sells products for everyday
household needs, seasonal products,
consumables and textiles in a convenient
discount format. With only approximately
35% of the total product range fixed,
Action aims to surprise its customers with
arefreshed product at low prices. Action’s
business model is simple: win customers by
offering large product categories at low
prices, with assortments and promotions
inan easy and efficient store format.
Todaythe company sells more than
6,000products across 14retail categories
(cleaning products, toiletries, office supplies,
toys, garden utensils, homeware, etc.) to
12million customers, across its 2,200 stores.
Action’s business model is based on a
singlestore format, which is scalable and
repeatable. It relies on buying big volumes,
maintaining low overhead and marketing
expense, and standardised store processes,
all coupled with an efficient logistics
network. 3i originally invested in Action in
2011, and under theirownership, the
company has demonstrated considerable
growth. Action grew from514stores in
4countries in 2014 to 1,552stores in
7countries by 2019. Sales increased from
1,506 million to €5,114 million and
operating EBITDA increased more than
three-fold over this same time period.
In2019 alone, the year prior to NBPE’s
investment, Action had increased its store
count with 230 new store openings.
At the time of NBPE’s investment, Action
hadbeen the largest investment and a
material driver of long-term growth for 3i,
which had owned Action in one of 3i’s
flagship funds since 2011. In order to
provide liquidity to its fund investors, the
fund sold its entire stake in Action which
valued the company at €10.25 billion,
representing an 18.2x September run-rate
EBITDA valuation multiple. As part of this
transaction, NBPE co-invested alongside
agroup of select co-investors and other
Neuberger Berman funds to enable the
company’s next phase of growth.
Neuberger Berman believed Action
represented an attractive opportunity to
invest in the companys continued growth.
At the time of NBPE’s investment,
store roll-out was rapid but there was
considerable white space potential, both
interms of new countries and existing
markets. Germany, France and Poland
werestrong growth markets at the time,
while significant opportunities existed for
expansion into new markets, including
Czech Republic, Italy and the rest of Europe.
With an average of a one-year historical
payback onnew store capex, growth unit
economics were very attractive. In addition,
strong expansion presented further
opportunities for supply-chain and
sourcing enhancements. Neuberger
Berman believed there was a compelling
opportunity to participate in the continued
development of the Action distribution
network focused on ‘one-day delivery
distribution centres toreduce average
delivery distance and provide more
efficient service to stores.
In 2022, Action had another strong year of
performance with strong sales growth in all
countries. It was another record year of
store openings with 280 net stores added
to its network, of which growth inFrance
and Poland were the largest drivers. Total
net sales increased 29.6% to €8.9 billion
whileoperating EBITDA grew 45.5% to
1.2billion. Operating EBITDA margin
increasing from 12.1% to 13.6%. While
Action did see some impact from lower
gross margins due to cost inflation, this
wasmore than offset by the positive effect
of operating leverage, as scale effects
increasingly benefit margins. Through
19March 2023, relative to the prior year
comparable period, net sales were up 37%,
and 2023 store expansion was on track with
23 stores added year to date in 2023.
Over the next four years, Action is targeting
between 1,300 and 1,400 new store
openings with average like-for-like growth
from the mid-single digits to high-single
digits. Neuberger Berman believes that,
asAction continues to scale,its business
model becomes increasingly difficult to
replicate, and thatthe company continues
to have a long growth runway ahead of it
over the next several years.
PE manager Investment thesis
Theme/Sector
Consumer
Low Cyclicality
Description
Fair value
Investment
Action is the fastest growing non-food discounter in Europe
Grow store network within existing countries
Expand into other European countries
Strengthen supply chain
Opportunity for operational enhancements
3i
$72.2m
››
See footnotes on pages 114 -115
19
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
5
10
15
20
20222021
15.2
17.4
Managers review
Continued strong earnings
and revenue growth,
despitechallenging
backdrop
Overall, the portfolio generated LTM
revenue and LTM EBITDA growth of
14.4%and 11.9%, respectively
6
, during
2022, with several companies reporting
EBITDA growth in excess of 30%.
Nevertheless,certain parts of the portfolio
were growing slower and overall portfolio
revenue growth outpaced EBITDA growth.
We did see some margin pressure across
the portfolio, particularly in companies
facing higher input costs, supply chain
costs or labour cost inflation. However,
anumber of companies were able to
maintain or expand margins, particularly
those in the consumer, financial and
business services sectors. In general, by the
latter part ofthe year many companies
were benefitting from the operational
changes which began in the first half,
whether they were cost savings initiatives,
price increases, supply chain
improvements, oracombination
ofenhancements. Activeownership of
underlying private equity managers in
general meant they were quick to adapt
tochanges in the economic environment
and, by working closely withunderlying
company management, could drive
changes in portfolio company operations,
which allowed companies to quickly adapt
and be better positioned for the current
environment. Asaresult, aggregate
EBITDA margin compression across the
portfolio in the year was less than 1%.
Valuation multiples declined YoY
15.2x
20
5.5x
20
EBITDA valuation
multiple
Net Debt/EBITDA
14.4%
6
11.9%
6
LTM Revenue growth
LTM EBITDA growth
Thisperformance included companies
which were growing strongly, certain
companies investing for growth as well
ascompanies which had to adapt to
challenges in the operating environment.
However, over 95% of the portfolio’s
fairvalue as of 31 December 2022 is in
companies which were profitable on
anLTM EBITDA basis.
Operating performance
outweighed decline
invaluationmultiples
Aggregating valuations across the
portfolioresulted in a weighted average
valuation multiple of 15.2x LTM EBITDA
20
at31December 2022, which was a
declineofover two turns, relative to the
valuation multiple at the end of 2021.
Withvaluations within our private
portfolioup 4.4% in 2022 on a constant
currency basis, lower valuation multiples
were generally the result of strong
operating performance.
96%
Portfolio is profitable
ona LTM EBITDA basis
In terms of LTM revenue growth, all sectors
contributed to positive revenue growth
during the year, driven by both organic
revenue growth and M&A. Healthcare,
industrials and business services sectors
grew LTM revenue the fastest, although
atslower rates relative to last year.
Whileconsumer, financial services and
TMTcontinued to grow revenue, these
were at slower rates relative to other
sectors in the portfolio.
In terms of LTM EBITDA growth, five of
thesix sectors contributed to growth,
although at slower rates versus 2021.
Nevertheless, three sectors, industrials,
healthcare and consumer, grew LTM
EBITDA at strong growth rates. Against
this,LTM EBITDA growth was slower in
TMTand business and financial services
relative to other sectors and last year.
Small increase in Net
Debt/EBITDA multiple
The average net debt/EBITDA multiple
was5.5x
20
, a small increase during the year,
which included the impact of debt to
finance M&A, partially offset bystrong
earnings growth. In some cases,companies
used free cash flow todeleverage.
Looking across ourportfolio, returns
continued to be driven by growth in EBITDA
rather than multiple expansion, and we
believe our strategy of investing in
companies with prudent capital structures,
and that we believe have the potential to
create strong sustainable earnings growth,
positions theportfolio well to continue to
perform across a range of interest rate and
economic conditions. From a debt maturity
perspective, over 79% of the portfolio
company debt matures after 2025.
››
See footnotes on pages 114 -115
20
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Managers review
Seven full or partial
realisations
Following a record year for realisations
in2021, NBPE announced $143 million of
realisations during 2022. As a percentage
of our opening portfolio, this was below
our long-term average of 21%, as private
equity exits slowed materially during the
year. Despite this slowdown there were
seven full or partial exits, whichgenerated
a2.7x multiple of capital,andanuplift
of6% relative to theirvaluation
at31December 2021. Whilethemultiple
ofcost achieved on these sales was
consistent with our five-year average,
theuplift to carrying value is below our
five-year average of 37%. This is largely
driven by a relatively high weighting to
companies thatwere valued at or near
salesproceeds at 31December 2021.
Including expected proceeds from sales
which were announced but not closed
during the year, these seven full or partial
exits represented $89 million of
realisations. There was also $13million of
proceeds generated from thesale of public
stock and approximately $40 million of
other portfolio realisations, of which
$24million was driven by realisations
fromNBPE’sinvestment in NB Credit
Opportunities and NB Specialty Finance
–both of which are in realisation mode.
Types of exits
Systems and solutions
utilised in distribution
centres
MHS, a provider of systems and
solutionsused in distribution centres,
wascombined with Fortna in 2022.
NBPEinvested in MHS alongside THL
Partners in2017 and the combination
ofthe two businesses creates a global
leader in e-commerce and logistics
automation which valued the combined
business at approximately $4 billion.
Thecombination merges MHS’s expertise
in automation technology and systems
integration with Fortna’s capabilities
around software and solutions for
warehouse and distribution. The
combination of automation technology
and operational optimisation software is
expected to provide end-to-end solutions
in logistics operations, with customers
benefitting from the breadth and depth
of both companies’ offerings, allowing
customers to further leverage advanced
automation to drive greater cost savings
and efficiencies.
M&A spotlight
22
M&A continues to be a
driver of value creation
inthe portfolio
Within the top 10 investments in particular,
M&A activity has contributed meaningfully
to growth and business transformation.
Private equity managers often use M&A
todrive value by finding attractive
consolidation opportunities, usually in
fragmented markets. Often, these
acquisitions are of smaller scale businesses,
which can be purchased for lower multiples
and then integrated into a larger
business,creating scale and efficiencies.
This can have the added impactof allowing
a private equity manager to, over time,
“buydown” their initial purchase multiple
of a platform business through M&A,
whensuccessful integration occurs.
WithinNBPE’s top portfolio company
holdings, a number ofcompanies including
Advisor Group, USI,and Kroll completed
acquisitions whichadded scale and
additional productor service capabilities
during 2022. Another way M&A canadd
value isthrough transformative acquisitions
– and MHS was a good example of this
during2022.
$143m
2.7x
of announced realisations
2
Multiple of cost
3
Sale to Strategic 23%
Sale to PE/Investor 32%
Dividends 3%
Sale of Public Stock 11%
Income Portfolio 20%
Other Portfolio Realisations 11%
››
See footnotes on pages 114 -115
21
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Managers review
Outlook
As we look forward, we believe NBPE’s
portfolio is well positioned to generate
strong growth over the long-term. From an
operating perspective, as demonstrated by
our private company performance, private
equity’s ability torespond quickly to market
forces, whetherthose be opportunities or
threats, should continue to grow value over
the longer term.
Pricing for new investment remains robust
for high-quality assets and, while both the
volume and value of exits declined from
record highs in 2021, there were still over
$530 billion of exits completed in 2022.
Byfar the largest buyers of private equity
backed assets are corporate strategic
buyers and other private equity funds, both
of whom remain open to new acquisitions,
in particular private equity. Alongside this
we also expect to see more GP-led
secondaries and continuation funds across
the market, as GPs look to continue to hold
performing assets longer, while providing
an exit for investors that need liquidity.
For NBPE, we believe we have a high-
qualityportfolio and at 106% invested
weare under no pressure to invest and
canbe highly selective. Given the pricing
environment for in-demand assets,
excluding the possibility of follow-on
activity for accretive M&A in our existing
portfolio companies, we do not expect
thepace of new investments to increase
materially in the short term. We have a
strong balance sheet and are well placed
totake advantage of opportunities and
benefit from aninvestment model that
allows us to manage our new investment
pacing, dependent onmarket conditions,
deal-flow and the portfolio as a whole.
Selective investment
intwocompanies
NBPE invested a total of $55 million during
the year, with $41 million invested into
twodirect equity investments.
The first new investment was a $26 million
investment into True Potential, alongside
Cinven, a leading international private
equity firm with a 30-year track record
ofinvesting across sixsectors primarily
across Europe, butalsoin NorthAmerica.
The second was a $15million re-investment
in an existing portfolio company that has
been astrong performer, following a
liquidity event, whereby NBPE recycled
some proceeds back into the company
tosupportits futuregrowth plans.
The remaining $14 million was invested
inplanned follow-ons in the portfolio.
Wealth management
technology platform
True Potential is a wealth management
technology platform serving advisors
andretail clients in the UK. The company
provides advice, investment platform and
fund solutions to more than 1.4 million
retail clients, with approximately 20%
ofthe financial advisor market in the UK
using True Potential’s technology and
support services. We believe there were
several factors which made this a
compelling opportunity, including
attractive market dynamics, and
differentiated business model, a strong
management team with a track record
ofgrowth, and an experienced sponsor
inCinven, with significant expertise in
both financial services and TMT. The
investment supports the existing growth
strategy and builds on the company’s
significant potential, backed by a
digital-first and client-focused strategy
with the goal to revolutionise the way
wealth management services are
provided. We believe True Potential has
performed well to date and are pleased
with the start the investment has made.
New investment spotlight
23
››
See footnotes on pages 114 -115
22
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
23
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Top 20 companies
PE manager PE managerInvestment thesis
10
Investment thesis
Theme/Sector Theme/SectorDescription Description
% of FV/$m % of FV/$m
Investment Investment
Business Services
Financial Services
Leading provider of vehicle remarketing services
Market leader
Defensive business model
B2C sales opportunity
Strong cash flow generation
$53.2m
TDR
Capital
4%
3
E-commerce
Consumer
European discount retailer
Grow store network and expand to other European countries
Strengthen supply chain
Operational enhancements
$72.2m
Multinational financial consultancy firm
3i
Market-leading businesses
Recent M&A has diversified revenue streams and
reducedcyclicality
Continued execution of accretive M&A
5%
6
Healthcare
Medical equipment management and services
Industry dynamics support growth
Leading provider in end-to-end medical equipment solutions
Diversified and loyal customer and supplier base
$40.8m
THL
3%
2
Financial Services
$32.1m
Independent network of wealth management firms
Strong M&A track record in a fragmented, consolidating
industry
Secular tailwinds support share gains for independent
platforms
Multiple levers for organic growth and value creation
$54.2m
Reverence
Capital
4%
4
Financial Services
Further
Global
Insurance brokerage and consulting services
Favourable industry dynamics
Attractive financial profile and high-quality cash flow
Ability to grow organically and through M&A
$50.0m
KKR
4%
7
Industrial
Technology
Industrials
Systems and solutions utilised in distribution centres
Rapidly growing market driven by e-commerce
Strong market position
High visibility on revenue
$39.7m
THL
3%
2%
5
Industrial
technology
Industrials
Leading provider of automation technology
Growth driven by megatrends
Strong value proposition with attractive financial
characteristics
Embedded growth options
$44.9m
THL
3%
9
Business Services
Undisclosed Business Services Company
Low expected cyclicality end markets
Essential service with ‘utility-like’ characteristics
Attractive financial profile with stable cash flow
$32.9m
Undisclosed
Not
disclosed
2%
1
8
Healthcare
Payment accuracy and clinical software solutions for
the healthcare industry
Compelling strategic rationale for the combination of
twobusinesses
Market leader with enduring competitive advantages
Attractive financial profile and free cash flow generation
$34.5m
Veritas
Capital
3%
24
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Top 20 companies
PE manager PE managerInvestment thesis Investment thesis
Theme/Sector Theme/SectorDescription Description
% of FV/$m % of FV/$m
Investment Investment
17
E-commerce
Consumer
Ticket exchange and resale platform for buyers
andsellers
Large scale and competitive positioning
High barriers to entry
Attractive entry price
$26.4m
Neuberger
Berman
2%
11
Technology/IT
Cyber security and secure access solutions
Business combinations create a highly attractive position
inthe market
Blue chip customer base
$29.4m
Francisco
Partners
2%
13
E-commerce
Consumer
Portfolio of consumer-branded IP assets, licensed to third
parties with a number of internally managed DTC platforms
Established platform with experienced management team
Unique business model
Strong free cash flow with revenue visibility
$28.5m
Neuberger
Berman
2%
18
Technology/IT
Provider of systems integration, consulting and
outsourcing services
Leading technology company in Italy
Attractive IT services market with secular growth from
digitaltransformation
$25.1m
NB
Renaissance
2%
15
Business Services
Waste management services
Favourable environmental services industry dynamics
Sticky and diverse customer base
Fragmented industry provides opportunities for M&A
$27.0m
BC Partners
2%
14
Consumer
Specialty chemicals and services provider
Sticky and diverse customer base/trusted provider
Natural barriers to entry, benefitting from scale
Mid-life investment/transformative M&A
$27.0m
Platinum
Equity
2%
12
Financial Services
Wealth management technology platform
Strong value proposition and focus on customer outcomes
Leading technology platform
Attractive market dynamics and track record of financial
performance
$28.7m
Cinven
2%
20
Consumer
Branded Toy Company
Strong brand with high-quality products
Multiple avenues for growth
Strong financial profile
$23.8m
Undisclosed
Not
disclosed
2%
19
Business Services
Professional services provider specialising in staffing
and consulting services
Scaled business with diversified end-markets
Large underlying market with positive growth trends
Attractive financial profile
$23.9m
Trilantic
Capital
2%
16
Industrials
Distributor of mission-critical standard and custom
engineered products
Leading market opportunity with diverse end-markets
Significant growth opportunities
Proven acquisition platform
$26.6m
AEA
Investors
2%
Industrials
Neuberger Berman – market review
Throughout 2022 and the start of 2023, geopolitical tensions,
high inflation, interest rate hikes and, most recently, a turbulent
banking sector, have created a period of uncertainty for
investors. However, we believe private market investments
have unique characteristics which generally allow them to
better navigate significant market volatility compared to public
markets. Additionally, private markets have particular qualities
that support the case for including them in a diversified
portfolio throughout a cycle. Some of those qualities may
even support the case for committing new capital to the asset
class at times like the present, as private equity has the ability
to take advantage of opportunity sets that tend to emerge
inrelatively weak points in the market cycle.
Opportunities for Growth
Private equity firms are largely focused
today on strategic and operational value
creation as opposed to relying on leverage
or multiple expansion as value drivers,
andthus typically make investments with
deep, well-thought-out plans with the
goalof accelerating earnings growth.
Theyoften also have more flexibility
toadapt operationally to a changing
economic environment relative to larger,
public companies. In particular, sustaining
margins and investing in growth initiatives
through difficult environments may be
easier for a smaller company working
awayfrom the glare and short-term
focusof public markets. In recent years,
thiswasparamount, as underlying
companies faced headwinds related to
thepandemic, supply chain disruption,
geopolitical unrest, inflationary pressure,
and higher interest rates.
Further, private equity firms today have
greatly improved on operating resources
in-house, and they can use their position
ofcontrol or influence to respond quickly
tochanges in the market environment.
Thevalue of this became particularly
apparent during the recent banking crisis
aswe saw sponsors react with speed to
help their firms and portfolio companies
safeguard assets and maintain access to
credit, while simultaneously identifying
exposures and proactively communicating
to investors in real time.
Although standard for public equities,
thisrapid response and willingness to
provide investors with transparency is a
shift for private equity, and an example of
the evolution and growing sophistication
of the asset class.
Performance
The impact of market volatility has
historically been more muted on private
markets given the long-term nature of the
underlying investments. Capital is locked
up, fire sales are rare and, in times of
volatility, sellers can simply hold on to
anasset longer and continue executing
ontheir operational and growth plans.
Furthermore, private equity managers
canbe quicker than their public
counterparts to manage costs, conserve
cash, or improve management. Private
firms also tend to have ready access to
capital in turbulent times, so they can inject
more equity into businesses that may be
temporarily affected by external weakness.
As potential evidence of these benefits,
operating performance of many private
equity backed companies has held up
welldespite the more difficult recent
macroeconomic backdrop, and many
portfolio companies are still growing
atorabove plan.
This active management has allowed
overall performance to hold up relatively
well compared to the declining public
market multiples. Some of that may be due
to lagging or over-optimistic valuations that
may ultimately have to be written down
– but not as much as many fear, in our view.
25
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Investment Activity
Global private equity deal activity slowed
during 2022, as evidenced in the chart
below. The first three quarters of the year
saw a run rate that was 80% as high as that
for the full year 2021 - and 2021 was an
extraordinarily busy year as the industry
gotback to work following the disruption
of the pandemic. Moreover, this slowdown
inactivity partly reflects another quality
that private equity brings to a portfolio:
private asset owners can be strategic and
opportunistic about when to monetize
their assets - if the market is weak, they
canoften hold onto fundamentally
high-quality assets until the environment
has recovered.
We are starting to see entry valuations
come down slightly, with the potential to
decrease further, but this likely won’t occur
until broader dealmaking activity further
rebounds. In contrast, one area of the
market where we have seen valuations
reset is in the public markets. This is still an
opportunity for larger-scale private equity
managers because they can acquire the
majority of these companies and delist
them in “take private” transactions. The
companies can benefit from the sponsor
transformation plans outside of the public
eye, which take time to implement and are
hard to execute with the short-term
scrutiny that comes with quarterly earnings
reporting. We believe this will represent a
significant opportunity for larger private
equity managers if the market uncertainty
and volatility persists.
Outlook for 2023
and Beyond
We believe that private equity is an
all-weather asset class: private equity
managers derive returns from buying
high-quality businesses, putting in strong
management, and implementing strategic
operating plans to create value.
Over the years and across market
environments, we have found that volatile
times often provide a more favourable
backdrop for investments and tend to be
the best vintages in private equity. In our
view, the industry is now better suited to
the task of finding opportunities than in
thepast, given lessons learned through
previous market cycles and the structural
improvements many private equity firms
have made to their operational playbooks
and teams. Although it will be important to
monitor the ongoing market volatility, we
think this remains a good time to commit
to private markets.
Pinpointing market turns is hard in any
asset class, but almost impossible in private
equity, given its long investment
timeframe, which sometimes cover
multiple economic and market cycles.
Importantly, private equity investments
have a natural hedge against any specific
year, as investment strategies are normally
executed over four to seven years,
insulating investors from an annual peak or
trough. We would argue that private equity
is a strategic asset class, to which investors
should maintain exposure through all
market environments – although it has the
potential to be very opportunistic when
dislocations arise.
Neuberger Berman Private Markets
24 April 2023
Neuberger Berman – market review
$2,000
40,000
30,000
20,000
10,000
$1,000
$1,500
$500
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
$181
$253
$386
$649
$1,049
$441
$192
$346
$435
$428
$522
$668
$874
$773
$947
$1,032
$943
$914
$1,617
$1,298
Capital Invested ($ in billions)
Total Capital Invested (Billions) Deal Count
Global Private Equity Capital Invested and Deal Count
Source:
24
››
See footnotes on pages 114 -115
26
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
100%
75%
50%
25%
One year Three year Five year
0%
62.7
89.4
-7.5
100%
75%
50%
25%
One year Three year Five year
0%
49.8
87.3
-9.7
1.00
0.50
0.75
0.25
18
19 20
21 22
0.94
0.72
0.58
0.57
0.53
NAV Total Return cumulative, $ Total Shareholder Return cumulative, £ Dividend growth $ per share
Rationale
Reflects the growth in the value of the Companys assets
less its liabilities. It includes all the components of NBPE’s
investment performance and is shown net of all costs
and includes dividends paid
Measures performance in the delivery of shareholder
value, after considering share price movements
(capitalgrowth) and any dividends paid in the period
A reliable source of income is important for
shareholders. NBPE targets an annualised dividend
yieldof 3.0% of NAV
NAV total return
$
Total shareholder return
£
Dividend growth over time
NAV total return declined by 7.5%
1
Five-year cumulative NAV total return of 89%
1
Performance driven by decline in value of quoted
holdings and foreign exchange headwinds on
non-USD assets outweigh 4% positive return from
private companies (in constant currencies)
Decline of 9.7% in share price total return during 2022
1
Five-year cumulative share price total return of 87.3%
1
Total dividend increase of 31% to $0.94 per share in
2022 versus 2021
Dividend maintained in 2H 2022, despite fall in NAV
inthe year
Over 10-year track record of dividend payments with
prudent increases over time
Capital appreciation through growth in net asset
valueover time while returning capital by paying
asemi-annual dividend
Shareholder returns through long-term capital
growth and dividend
Returning capital to shareholders by paying a
semi-annual dividend
Progress
Link to
objectives
Examples of
related factors
that we monitor
Performance and valuations of the underlying
investments
Efficiency of NBPE’s balance sheet
Ongoing charges ratio
Rate of NAV growth
Share price performance relative to wider public
markets and listed private equity peer group
Level of discount in absolute terms and relative to the
wider listed private equity peer group
Trading liquidity and demand for NBPE’s shares
Available liquidity
Proceeds received and expected during the year
Investment pipeline
(7.5)% (9.7)% $0.94
4.9%
13.5%
2022 2022 dividends
yield on share price
five year dividend growth CAGR
Key performance indicators
››
See footnotes on pages 114 -115
27
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
400
300
200
20 21 22
389
120
200
100
200
150
100
20 21 22
168
55
132
50
400
300
200
Total
liquidity
ZDP
24
307
73
100
Total proceeds received $m Total new investment $m Maturity profile/total liquidity $m
Rationale
Realisations are a core driver of NAV growth and a
source of liquidity to make new investments and
dividend payments
Maintain a prudent investment pace based on the
levelof portfolio realisations, quality of investment
pipeline and market environment
Maintaining a robust financial position and strong asset
coverage in a range of forecast scenarios. NBPE has a
long-term investment level target range of 110%-115%
Maintain healthy pace of
realisations and uplift on exit
Invest selectively in new investment
opportunities over time
Prudent and efficient balance
sheet management
$143 million of realisations announced
2
; $120 million
ofproceeds received
Announced realisations at a 6% uplift
8
to December
2021 values and a 2.7x
3
multiple to cost
10-year average annual liquidity of ~21% of the
opening portfolio value
$41 million invested into one new and one
existing portfolio company; $14 million of
follow-on investments
Investing in key themes and sectors
$7 million of gross cash and $307 million of
availableliquidity
106% investment level
Unfunded commitments are adjusted for amounts
theManager believes are unlikely to be called.
Asof31December 2022, unadjusted unfunded
commitments were $96.0 million (adjusted
$47.6million) and the unadjusted commitment
coverage ratio was 320%
25
(645% adjusted)
Repaid 2022 ZDPs on maturity in September 2022
Capital appreciation through growth in net asset
valueover time while returning capital by paying a
semi-annual dividend
Capital appreciation through growth in net asset
valueover time through a highly selective
investmentapproach
Long-term investment target level range of 110%-115%
Progress
Link to
objectives
Examples of
related factors
that we monitor
Vintage year diversification, maturity of the portfolio,
average holding periods
Uplifts to carrying value and cost
Liquidity as a percentage of opening portfolio
Available liquidity and realisation outlook
Balance sheet strength
Market environment and pricing
Available liquidity and realisation outlook
Compliance with financial covenants of RCF
Ensure the maturity profile of ZDPs and RCF are
wellcovered
$120m $55m
6.4%
2.7x
3
proceeds received invested in 2022
$1.4bn
gross assets
106%
invested
$7m
gross cash balances
$300m
undrawn credit facility
2022 uplift to
carrying value
8
original cost
Key performance indicators
››
See footnotes on pages 114 -115
28
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Environmental, social and governance
A focus on ESG at all points of the
investment process
The three pillars
ofNBPE’s Responsible
Investment Policy
Our policy is centered on the objective of seeking to achieve
better investment outcomes through incorporating
Environmental, Social and Governance (ESG) considerations
into theinvestment process.
Avoid AmplifyAssess
29
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Ability to exclude particular
companies or whole sectors from
the investable universe
NBPE seeks to avoid companies that
produce controversial weapons,
tobacco,civilian firearms, fossil fuels
andprivate prisons. NBPE also seeks to
avoid companies with known serious
controversies related to human rights
orserious damage to the environment,
including as outlined by the United Nations
Global Compact (UNGC) and OECD
Guidelines for Multinational Enterprises
Consider the valuation implications
of ESG risks and opportunities
alongside traditional factors
intheinvestment process
Material ESG factors are formally
incorporated in Investment
Committeememorandums
Focus on ‘better’ companies
basedon environmental, social
andgovernance characteristics
Simultaneously seeking to minimise
exposure to companies with
potentialadverse social and/or
environmental impacts
How ESG is integrated into
the investment process
Neuberger Berman Private
Markets is able to leverage
itsposition as a diversified
asset manager, integrating
ESG insights in order to
identify opportunities
withrespect to direct private
markets investments.
Private equity can be
well-aligned to
ESG integration
Private equity investors
have the potential to drive
improvements.
How ESG materiality is assessed
When conducting due diligence on direct
investments, the investment team utilises
our proprietary NB Materiality Matrix to
assess industry-specific ESG factors that are
likely to be financially material
(informedbythe firm’s research sector
26
experts and highlighted in blue, below) as
well as the lead GP’s level of ESG integration
based on our Manager ESG Scorecard.
How ESG factors can
affectvaluations
Sector focus
Private equity managers tend to focus on
sectors that are less resource intensive or
asset heavy. As such, these also tend to be
sectors that are more efficient and
experience less volatility, benefitting from
secular tailwinds
Deep due diligence
Private equity managers are able to
conduct deep and meaningful due
diligence on a companys specific ESG
factors that are financially material
Control
Private equity managers own and control
their portfolio companies and may improve
the environmental, social or governance
aspects of a company during ownership
Day-to-day operations
Incremental improvements may have
positive implications for profits
Examples
Proactive approach to environmental
issues, such as resource consumption
andwaste management, may lower
operating costs
Conscientious employee policies may lead
to greater retention and productivity
Tail risks
Addressing systematic ESG issues that have
the potential to affect business
Examples
Seeking to understand climate risk on
portfolio companies may mitigate risks
associated with extreme weather
Pre-empting potential ESG issues
maymitigate risk of breaches and cost
ofcompliance
Environmental Social Workforce Supply chain Leadership & governance
Emissions Water
management
Data privacy
&security
Pricing
transparency
Health &
safety
Human capital
development
Product safety
& integrity
Materials
sourcing
Innovation Policy &
regulation risk
Consumer goods
Extractives/Minerals
Financials
Food & beverage
Health Care
Infrastructure
Represents a subset of factors for illustrative and discussion purposes only.
Environmental, social and governance
››
See footnotes on pages 114 -115
30
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
››
See footnotes on pages 114 -115
NBPEs portfolio
through a
sustainability lens
NBPE Portfolio Through
A Sustainability Lens
27
Renaissance Learning
30
Ownership timeline
78%
Neutral
+
1%
Adverse Potential
29
Companies that may contribute
to significant adverse outcomes
for people or the environment
Companies that
may have a mixed
orunknown
benefitto people
orthe environment
13%
Positive Sustainability Potential
Companies that have the potential
for overall positive benefit to people
or the environment
Companies that have the
potential to contribute
solutionsto pressing social
orenvironmental challenges
21%
of the portfolio has a
positive sustainability
potential or an overall
positive benefit to people
or the environment
28
+ +
Environmental, social and governance
Notable PE financing milestones
Notable company milestones
UN SDG alignmentInvestment
2018 2019 2020 2021 2022
Disparities in “school readiness” start in early childhood
and are exacerbated along socioeconomic and racial
lines, bearing significant consequences on future
graduation rates and earning potential
31
Company is a software and learning analytics company,
tackling the school readiness gap through personalised
assessment and instructional tools in math, reading,
andearly literacy for K-12 students, covering >40%
U.S. public schools
NBPE makes an initial
investment in Renaissance
Learning, alongside
Francisco Partners and
other co-investors for a
majority interest.
Renaissance’s product suite grows as it acquires:
Early Learning Labs
preschool
assessment tools
Freckle
student-centered
practice platform
Schoolzilla
data-based insights on
progress and growth
Renaissance expands its offerings as it acquires:
Nearpod
collaborative
instructional platform
Lalilo
foundational literacy
solution for K–2
students
Renaissance earned
severalindustry awards such
as the SIIA CODiE Award for
Excellence in Diversity &
Inclusion in EdTech.
NBPE makes additional follow-on equity investments,
in addition to funding from Francisco Partners, in order
to fund anticipated acquisitions.
Blackstone announced
asignificant minority
investment to further
accelerate growth.
Inconnection with this,
NBPE received a partial
realisation of $14 million.
NBPE invests additional
capital; NBPE retains
meaningful ownership
post this transaction to
participate in future
growth.
4.1 Ensure that all girls and boys complete
free, equitable and quality primary and
secondary education leading to relevant
and effective learning outcomes
8%
31
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Environmental, social and governance
Jennifer oversees
environmental, social and
governance integration in
private markets and multi-
asset class solutions. Jennifer
also leads the development
and implementation of
sustainable and impact
investing strategies with a
portfolio management focus
on private equity.
How does ESG create value
within private equity?
Private equity investors are uniquely
positioned to effect change, given they
generally have controlling ownership of
companies. This means private equity
investors potentially have more ability to
influence strategic and operational change
– whether to tackle climate risks or other
business challenges – than many public
equity investors.
Q&A
ESG has been integrated
into Neuberger Berman
Private Equitys investment
process since 2007 – but we
have made improvements
along the way and are
continuously looking to
enhance our practices.
Weare focused on
investing with long-term
partners and engaging to
promote ESG integration
best practices.
Fundamentally, we believe
incorporating ESG into our
investment process can
potentially lead to more
consistent and better
investment outcomes
because it helps identify
material investment risks,
aswell as opportunities
todrive value.
Interview with Jennifer
Signori, Managing Director
Historically, private equitys focus on ESG has
been weighted towards the ‘G, through an
emphasis on driving value and working
closely with management teams to lead
operational and strategic change. However,
there is a growing focus on how social and
environmental factors can be material to
financial value. For example, the COVID-19
pandemic highlighted the need for
responsible supply chain management,
business continuity planning and timely
management of employee health and safety.
From an environmental standpoint, the
physical risks from climate change are already
materialising, with greater prevalence and
severity of extreme weather events being felt
around the globe. Real economic value is at
stake, so adaptation and mitigation plans are
necessary. Governments are beginning to
take steps to reduce emissions and slow the
impact of climate change – through legislation
and regulation, as well as encouraging
emissions reduction commitments.
All of this affects how companies do
businessin these markets. Companies that
succeed in this changing environment or,
even better, thrive while leading the
adoption of new approaches, are likely to
beviewed more favourably and to create
value for their investors.
Jennifer Signori
Managing Director
32
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
››
See footnotes on pages 114 -115
Environmental, social and governance
How can private equity
tackle the challenge that
we face on climate change?
As mentioned, private equity’s controlling
ownership of companies can enable the
strategic and operational change necessary
to tackle climate change. Private equity
firmsare also well positioned to invest in
companies developing targeted climate
products or services, which are often run
bysmaller or earlier stage companies,
andtohelp those business scale and
becomemainstream.
A serious impediment to measuring the
effectiveness of this change is the lack of
climate data across the industry. Most
private companies are not currently doing
carbon footprint assessments, which makes
it difficult for private equity managers to
measure the carbon footprint of their
portfolio and set emissions reduction targets.
Because of this, private equity managers and
investors often rely on top-down emissions
estimates, based on proxies, to understand
their financed emissions.
Given the data challenges, private equity
managers are still in the early stages of
committing to net zero. For example, only a
handful of firms have emissions reduction
targets that are validated by the World
Resources Institute’s Science Based Targets
initiative (SBTi).
32
That said, initiatives such as the ESG Data
Convergence Initiative, which brings
together various private equity stakeholders,
are encouraging greater disclosure of metrics.
However, the impact will take time, due to
the inevitable lag between private equity
firms making commitments on new funds
and investing the capital.
How do you engage with
the industry and your
managers on climate risk?
We participate in industry groups that aim
topromote climate disclosure and analysis,
including as a member of the Carbon
Disclosure Projects private equity technical
working group, the Initiative Climat
International (iCI) net-zero working group,
and the Net Zero Asset Managers Initiative
33
.
Alongside this, we engage with our private
equity managers on a variety of climate-
related topics, and collect ESG Data
Convergence Initiative metrics from our
investees, where available. Our recent
webinar on net zero investing best practices
with the Institutional Investor Group on
Climate Change (IIGCC) reached more than
80 private equity managers globally, to
discuss the unique challenges of net zero
implementation in the private equity context.
How do you assess climate
risk and opportunities
within your investment
process?
As a firm, Neuberger Berman supports the
Task Force on Climate-related Financial
Disclosure (TCFD), and we are committed to
understanding our climate-related risks and
opportunities, while managing the risks that
are material to our investment portfolios
and our firm.
Within Neuberger Berman Private Equity,
we screen potential investments for material
ESG risks and collect carbon emissions data
at the time of due diligence – to the extent
itis reported by the company. As part of
diligence, we may also conduct climate risk
analysis for specific direct investments
where climate risks – especially physical risk
– may be more material. On an ongoing
basis, we monitor investments for ESG issues
as part of our dialogue with GPs. We also
leverage a data analytics platform to track
publicly available information that allows us
to flag significant ESG-related issues.
Importantly, the sectors in which private
equity tends to invest, such as the
technology, consumer discretionary, and
healthcare sectors, are usually less affected
by climate costs. Typical private companies
ina particular sector may also have lower
climate costs than their public market
counterparts. For example, in the energy
and utilities sector, traditional utility
companies are more likely to be public
companies, whereas a private company
inthe same sector is more likely to be an
asset-light business providing services
toutility companies.
Can you tell us a little more
about how you calculated
the carbon footprint
estimates for NBPE’s
portfolio this year?
In 2021, we started collecting carbon
footprint data on potential direct co-
investments, and since 2022 we have been
collecting Scope 1 and 2 emissions data from
investees, where available, as part of the ESG
Data Convergence Initiative. As this data is
generally not readily reported, we
developed a methodology for estimating
carbon footprint information for private
equity investments.
In 2022, we conducted the first top-down
estimate of NBPE’s carbon footprint using
third-party emissions data proxies – given
the limited actual disclosure of private
companies. Due to the inherent challenges
of using estimations, we are continuing to
refine this methodology. At the same time,
we are exploring climate analysis tools and
resources through pilot partnerships and
industry collaborations.
Neuberger Berman’s Industry Collaborations on Climate
33
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Jonathan Shofet
Global Head of Private Investment Portfolios
andCo-Investments, Managing Director,
Member of the Investment Committee
Manager – People & culture
An award-winning culture
For eight consecutive years, Neuberger
Berman has been named first or second in
Pensions & Investments Best Places to Work
in Money Management survey (among
those with 1,000 employees or more)
Neuberger Berman’s business
principles
Our clients come first
We are passionate about investing
We invest in our people
We motivate through alignment
We continuously improve and innovate
Our culture is key to our long-term success
Neuberger Berman, a client-led partnership
As a private, independent,
employee-owned investment
manager, Neuberger Berman
has the freedom to focus
exclusively on investing for
itsclients forthe long term.
By design, Neuberger
Bermanattracts individuals
who share a passion for
investing and who thrive in
an environment of rigorous
analysis, challenging
dialogue, and professional
andpersonalrespect.
99%
Retention levels of NB Private Markets
Managing Directors and Principals
34
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Neuberger Bermans
commitment to equity,
inclusion and diversity
We believe firms perform
better for clients and
stakeholders when there
isadiverse population, and
atrue equitable and inclusive
environment. Diversity alone
is not enough.
of Neuberger
Berman Private
Markets employees
arefemale
of Neuberger
Berman Private
Markets Managing
Directors are female
Equity
To be ‘equitable’ is to level the playing field
for all
Inclusion
An environment where everyone can
flourish and be their best selves
Diversity
We look for a breadth of diversity across
many characteristics
We believe that partnering with colleagues
whohave a myriad of experiences, backgrounds,
and perspectives is fundamental to our firms
and our clients’ success. Ultimately, we perform
better for our stakeholders when diverse,
authentic voices are valued, and our teams
operate in a fair and unbiased environment.
Manager – People & culture
31%
34
22%
34
››
See footnotes on pages 114 -115
35
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Maura Reilly Kennedy
Managing Director
Manager – people & culture
The Investment Committee
The Investment Committee has an average of ~30years of
professional experience and worked together for an average
of more than 19 years.
Anthony Tutrone
Global Head of NB Alternatives, Managing Director
35 years of industry experience
David Stonberg
Deputy Head of NB Alternatives and the Global Co-Head of
Private Equity Co-Investments, Managing Director
32 years of industry experience
Joana Rocha Scaff
Head of Europe Private Equity, Managing Director
24 years of industry experience
Peter von Lehe, JD
Head of Investment Solutions and Strategy, Managing Director
29 years of industry experience
Paul Daggett, CFA
Managing Director
24 years of industry experience
Patricia Miller Zollar
Managing Director
36 years of industry experience
››
Full biographies available online
36
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Manager – people & culture
Elizabeth Traxler
Managing Director
21 years of industry experience
Michael Kramer
Managing Director
27 years of industry experience
Brien Smith
Senior Advisor to the Neuberger Berman
Private Equity Division
41 years of industry experience
Jacquelyn Wang
Managing Director
21 years of industry experience
Jonathan Shofet
Global Head of Private Investment Portfolios and Co-Investments
Managing Director
26 years of industry experience
Kent Chen, CFA
Head of Asia Private Equity, Managing Director
30 years of industry experience
David Morse
Global Co-Head of Private Equity Co-Investments, Managing Director
37 years of industry experience
››
Full biographies available online
The Investment Committee continued
37
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Stakeholder engagement
Stakeholder engagement
The Directors are responsible for acting
inaway that they consider, in good faith,
ismost likely to promote the success of
theCompany for the benefit of its
membersas a whole. In doing so, they
havehad regard to the factors set out
insection 172(1)(a) to (f) of the UK
Companies Act 2006, which includes the
needs of stakeholders and wider society.
How the Board engages with stakeholders
Stakeholder How the Board engages Key topics in the year Examples of considering stakeholder interests
Shareholders
The support of the Companys
current and future
shareholders is critical to the
continued success of the
business and the achievement
of its strategic objectives.
The board understands that,
in addition to performance,
shareholders also place great
emphasis on governance and
regulatory compliance and
ESG. The Company’s business
is conducted taking these
factors into account.
The Board welcomes the views of shareholders and places
great importance on communication with its shareholders.
The Board maintains awareness of shareholder views by
means of regular updates and insights from the Manager and
advisers as well as meetings with shareholders.
Key communication channels with shareholders include:
Shareholder engagement: The Manager holds regular
meetings with analysts and existing, new and potential
shareholders. The Manager also presents at industry
conferences. Feedback from these meetings is shared with
the Board.
Publications: In addition to the Annual Report, the Company
publishes interim accounts, monthly NAV updates and
factsheets, and investor presentations to provide regular
financial updates throughout theyear.
Capital Markets Days and AGM: The Directors are available
tomeet shareholders directly through NBPE’s annual Capital
Markets Day (or virtual equivalent) or via the AGM.
Website: To provide significant transparency and help
inform investors, all the Company’s publications are available
on the website.
Shareholder concerns: Shareholders may also contact the
Chairman, Senior Independent Director and other Directors
through the Company Secretary.
Portfolio performance, including the impact
of the inflationary environment, rising
interest rates and supply chain issues
How companies navigated operational
challenges and inflationary pressures, and
impacts to supply chains
Discussions around the general state of
markets/economy and the rising cost of
livingand the impact on companies in
theportfolio
Information on any new investments
andrealisations
Shareholder communications
Share price performance and discount
Appointed Jefferies, at their discretion,
torepurchase shares, based on criteria set
bythe board
Dividend policy
Private equity market environment
Information on the Company’s Responsible
and Sustainable Investment Policy
Balance sheet management, including the
maturity and final payoff of the 2022 ZDPs
The Board comprises five independent
directors.
The AGM that took place on 14 June 2022
provided an opportunity for Shareholders
to engage with the Board.
The Board reviewed and discussed the
underlying performance of portfolio
companies in the context of the broader
operating environment.
The Board held numerous discussions
throughout the year with Company
advisors related to the share price
discount to NAV. In October 2022,
theBoard announced Jefferies was
appointed to repurchase shares at
theirdiscretion, based on criteria set
bythe board. No repurchases were
madein 2022.
The Capital Markets Day was held
virtually. Shareholders were able to ask
questions, via a Q&A facility. A replay was
made available on the website for any
shareholders unable to attend.
As NBPE is a Guernsey company, this
legislation does not directly apply to it, but
the Board is cognisant of the importance
ofthese matters, and by virtue of the
requirement set out in the AIC Code
ofCorporate Governance, holds itself
tothesestandards.
The Board provides appropriate training
toall new Directors, which includes
trainingon their duties, and maintains a
programme of continuing development.
More details on Director induction and
Board evaluation can be found on
pages 51-52.
Set out below is a summary of NBPE’s
keystakeholder groups and how it engages
with them, in addition to examples of
keytopics of relevance to the stakeholder
groups and how their interests have
beenconsidered in decision making.
Asaninvestment company, the Company
does not have any employees.
38
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Stakeholder engagement
Stakeholder How the Board engages Key topics in the year Examples of considering stakeholderinterests
Investment Manager
It is important that the Board maintains
astrong relationship with the Manager.
TheCompany leverages the strength
ofNeuberger Berman’s private equity
platformto seek the most attractive direct
investment opportunities.
The Manager prepares detailed financial
reports to the Board on the portfolio,
performance, cash flow modeling and
otherfinancial data to help guide discussions
and decisions.
The Board maintains good relationships with
key members of the Investment Manager’s
investment team, as well as other functions,
including finance and legal.
The Manager also interacts with other service
providers as necessary for the day-to-day
management of the Company.
The Directors review financial reports
prepared by the Investment Manager ahead
of each quarterly Board meeting. Annually,
the Audit Committee reviews detailed
reports from financial models prepared to
support the Company’s Viability Statement.
In conjunction with the Manager, the Audit
Committee reviews and monitors the
Companys investment level and investment
pacing forecasts contained within the
support of the Viability Statement.
Portfolio performance, including the
impact of the inflationary environment,
rising interest rates, and supply chains and
other macro economic risks
Information on any new investments
andrealisations
Private equity market environment
Information on the Company’s Responsible
and Sustainable Investment Policy
Balance sheet management, including the
maturity and final payoff of the 2022 ZDPs
Share price performance and discount
Investment level and cash flow forecasts
Debt maturities
The Manager and the Company work
together to ensure they are aligned.
Bothshare a mutual interest in the success
ofthe investments as well as the Companys
perception and reputation in the
marketplace.
Both the Manager and the Board strive to
maintain a strong working relationship to
achieve these goals.
In October 2022, the Directors attended
anonsite at the Manager’s offices in
NewYork and met with senior professionals
across various functions at Neuberger
Berman, including investments, ESG, risk,
legal/compliance, finance and internal audit.
In addition, the Directors also met withkey
service providers including MUFG, PWC and
KPMG. Further detail of this onsite meeting
can be found on page 56.
The Board reviewed detailed financial model
forecasts prepared by the Manager to assist
with cash forecasting and available liquidity,
post the 2022 ZDP payoff.
Investee entities
The Manager is responsible for executing the
Company’s overall investment policy and
objective, as approved by the Board. As such
day-to-day engagement with underlying
private equity managers, and investee
companies is undertaken by the Manager.
The Board receives updates at each
scheduled Board meeting from the Manager
on the investment portfolio, including
regular valuation reports and detailed
portfolio and returns analyses.
The Manager maintains a wide range
ofprivate equity networks and close
relationships with leading private equity
managers globally. The Manager regularly
conducts discussion of key private equity
topics, including deal sourcing, market
environment, fundraising, team composition,
investment performance and monitoring,
ESG and other factors with various managers.
The Manager strives to be a solutions
provider and strategic partner to underlying
private equity managers, which ultimately,
over time, strengthens and cultivates the
relationship.
39
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Stakeholder engagement
Stakeholder How the Board engages Key topics in the year Examples of considering stakeholderinterests
Lenders
The Company’s co-investment model means
that NBPE can respond to market conditions
and be capital efficient. NBPE does not need
to take off-balance sheet risk in the form of
unfunded commitments to achieve a target
investment level.
In order to achieve this, the Company’s lenders
provide the Company with debt and debt-like
financing with maturity dates, fixed capital
entitlements which bear interest and fees at
various interest and fee rates.
At the overall direction of the Board,
members of the Manager’s finance and
investment teams maintain dialogue with
the Company’s bank and lender
counterparties.
Feedback on these discussions is shared with
the Board at the quarterly Board meetings,
oras required.
The lenders are focused on asset coverage,
valuation of assets and key financial
ratiosonthe Company’s liquidity and
financial position.
On 30 September 2022, the Company
repaidthe final capital entitlement of the
Company’s 2022 ZDP Shares.
The Manager keeps the Company’s
lendersaware of portfolio developments
throughout the year through both public
disclosures and private investment
monitoring reports.
In addition, the Company provides detailed
compliance reports to the Companys credit
facility lender and the Board, showing asset
coverage, ratios and covenant tests.
Information regarding the Company’s
current borrowing can be found at Note 4
tothe Financial Statements on page 90.
Other service providers
The Company’s service providers work with
the Manager, Company Secretary and Board
to achieve the Company’s objectives.
Other service providers include but are not
limited to: fund administrators, tax
accountants, auditors, brokers, investor
relations, legal counsel, marketing and
advisory services, external research, and
media relations.
The Board maintains regular contact with
itskey service providers and receives regular
reporting from them, both through the
Board and committee meetings, as well as
outside the regular Board meeting cycle.
The Management Engagement Committee
formally assesses performance, fees and
continuing appointments annually to ensure
that the key service providers continue to
function at an acceptable level and are
appropriately remunerated to deliver the
expected level of service.
The Management Engagement Committee
reviews and evaluates the financial reporting
control environments in place at each
serviceprovider.
The Company’s service providers have been
carefully selected for their relevant expertise.
Their advice, as well as their needs and views,
are routinely considered by the Board.
More information concerning the service
provider review undertaken by the MEC
canbe found on page 56.
40
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Stakeholder engagement
Stakeholder How the Board engages Key topics in the year Examples of considering stakeholderinterests
The community and the environment
NBPE believes investing responsibly
incorporating material ESG considerations
can help inform the assessment of overall
investment risk and opportunities.
To reflect the Company’s ongoing commitment
to ESG, the Company published a Responsible
and Sustainable Investment Policy in 2020.
ESG issues are a standard part of the
Managers investment process, and
increasingly integral to the Boards thinking.
The Manager integrates ESG considerations
throughout the investment process by
helping to identify both material risks and
opportunities, and the Board receives regular
updates on the Manager’s ESG practice.
TheBoard reviews the Companys
compliance with its Responsible and
Sustainable Investment Policy.
In addition to the regular updates from the
Managers ESG team, the Board receives
anddiscusses detailed analysis of the
sustainability impact of the portfolio on
anannual basis, which includes details
onmaterial ESG risks of underlying
portfoliocompanies.
ESG considerations and the impact of
theCompany on the community and
environment are regular topics at
Boardmeetings.
During the onsite in New York, the Directors
discussed updates on the ESG team and
evolution in the marketplace, the Manager’s
ESG strategy, integration and analysis and
NBPE’s portfolio.
More information concerning the
Company’sapproach to ESG can be found
onpages 29-33.
41
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Risk management
Risk management framework
The Board considers the risk management
framework with investment, financial,
strategic, operational and external risks
tobe the principal risks and uncertainties
ofthe Company. Within each of the five
principal risks and uncertainties categories
on pages 43 and 44, the Directors have
identified a number of key underlying risks.
While it is not possible to identify and
manage every risk to the Company, the
Directors seek to identify the key underlying
risks within each category where possible.
Each identified key underlying risk includes
information on the controls relied upon by
the Board, andthe responsible provider or
providers. Through a matrix, each key
underlying risk iscolour-coded between
green (low-risk) and red (high/elevated risk)
by calendar quarter, in order to show the
evolution of the key underlying risk over
time. Judgement is applied to determine
these assessments andthe Board considers
any changes to the assessments of the key
underlying risks onaquarterly basis. Not all
risks can be eliminated; therefore, there is
only a reasonable assurance against fraud,
misstatements or losses to the Company.
The Board is ultimately responsible for the
identification and assessment of risk as well
as for monitoring the key risks to the
Company on an ongoing basis. In order to
identify andassess key risks to the Company,
the Directors rely on a risk matrix prepared
and maintained by the Investment Manager
and reviewed by the Board on a quarterly
basis. The risk matrix identifies risks
categorised bythe principal risks and
uncertainties. Theprincipal risks identified
by the Board areset out on pages 43-44.
The Board also monitors the outlook of the
key underlying risks to assess future risk
areas. As of 31 December 2022, the Board
identified several underlying risks which
were determined to have an elevated or
high risk outlook. These risks included
sovereign and political factors, the general
market environment and rising interest
rates, and risks related to the potential for
ongoing elevated inflation. In addition,
while no successful cyber attacks had
occurred, the board acknowledged the
potential for cyber attacks were an elevated
and continuing risk.
The Board considers emerging risks as those
which can be identified in the current
environment, but which are inherently
longer-term in nature or uncertain as to
theirtiming. The Board further recognises
emerging risks are difficult to quantify and
highly uncertain as to if and when they may
impact the Company and to what extent.
However, the Board considers a number
ofemerging risks to the Company, which
include: the general market environment
and impacts from inflation and rising
interest rates, geopolitical risks, the share
price discount to NAV, and cyber risks. The
Board believes the Company is mitigating
these risks to the extent possible and noted
the robust investment and portfolio
monitoring procedures by the Manager to
understand the operating environment of
portfolio companies, including dialogues
with lead private equity managers.
Risk management framework
Investment
Committee
**
Valuation
Committee
**
Investment
Risk Committee
Operational
Risk Committee
NBPE Board of Directors
NBPE Audit Committee
Investment Manager: NB Private Markets
*
Independent assurance Internal audit
Independent control units
that collaborate
Infrastructure
Technology
Business
Technology
Operations
Finance
Legal
Compliance
Asset
Management
Guideline
Oversight
Investment
Risk
Operational
Risk
Independent
teams which
collaborate to
identify and
mitigate risk
* NB Private Markets is a general description of the business of the Investment Manager, NB Alternatives
Advisers LLC; there has been no change to the Investment Manager of NBPE
** Highlights represent committees of the Investment Manager; other committees presented above are
resources of the parent company, Neuberger Berman, of the Investment Manager
42
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Principal risks and uncertainties
Principal risks and uncertainties
The table below shows a summary of the key underlying risks within each of the five principal risks and uncertainties identified by the Board.
The status below shows whether the principal risks are increasing, decreasing or not changing compared to the previous year.
Key risks Potential Impact Key Controls Assessment
Investment risk
Investment decisions – Selecting investments to generate the
best risk adjusted returns
Sub-optimal risk-return investment decisions could
lead the Company to higher risk investments to
generate a desired level of return.
Highly experienced Manager with deep team
Extensive due diligence process
ESG-integrated investment process
Thorough investment underwriting and
duediligence
Regular Board review of Manager performance,
operations and capabilities
Robust, consistent valuation processes
Monthly NAV updates
Quarterly valuation review
Annual audit and semi-annual review
Manager review of portfolio and monitoring
offoreign exchange exposure when analysing
new investments, if applicable
Performance – Achieving underwriting case and meeting
long-term objectives
Inconsistent investment performance would
impact the Company’s financial position.
Valuations – Misstatements to NAV The valuation of investments directly impacts the
Company’s financial position, key ratios/covenants
and performance.
Foreign exchange – Fluctuations of exchange rates of non-USD
investments in local currency relative to USD
Fluctuations of exchange rates can impact
performance when translated to dollars.
Financial risk
Liquidity management – Inadequacy of cash balances for
short-term needs
Credit facility Availability of borrowings and maintenance
ofcovenants
ZDP liabilities – Ability to repay at maturity
Foreign exchange – Fluctuations in GBP/USD exchange rate for
Sterling denominated liabilities
Poor management of near-term cash requirements
and of credit facility borrowings impacts the
Company’s ability to make new investments and
carry out day-to-day operations.
The Company’s 2022 ZDPs were fully repaid
atmaturity in September 2022, de-risking the
Company’s balance sheet. The remaining ZDP
securities mature in 2024.
Company’s creditworthiness would be materially
impacted bynot meeting liabilities when they
come due.
Monitoring of cash balances
Review of management reports and financials
Monitoring of headroom and financial ratios
Monthly calculations of liability
Known final capital entitlement and
maturitydate
Ability to fully or partially hedge currency risk
through forward currency contracts
43
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Principal risks and uncertainties
Key risks Potential Impact Key Controls Assessment
Strategic risk
Share price discount – Monitoring of share price discount to NAV
Meeting business objectives – Ability to meet business and
investment objectives in current environment
A failure within strategic risks could impact the
Company’s reputation and performance.
Over time, the Company has completed a number
of initiatives aimed at enhancing shareholder value
and narrowing the discount, from portfolio
construction, investor relations initiatives, dividend
policy and share buybacks.
Monitoring discount and review market research
Strategic investor relations programme
Periodic review of appropriateness of investment
objective and policy
Appointed Jefferies in October 2022, at their sole
discretion, to repurchase shares, based on criteria
set by the board
Operational risk
Legal/Compliance – Investment activity legal risks, including
investing within policy limits and compliance with regulations
Litigation – Legal action brought against the Company or Board
Business operations and continuity – Day-to-day operations
and management of the Company. Frameworks for business
continuity
Internal policies and procedures – Policies and procedures of
Investment Manager and key service providers of the Company
Governance – Company governance and oversight by the Board
Key professionals – Retention of key staff
Legal and compliance risks and the potential of
litigation action creates significant risk and
uncertainty if brought against the Company,
Boardor Manager.
Company operations are carried out by the
Investment Manager and the Administrator; a
negative event at either could impact the
Company’s ability to operate day to day.
Policies and procedures at key service providers
designed to reduce or mitigate risks to the
Company as a policy violation could be impactful.
The Board oversees all aspects of the Company.
The Company itself has no operations or
employees and instead relies on that of key service
providers. A loss of key professionals could impact
the ability of the Company to operate.
Reliance on in-house legal teams of the Manager
and external counsel
Legal negotiations and procedures to ensure
adherence to investment guidelines
Reliance on operational staff of the Manager and
fund administrator
Reviews of service providers to ensure control
environments are adequate
Business Continuity Plans of Manager and
administrator
Policies and procedures of the Manager and
service providers and internal controls designed
to pick up potential issues
Assessment processes; review of best practices
Resources of the Manager for attracting and
retaining talent
External risk
Sovereign/Political risks – Changes in economical and
politicalenvironment
General market/Investment environment
– Changes in marketor regulatory environment
– Inflationary environment and supply chain risks
– Interest rate environment
COVID-19 – Potential further risks related to COVID-19
External risks impact the Company’s investment
portfolio to varying degrees, which could have
animpact on the Company’s performance.
External risks are inherently difficult to forecast
andimpacts are uncertain. Impacts to supply
chains and the inflationary environment in 2022
posed certain operating challenges during the
year. Further, portfolio companies are adapting to
higher interest rate environment, given elevated
inflationary pressures.
While mitigated in 2022 relative to prior years,
potential risks related to COVID-19 remain.
The Board and Manager are aware of the general
market environment and global risks generally
Risk mitigation is difficult, other than during the
investment analysis phase prior to making a
newinvestment
Investment Manager maintains discussions with
underlying general partners to assess and
understand potential exposure/degree of impact
Consultation with other outside advisors
44
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Going concern and Viability Statements
Going concern and Viability Statements
Going concern
The Group’s principal activities and
investment objectives are described on
pages 59 and 62 of the Report, and the
Group’s financial position is stated on page
78 of theReport. Note 11 of the
Consolidated Financial Statements
describes the Group’s risks with respect to
market, credit and liquidity risk. On page 90
of the report, the Group’s liquidity and
available borrowing facilities are described.
The Group’s cash flows are provided on
page 82 of the Report. Given the Group’s
cash flows and financial position, the
Directors believe the Group has the
financial resources to meet its financial
commitments as they fall due.
Therefore, having considered a 12-month
horizon from the date of authorisation of
this annual financial report, the Directors
have a reasonable expectation that the
Group has adequate resources to continue
to operate into the foreseeable future and
accordingly the Consolidated Financial
Statements have been prepared on a going
concern basis.
The Directors have selected a three-year
window for evaluating the potential impact
to the Group on the following basis:
Investments are subject to overall
financial market and economic
conditions. Projecting long-term financial
and economic conditions is inherently
difficult, but a three-year window is a
reasonable time horizon.
Value creation plans are executed over
anumber of years and private equity
managers generally take a longer-term
view on performance, rather than a focus
on “quarterly earnings”; three to five years
is a typical holding period target for
private equity managers.
Medium-term outlook of underlying
Company performance is typically
assessed for valuation purposes.
The Company fully repaid the 2022 ZDP
Shares at maturity and the remaining class
of ZDP Shares will not mature until October
2024. The Group’s ability to refinance or
repay the 2024 ZDPs isa medium-term risk
as they mature within the three-year
forecast period. The Company has no other
financings maturing within the three-year
forecast period.
Based on the 31 December 2022 GBP/USD
exchange rate of $1.20, the final capital
entitlement of the 2024 ZDP Shares is
approximately $78 million. To evaluate the
Company’s financial position, the Directors
reviewed a financial model prepared by the
Investment Manager. The financial model
includes projections of cash flows,
expenses and liabilities, as well as NAV
growth assumptions to evaluate loan to
value and coverage test ratios.
The Board believes the Company is in a
healthy financial position and able to meet
upcoming liabilities when they mature.
TheDirectors further note the Company’s
$300 million revolving credit facility was
fully undrawn as of 31 December 2022.
Further, the borrowing availability period
extends to 2029, beyond the maturity of
the 2024 ZDP Shares. The Board noted the
credit facility could be used in whole or in
part (based on availability) to repay the
2024 ZDP Shares.
Viability Statement
The Board has evaluated the
long-term prospects of the
Group, beyond the 12-month
time horizon assumption
within the going concern
framework. Further details of
the forecast and the process
for assessing long-term
prospects of the Group are
set out below and the Board
believes this analysis provides
a reasonable basis to support
the viability of the Group.
45
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Going concern and Viability Statements
However, the Directors recognise that
overall market conditions represent a
continued risk and uncertainty for the
Company. In light of this, the Manager
prepared a second forecast case which was
a downside case scenario, indicative of a
deep recession and slow recovery. This case
assumed a 10% NAV decline in 2023 and no
growth in 2024 and2025. Further, this case
only assumed $52 million of realisations
during 2023, ofwhich $37 million had been
received through Q1 2023. 2024 and 2025
assumed only a limited amount of
realisations belowhistorical averages.
The key findings from this analysis and
discussions with the Manager was that, in
both cases, NBPE could continue to fund its
existing commitments, pay dividends and
ongoing expenses and have borrowing
capacity available to repay the 2024 ZDPs
atmaturity. The downside case showed
ahigher investment level in later periods
ofthe forecast (as a result of the decline
invaluations). Over the forecast period of
the downside case, NBPE maintained
ample liquidity and LTV ratios; in addition,
the 2024 ZDPs had a healthy coverage
cushion. In light of this analysis, the
Directors concluded the Company could
continue to operate over the three-year
viability window.
The Manager discussed the key financial
assumptions and findings of the model
with the Board. The model forecasts returns
and cash flows on an asset-by-asset basis
toevaluate cash and investment pacing
considerations and the Manager selected
two cases to evaluate the viability of the
Company over the three-year window.
Both cases included expected realisations
from signed but not yet closed transactions.
The base case made further assumptions
ofNAV growth and additional realisations,
both of which were below the long-term
averages of the Company. The model also
assumed a certain pace of re-investment,
based on the level of realisations from the
portfolio. The Manager views this as a
reasonable case to evaluate the prospects
of the Company even in the current
economic environment.
46
STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER NB Private Equity Partners Annual Report 2022
Governance
48 Governance overview
49 The Board
51 Governance
59 Directors’ Report
62 Investment Objective and Policy
63 Remuneration Report
66 Report of the Audit Committee
71 Statement of Directors’ Responsibilities
Governance
47
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance overview
Board structure and Committees
Board of Directors
William Maltby
Chairman, Independent Director
Wilken von Hodenberg
Senior Independent Director
Trudi Clark
Independent Director
John Martyn Falla
Independent Director
Louisa Symington-Mills
Independent Director
Audit Committee
John Martyn Falla
C
Trudi Clark
Wilken von Hodenberg
Louisa Symington-Mills
Provides oversight and reassurance
totheBoard, specifically with regard to
the integrity of the Company’s financial
reporting, audit arrangements, risk
management, and internal control
processes and governance framework.
Management Engagement Committee
Trudi Clark
C
John Martyn Falla
William Maltby
Wilken von Hodenberg
Louisa Symington-Mills
Reviews annually the terms of the
Investment Management Agreement.
Additionally, the Committee reviews
theperformance and terms of
engagement of other key service
providers to the Company.
Nomination and Remuneration Committee
Trudi Clark
C
John Martyn Falla
William Maltby
Wilken von Hodenberg
Louisa Symington-Mills
Assists the Board in filling vacancies on
the Board and its committees and to
review and make recommendations
regarding Board structure, size and
composition. Additionally, the Committee
reviews the remuneration of the
Chairman and Non-Executive Directors.
Good corporate governance
isfundamental to the way
NBPEconducts business.
Effective oversight of strategy and risk
isparticularly important to promote the
long-term success of the Company.
The Chairman is responsible for ensuring
that the Board upholds a high standard
ofcorporate governance and operates
effectively and efficiently, promoting
aculture of openness and debate.
The Board seeks to be responsive to both
the evolving regulatory environment and
changing expectations about the role of
business in society. In particular, the Board
seeks to ensure that its own culture and
that of the Manager are aligned with the
Company’s purpose and values, and that
the Company has the necessary service
providers with the appropriate financial
and human resources to deliver its strategy.
William Maltby
Chairman
Committee Chair
Gender
60% Male
40% Female
››
P66
››
P49
››
P56
››
P57
C
48
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
The Board
The Board
William Maltby
Chairman, Independent Director
M
N&R
Appointed 21 March 2019
Background and experience
William Maltby was vice chairman of Investment Banking at Deutsche
Bank where he worked for more than 25 years. Mr. Maltby spent a
further six years as a Senior Adviser to the Investment Banking
Division of Deutsche Bank. Mr. Maltby was a corporate financier
specialising in financial sponsors and leveraged finance, and was
head of Deutsche Banks European Financial Sponsor Coverage and
Leveraged Finance businesses. He joined Morgan Grenfell in 1984
which was acquired by Deutsche Bank in 1989.
Mr. Maltby was chairman of Mithras Investment Trust Plc, a private
equity fund of funds investment trust listed on the London Stock
Exchange from 2012 to 2018, when it completed a successful
realisation strategy.
Mr. Maltby is also chairman of Ekins Guinness LLP. He qualified as a
Chartered Accountant with Peat Marwick and has a law degree from
the University of Cambridge.
Contribution to NBPE
Mr Maltby’s expertise brings a wealth of knowledge of listed
investment trusts, investment banking and private equity to the
Board, in addition to being an experienced and effective Chairman.
Other public directorships
Mr Maltby has no other public directorships.
Wilken von Hodenberg
Senior Independent Director
M
A
N&R
Appointed 21 March 2019
Background and experience
Wilken von Hodenberg is a businessperson with 39 years of
experience in private equity, investment banking and senior
management. Mr. von Hodenberg has been at the head of five
different entities and for some years occupied the position of
chairman of German Private Equity & Venture Capital Association.
Mr. von Hodenberg was a member of the Supervisory Board for
Deutsche Beteiligungs AG from 2013 until February 2020. He is also
anon-executive director of eCapital Entrepreneurial Partners AG;
Mr.von Hodenberg became vice chair of Wepa SE in April 2022.
From 2000-2013 Mr. von Hodenberg was CEO of Deutsche
Beteiligungs AG. Mr. von Hodenberg also served as a managing
director of Merrill Lynch in Frankfurt (1998-2000). Prior to this
Mr.vonHodenberg was managing director at Baring Brothers GmbH
(1993-1997). From 1990-1992 he was CFO of Tengelmann Group,
amajor German retailing group. He started his career at JPMorgan
inNew York and Frankfurt (1983-1989). Mr. von Hodenberg holds
aLawdegree from the University of Hamburg.
Contribution to NBPE
Mr von Hodenberg’s private equity investment expertise is highly
valuable for Board discussions and of particular relevance for
theCompany.
Other public directorships
Sloman Neptun AG.
The Board is responsible for
oversight of NBPE, and for
effective stewardship of the
Companys affairs.
Matrix of skills and experience
Board member
Investment
Trusts
Private
Equity
Asset
Management
Investment
Banking
Finance/
Audit
William Maltby
Wilken von Hodenberg
Trudi Clark
John Martyn Falla
Louisa Symington-Mills
M
Management Engagement Committee
A
Audit Committee
N&R
Nomination and RemunerationCommittee
Committee chair
49
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
John Martyn Falla
Independent Director
M
A
N&R
Appointed 21 December 2015
Background and experience
John Falla, a resident of Guernsey, is an Associate of the Institute of
Chartered Accountants in England and Wales. Mr. Falla has a degree
in Property Valuation and Management from City University London
and is a Chartered Fellow of the Chartered Institute for Securities and
Investment, holding their diploma. Mr. Falla qualified as a chartered
accountant with Ernst and Young in London, before transferring to
their Corporate Finance Department, specialising in the valuation of
unquoted shares and securities, including private equity holdings.
OnMr. Falla’s return to Guernsey in 1996, he worked for an
International Bank before joining The International Stock Exchange
(formerly Channel Islands Stock Exchange) in 1998 on its launch as
amember of the Market Authority.
In 2000, Mr. Falla joined the Edmond de Rothschild Group.
Althoughbased in Guernsey, he provided corporate finance advice
tointernational clients including open and closed-ended funds,
andinstitutions with significant property interests. Mr. Falla was
alsoa director of a number of Edmond de Rothschild operating and
investment entities. Mr. Falla has been a non-executive director of
London listed companies for a number of years, and is now a full-time
non-executive director and consultant.
Contribution to NBPE
Mr Falla has significant expertise as an accountant and as a
non-executive director of listed companies for over 10 years, both
ofwhich contribute to his role as a non-executive director of the
Company and as Chair ofthe Audit Committee.
Other public directorships
Marble Point Loan Financing Limited and Baker Steel Resources
TrustLimited.
Trudi Clark
Independent Director
M
A
N&R
Appointed 24 April 2017
Background and experience
Trudi Clark qualified as a chartered accountant with Robson Rhodes
in Birmingham, after graduating in Business Studies. Moving to
Guernsey in 1987, Ms. Clark joined KPMG where she was responsible
for an audit portfolio including some of the major financial
institutions in Guernsey. After 10 years in public practice, Ms. Clark
was recruited by the Bank of Bermuda as Head of European Internal
Audit, later moving into corporate banking. In 1995 Ms. Clark joined
Schroders in the Channel Islands as CFO. Ms. Clark was promoted in
2000 to Banking Director and Managing Director in 2003.
From 2006 to 2009, Ms. Clark established a family office, specialising
in alternative investments. From 2009 to 2018, Ms. Clark returned
topublic practice specialising in corporate restructuring services.
Ms.Clark has several non-executive director appointments for
companies both listed and non-listed investing in property, private
equity and other assets.
Contribution to NBPE
Ms Clark has significant expertise in both accountancy and Guernsey
regulations, as well as being an experienced non-executive director
of public companies, all of which have proven beneficial to both the
Board and its Committees.
Other public directorships
BMO Commercial Property Trust Limited, The Schiehallion Fund
Limited and Taylor Maritime Investments Ltd.
Louisa Symington-Mills
Independent Director
M
A
N&R
Appointed 15 June 2021
Background and Experience
Louisa Symington-Mills has extensive experience of the listed private
equity sector. She was a listed alternative investment funds equity
research analyst at Royal Bank of Scotland and Jefferies, with a
particular focus on listed private equity investment companies.
Shehas played a key role in increasing awareness and understanding
of listed private equity.
She subsequently became chief operating officer at LPEQ (now
partofInvest Europe), an international association of listed private
equity companies, and is now an award-winning entrepreneur.
MsSymington-Mills began her career at M&G Investment
Management in 2003 and has an English Literature degree from
theUniversity of Durham.
Contribution to NBPE
Ms Symington-Mills’ experience in listed private equity, and as a
research analyst, provides a depth of insight to the Board during
meetings . Her input is particularly valued during discussions with the
Company’s corporate brokers and other investor relations advisers.
Other public directorships
Ms Symington-Mills has no other public directorships.
The Board
50
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance
The Board of NBPE has considered the
Principles and Provisions of the AIC Code
ofCorporate Governance (“AIC Code”).
TheAIC Code addresses the Principles and
Provisions set out in the UK Corporate
Governance Code (the “UK Code”), as well
as setting out additional Provisions on
issues that are of specific relevance to NBPE.
The Board considers that reporting against
the Principles and Provisions of the AIC Code,
which has been endorsed by the Guernsey
Financial Services Commission, provides
more relevant information to shareholders.
The AIC Code is available on the AIC
website (www.theaic.co.uk). It includes an
explanation of how the AIC Code adapts
the Principles and Provisions set out in the
UK Code to make them relevant for
investment companies.
Composition and
independence
The Board comprises five Non-Executive
Directors. The Board regularly reviews the
independence of its members and, having
due regard to the definitions and current
guidelines on independence under the
AICCode, considers all Directors to be
independent and confirms that the
Chairman was independent on
appointment and has remained so during
his tenure. Biographies of each Director
canbe found on pages 49 to 50.
The Company does not have a chief
executive officer and day-to-day
management of the Company has been
delegated to the Investment Manager
bythe Board.
Role of Senior
IndependentDirector
The Senior Independent Director (“SID”)
works closely with the Chairman and
ensures each of the Non-Executive
Directors’ concerns are heard and is
available to attend meetings with a range
of major shareholders to understand
potential concerns. The Board has
appointed Wilken von Hodenberg
tofillthisrole. The SID Roles and
Responsibilities Policy can be found
ontheCompanys website.
The Company has complied with the
Principles and Provisions of the AIC Code,
except as set out below:
The role of the chief executive;
Executive Directors’ remuneration; and
The need for an internal audit function.
The Board considers these provisions
arenot relevant to the position of NBPE,
beingan externally managed investment
company. In particular, all of the Companys
day-to-day management and administrative
functions were outsourced to third parties.
As a result, the Company has no executive
directors, employees or internal operations.
The Company has therefore not reported
further in respect of these provisions.
The Company is also subject to the
Alternative Investment Fund Managers
Directive (“AIFMD”) and has a
managementagreement with NB
Alternatives Advisers, LLC (the “Investment
Manager” or the “Manager”) to act as its
Alternative Investment Fund Manager
(“AIFM”). The Bank of New York acts as
itsdepositary, in accordance with the
requirements of the AIFMD.
Induction and training
Directors are provided, on a regular basis,
with key information on the Company’s
policies, regulatory requirements and its
internal controls. Regulatory and legislative
changes affecting Directors’ responsibilities
are advised to the Board as they arise, along
with changes to best practice by, among
others, the Company Secretary and the
Auditors. Advisers to the Company also
prepare reports for the Board from time
totime on relevant topics and issues.
Inaddition, directors attend relevant
seminars and events to allow them to
refresh their skills and knowledge and keep
up with changes within the investment
company industry.
When a new Director is appointed to the
Board, he/she is provided with relevant
information regarding the Company
andtheir duties and responsibilities as
aDirector. In addition, the new Director
alsospends time with representatives
ofthe Company Secretary and the
Investment Manager in order to learn
moreabout their processes and procedures.
Corporate governance
The Directors believe in
strong corporate governance
and are committed to the
appropriate standards of
corporate governance.
51
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance
The induction process covers a number
ofkey business areas and teams, including:
meetings with the Board and Chairman to
discuss the Companys business, operations
and governance; meetings with the
Company’s investment advisor to look
atthe Companys portfolio, investment
management and operations; meetings
with the Company’s administrator to
discuss legal and regulatory obligations
and requirements, processes and
governance generally; meetings with the
Company’s corporate brokers to discuss
investor perceptions, capital markets,
andthe development of the Company’s
shareholder base; and meetings with the
Company’s Auditors and PR advisors.
The Board provides appropriate training to
all new Directors, which includes training
on their duties, including those under
Section 172 of the UK Companies Act 2006,
and provides refresher courses from time to
time. When a new Director joins the Board,
they receive regular and ongoing training,
including details of all regulatory and legal
duties as a director of a Guernsey domiciled
investment company listed on the Main
Market of the London Stock Exchange.
Furthermore, the Chairman reviews the
training and development needs of each
Director during the annual Board
evaluation process.
Performance evaluation
In accordance with the AIC code, the
Company undergoes an annual evaluation
of the Board’s performance, its committees,
the Chair and the individual Directors.
Thisprocess takes place in the form of
questionnaires and discussion and helps
ensure that the Board’s operations remain
aligned with the culture, purpose and
values of the Company, and help identify
areas for improvement. The Senior
Independent Director leads the appraisal
ofthe Chairman’s performance.
In 2022, an external review of the Board’s
performance took place. This external
evaluation was undertaken by Fletcher
Jones Limited, whoare independent from
the Board and the individual Directors.
Thelead evaluator received briefings from
the Chairman before reviewing all Board
and Committee materials from the prior
year. A detailed bespoke questionnaire
wasissued to each Director as well as a
number of employees of the Manager,
whoregularly present, engage with or
observe meetings of the Board or one or
more of the Committees. Each participant
then met with the evaluators to discuss
points raised. The evaluator also attended
aBoard meeting.
The independent review raised no
substantive issues and concluded the
Boardis well managed and an effective
Boardthat works well together. Discussions
are transparent and clear and the Board
operated with skill and focus on all areas
ofimportance. The evaluation did
nothighlight any material weaknesses or
concerns. A small number of areas were
identified for further focus, including
succession planning, adding a further
skillset to the board and expanding the
investor relations resource in London.
TheBoard welcomed all recommendations
provided by Fletcher Jones and intends to
proceed accordingly, particularly in
reference to the succession planning for
theChair of the Audit Committee.
Directors’ time
commitments
At the time a new Director is appointed to
the Company, consideration is given to his
or her time commitments and availability
inorder to fulfil the role. A schedule of each
Directors’ appointments is tabled quarterly
for each Board meeting. In the year under
review, all directors were considered to
have sufficient time to commit to their
respective roles on the Board, taking
account of their external appointments.
Diversity and inclusion
The Board ‘s ongoing objective is to have
anappropriately diversified representation
bygender, ethnic background, skills
andexperience.
The Board welcomes and supports the
recently updated Listing Rules, on a
complyor explain basis, reflecting the
recommendations set by both the
Hampton-Alexander Review on gender
diversity and the Parker Review regarding
minority ethnicity representation on
boards. The Board currently has two female
Directors making the gender balance 40%
female and 60% male. The Board is
cognisant that a female director does not
currently hold one of the senior positions
(that are appliable to the Company) of
either the Chair or the Senior Independent
Director, but notes Trudi Clark chairs
boththe Management Engagement
Committee and Nomination and
Remuneration Committee. The Board is
also cognisant that, at the present time,
there is no representation from a minority
ethnic background.
52
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance
Tenure of Non-Executive
Independent Directors
Each Non-Executive Director is appointed
by a letter of appointment on an ongoing
basis, and shareholders vote on whether
toelect/re-elect him or her at every AGM.
ANon-Executive Director will only be
proposed for re-election at an AGM if the
Board is satisfied with the Non-Executive
Directors performance, independence
andongoing time commitment.
The Board has adopted a policy on tenure
that is considered appropriate for an
investment company. The Board does not
believe that length of service, by itself,
leadsto a closer relationship with the
Investment Manager or necessarily affects
a director’s independence. The Board’s
tenure and succession policy seeks to
ensure that the Board is well balanced and
will be refreshed from time to time by the
appointment of new Directors with the
skills and experience necessary to replace
those lost by Directors’ retirements.
Directors must be able to demonstrate their
commitment to the Company. The Board
seeks to encompass past and current
experience of various areas relevant to the
Company’s business.
Chair Tenure Policy
The Companys policy on Chair tenure
isthat the Chair should normally serve
nolonger than nine years as a Director
but,when it is in the best interests of the
Company, shareholders and stakeholders,
the Chair may serve for a limited time
beyond that. Such circumstances may
include, but not be limited to, periods of
succession planning or to provide stability
during a period of major change in the
Company. In such circumstances, the
independence of the other Directors
willensure that the Board as a whole
remains independent.
Role of the Board
It is the responsibility of the Board to ensure
that there is effective stewardship of the
Company’s affairs. Strategic issues are
determined by the Board. A formal
schedule of operational matters reserved
for the Board has been adopted in order to
enable it to discharge its responsibilities,
and enable directors to have full and timely
access to relevant information.
The Board acknowledges the importance
of gender and minority ethnic diversity
within the Boardroom. Whilst all future
appointments will be made based on merit,
the consideration of the Boards diversity
will form an integral part of succession
planning. The Board’s long-term succession
plan takes account of future retirements
ofdirectors upon reaching nine years
ofservice and the skills that they bringthat
will need replacement. TheBoard
envisages that successors will besought
ahead of retirements to allow foran
appropriate handover period with minimal
disruption. As part of this planning, the
Board will be appointing a search
consultant in the coming months for the
appointment of one new non-executive
director, and while, at the date of this
report, the composition of the Board is
notwholly compliant with the Financial
Conduct Authority’s diversity rules, the
Board is seeking to be fully compliant by
theend of 2024.
Gender diversity
Director
Number
ofBoard
members in
scope
Percentage
ofthe Board
Number
ofsenior
positions on
the Board
(CEO,CFO, SID
and Chair)*
Men 3 60% 2
Women 2 40% 0
Not specified/prefer not to say 0 0% 0
* As the roles of CEO and CFO are not applicable for investment trusts, this criteria cannot be met in full.
Ethnic diversity
Of the five board members, 100% are from White British or other White backgrounds
at31December 2022.
53
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance
In the unlikely event of any Directors being
unable to attend Board or Committee
meetings, the relevant Directors would be
contacted by the Chairman before and/or
after the meeting to ensure they are aware
of the issues being discussed and to obtain
their input.
Company Secretary
The Directors also have access to the advice
and services of the Company Secretary,
Ocorian Administration (Guernsey) Limited,
which is responsible to the Board for
ensuring the timely delivery of information
and reports and for ensuring that statutory
obligations of the Company are met.
Ocorian Administration (Guernsey) Limited,
an affiliate of First Directors Limited (the
“Trustee”), provides certain administrative
functions relating to certain corporate
services and Guernsey regulatory matters
affecting the Company.
Flow of information
The Company places a great emphasis
onthe flow of information from the
Investment Manager to the Board, ensuring
that the Directors have relevant
information to make informed decisions for
the benefit of the shareholders. Alongside
the quarterly meeting, the Board often
meets on an ad hoc basis as needed to
discuss other Company matters, such as
dividend payments. The Manager provides
the Board with key information regarding
the underlying investments, ideas for new
initiatives that will help drive shareholder
value and continual feedback from
shareholders. This information assists the
Board’s evaluation of the Companys Key
Performance Indicators, found on pages 27
and 28 of the Strategic Report.
The Investment Managers report to the
board included:
Investment performance and portfolio
composition: the Board reviewed detailed
performance of underlying portfolio
company investments as well as detailed
analysis on the underlying portfolio
composition as a whole. The Board
evaluated the portfolio to assist in
decisions regarding dividends paid
bytheCompany.
Company financial position and net asset
value (NAV): the Board reviewed the
Company’s financial position and the
performance of the Company’s NAV.
Returns information: the Board evaluated
both the NAV per share return and the
NAV total return, including the
Company’s dividends.
The Board gives feedback on all relevant
items discussed to help achieve success
forthe benefit of shareholders as a whole.
Furthermore, the Board has access to
theadvice and services of the Company
Secretary, brokers and lawyers and any
other advisers as deemed necessary,
attheexpense of the Company, to
discharge their responsibilities properly.
Board meetings and
meeting attendance
The Board meets at least four times a year
to discuss Company developments and
ongoing activities. This includes reviewing
and evaluating the dividend, monitoring
and adapting, as necessary, the investment
strategy, and reviewing the financial and
investment performance of the Company.
The Investment Manager and the
Company’s Administrator furnish the
Directors with relevant materials, including
investment reports, risk analysis and other
documents in a timely manner prior to each
Board meeting. In addition, an agenda is
circulated to the Directors prior to the
meeting and the Directors may consider
additional topics for discussion prior to
each Board meeting. Representatives from
the Investment Manager attend the
meetings to report to the Board on relevant
updates regarding investment
performance and investment activities.
Other service providers to the Company are
invited to speak at Board meetings on
relevant matters, as necessary. In addition
to the four quarterly Board meetings,
therewere other ad hoc Board meetings
throughout the year to approve various
documentation, dividend payments, and
other matters. The quorum for any Board
meeting is two Directors but attendance
byall Directors at each meeting is
stronglyencouraged.
During 2022, there were four quarterly Board meetings. Attendance by the Directors at
these meetings and other committee meetings during the year is below:
Director Board Meeting
Audit
Committee MEC NRC
4 3 1 1
William Maltby 4 3 1 1
John Martyn Falla 4 3 1 1
Trudi Clark 4 3 1 1
Wilken von Hodenberg 4 3 1 1
Louisa Symington-Mills 4 3 1 1
54
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance
The Board recognises that much of the
decision making, particularly with respect
to underlying investments, is delegated
totheInvestment Manager as per the
Investment Management Agreement;
however, the Board regularly reviews
information to ensure decisions are in line
with the overall strategy set by the Board.
The Board also reviews service provider
contracts, including the Investment
Managers, annually to ensure terms
ofthecontract are executed and remain
inthebest interest of shareholders.
Director indemnity
To the extent permitted by the Companies
(Guernsey) Law, 2008 (as amended),
theCompany’s Articles of Incorporation
indemnify the Directors out of the
Company’s assets from and against all
liabilities in respect of which they may be
lawfully indemnified, except for any liability
(if any) as they shall incur or sustain by or
through their own wilful act, negligence
ordefault.
During the year, the Company has
maintained insurance cover for its Directors
and officers under a directors and officers
liability insurance policy.
Disclosures required under
LR 9.8.4R
The Financial Conduct Authoritys Listing
Rule 9.8.4R requires that the Company
includes certain information relating to
arrangements made between a controlling
shareholder and the Company, waivers of
directors’ fees, and long-term incentive
schemes in force. The Directors confirm
thatthere are no disclosures to be made
inthis regard.
Conflicts of interest
The Company has adopted a policy
requiring Directors to disclose any conflicts
of interest, including those resulting from
significant shareholders in the Company
oran investee company and other
directorships, shareholdings or historic
employment linked to the Investment
Manager. In accordance with the policy,
anysuch conflicts require approval from
theremainder of the Board. A list of each
Director’s directorships are tabled at each
quarterly meeting and the Board considers
any potential arising conflicts at each Board
meeting held prior to proceeding with any
business. Currently there are no material
conflicts in respect of any Director.
Anti-bribery and
corruption policy
The Manager has processes in place to
ensure that bribery and corruption do
nottake place within the Manager or
theCompany. These include formal
policiesand regular training for all staff.
TheBoard has reviewed these processes
and found them adequate.
Environmental policy
Due to the Company’s premium listing on
the London Stock Exchange, the Company
is required to disclose its environmental
policy. As an investment company, NBPE
isnot required to report against the Task
Force on Climate-Related Financial
Disclosures (TCFD”) framework, however,
understanding and managing climate-
related risks and opportunities based on
the TCFD´s recommendations is part of
theInvestment Manager’s Responsible
Investment Policy.
Further information on the social and
environmental policies of the Manager can
be found in the Environmental, Social and
Governance section on pages 29 to 33
andin the Manager’s ESG report, which
canbe found on the Company’s website
https://www.nbprivateequitypartners.
com/en/responsible-investing.
Whistleblowing policy
andarrangements
The Board and the Audit Committee have
been made aware of the processes the
Investment Manager has in place to ensure
that staff of the Investment Manager may
in confidence raise concerns about possible
improprieties in matters of financial
reporting or other matters and ensure
thatarrangements are in place for the
proportionate and independent
investigation of such matters and follow-up
action. The Investment Manager has
established and implemented processes.
These include formal policies and regular
training for all staff. The Board was satisfied
that the processes in place are appropriate.
55
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance
Board committees
The terms of reference for all committees
described below are available on the
Company’s website.
Management Engagement
Committee
The Management Engagement Committee
(“MEC”) comprises all of the Directors and
ischaired by Ms. Clark. The MEC meets at
least once a year pursuant to the
Committee’s Terms of Reference, and at
other times as required by the Board.
The principal duties of the MEC are to:
Review the terms of the Investment
Management Agreement, as well as any
other key service providers;
Propose any changes to the terms of the
Investment Management Agreement,
orthat of any other key service provider
agreement that it considers necessary
and desirable as a result of its review;
Review the fees payable to the Investment
Manager to ensure that it does not
encourage excessive risk and that it
rewards demonstrable superior
performance;
Review the overall performance of the
Investment Manager and other key
service providers;
Satisfy itself that the duties of the parties
as set out in the relevant agreements are
being performed as required;
Consider any changes proposed by the
parties to the terms of the relevant
agreements and to review, at the intervals
provided for in the agreements, the
amount and terms of payment of the
parties’ remuneration;
Consider any specific matters relating to
the engagement of the parties which the
Board may request;
Report to the Board on its conclusions
andto make recommendations in respect
of any matters within its remit; and
Ensure that service providers are not
operating conflicts of interest in
accordance with Authorised Closed
Ended Investment Scheme Rules.
The Company has agreements with service
providers, the following of which are
considered significant:
NB Alternatives Advisers LLC, as
Investment Manager, pursuant to an
Investment Management Agreement
MUFG Capital Analytics LLC, as
Administrator
Ocorian Administration (Guernsey)
Limited, as Company Secretary and
Guernsey Administrator
Link Market Services, as Registrar
Jefferies and Stifel, as joint Corporate
Brokers
Herbert Smith Freehills and Carey Olsen,
as Legal Counsel
Kepler Partners, as Marketing advisor
Kaso Legg Communications as Public
Relations Advisor
AS&I Consulting Limited, as Investor
&Communications Advisor
PricewaterhouseCoopers Dallas,
asTaxAdvisor
Information regarding the consolidated
fees paid to service providers can be found
on Note 10 to the Financial Statements.
During 2022, the MEC conducted a review
of the key service providers, including the
Investment Manager. The MEC invited
eachof the key service providers to give
theBoard a self-assessment review of their
performance during the year, through a
questionnaire. The Directors reviewed each
of the questionnaires and held a discussion
regarding the performance of each of the
Company’s key service providers, level of
service and service contracts. Following this
discussion, the MEC was satisfied with the
level of service the Company was receiving
from each of the key service providers.
Onsite meeting with
NeubergerBerman
In October 2022, the Directors met with
representatives of the Investment Manager
and other external advisors at Neuberger
Berman’s headquarters in New York, NY.
Over the course of two days, the Directors
met senior Neuberger Berman
professionals in key service areas for the
Company, including: investment
management, internal audit, risk,
valuations, and legal and compliance.
Aspart of the meetings related to
investments and the Company’s focus
onco-investments, the Directors met
keysenior members of the Investment
Managers Co-investment Platform and
held detailed discussions around strategy,
sourcing, the investment legal process,
managing conflicts, allocations, and
investment monitoring. In addition, the
Directors discussed the Company’s
ongoing marketing and investor relations
initiatives and strategy with advisors and
the Investment Manager. The Directors
alsomet representatives from MUFG,
theCompanys fund service and record
keeping agent, PWC, the Company’s tax
advisors, and KPMG Dallas, which performs
audit work under the direction of the
Company’s external Auditor, KPMG
Channel Islands. The Directors believed the
sessions were thoughtful and informative.
Following the onsite, the Directors were
reminded and assured of the strong
processes and controls in place at the
Company’s various service providers, and
inparticular at Neuberger Berman.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance
Audit Committee
The Audit Committee comprises Mr. Falla as
Chairman, Ms. Clark, Ms. Symington-Mills
and Mr. von Hodenberg. All Directors on
the committee bring relevant experience
and perspectives; the composition of the
Audit Committee is considered appropriate
for the Company’s size and strategy. In
accordance with best practice governance,
the Chairman, William Maltby, resigned
from the Audit Committee during the year.
Details of the role of the Audit Committee
can be found in the Audit Committee
Report on page 66.
A full copy of the Audit Committee termsof
reference are available on theCompany’s
website and from the Company Secretary.
Nomination and Remuneration
Committee
The Nomination and Remuneration
Committee (“NRC”) is comprised of all of
the Directors and is chaired by Ms. Clark.
The duties and responsibilities of the
Committee are summarised below:
Nomination
Identifying and nominating, for approval
by the Board, suitable candidates to fill
Board vacancies
Considering the services of external
advisers to facilitate a director search
To review regularly the Board structure,
taking into consideration the skills,
knowledge, diversity and experience
ofthe Board
To review the results of the annual Board
evaluation process
To review annually the time requirements
from the Non-Executive Directors
Succession planning
Remuneration
To agree and determine the remuneration
of the Chairman and Non-Executive
Directors whilst ensuring that no Director
is involved in any decisions regarding their
own remuneration and taking into
consideration all relevant legal and
regulatory compliance
To obtain reliable and up-to-date
information regarding remuneration
inother comparable companies
To review and consider any additional
adhoc payments in relation to duties
undertaken over and above normal
business
During 2022, the NRC considered proposals
for the appointment of an external board
evaluator and recommended to the Board
the appointment of Fletcher Jones. The
NRC monitored the progress of the external
evaluation which took place during 2H
2022 and discussed the effectiveness of the
process. The Committee met in early 2023
to discuss the report produced by the
evaluator. Further details in respect of the
external evaluation process can be found
on page 52. Additionally, the NRC
considered the Directors’ remuneration
forthe year 2022.
The NRC regularly considers the Board
succession plan with the next planned
Director retirement being Mr. Falla at the
2025 AGM. The NRC is also aware that the
Company needs to improve the Boards
ethnic diversity. Therefore the Board felt it
was appropriate to increase the Board to six
fora period of time, by recruiting early for
Mr. Falla’s succession but also to hopefully
recruit to the Board a Director with the
appropriate skills and merit but from a
minority ethnic background. In the longer
term it is the Board’s intention for the
number of Directors to remain at five.
The NRC will be hiring an external agency
toassist with searches for anew director
candidate.
Full details of the Remuneration Report
canbe found on pages 63 to 65.
Internal controls
As explained in more detail in the Report
ofthe Audit Committee, the Board, as
advised by the Audit Committee, monitors
the risks facing the Company and the
controls put inplace to help mitigate those
risks. The Company itself has no premises
nor employees, and operates by delegating
functions to service providers subject
totheoversight of the Board.
The Board assesses the internal controls of
the Companys service providers annually
as part of the provider self-assessment
review. Service providers are asked to
provide the Board with information, and
relevant policies, regarding effective
internal controls, appropriate disaster
recovery/business continuity arrangements,
technology to maintain information security
and client confidentiality, compliance with
anti-bribery and corruption laws, details
onthe prevention of the facilitation of tax
evasion, compliance with data protection
legislation, their organisation’s ESG
considerations, and any details regarding
cyber-attacks. The Investment Manager,
towhom is delegated the day-to-day
management of the Company, is also
assessed as part of this review.
57
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Governance
In line with the FRC guidance, the Audit
Committee keeps under review the need
for an internal function. The Audit
Committee is satisfied that the systems
ofinternal control of the Company, the
Investment Manager and the Administrator
are adequate to fulfil the Board ’s obligation
in this regard and that currently an internal
audit function is not necessary.
Culture and purpose
The Companys purpose is to give
shareholders access to the long-term
returns available from a portfolio of direct
investments in highly attractive private
companies through leveraging the
strength of the Neuberger Berman global
platform, while investing responsibly to
create value for our stakeholders.
The Directors believe that maintaining a
healthy corporate culture among the Board
and in its interaction with the Investment
Manager, shareholders and other
stakeholders will support the delivery of
the Company’s purpose, values and
strategy. As part of this, the Board
recognises the importance of ensuring
thatthe Company’s culture and that of
theInvestment Manager are aligned.
TheBoard, together with the Investment
Manager, promotes and facilitates a strong
culture of communication, respect and
trust through ongoing dialogue and
engagement with its service providers.
Asthe Company has no employees and
actsthrough the Investment Manager,
theBoard continues to monitor culture
onan ongoing basis via feedback
fromshareholders, the Investment
Manager or input from other advisers.
Aspart of this culture, the Board and
Investment Manager believe responsible
investing is an important part of operating
in today’s society and assessing overall
investment risk and opportunities
(seepage 29). For more information on the
Company’s Responsible Investment policy
and the Investment Manager’s culture
andvalues, please see pages 29 to 33.
Stakeholder engagement
NBPE’s Section 172 statement, which
details engagements with stakeholders
during the year, can be found on
pages38to 41.
Shareholder
communication
The Board welcomes shareholders’
viewsand places great importance on
communication with the Company’s
shareholders.
Both the Company’s Annual Report and
consolidated financial statements,
containing a detailed review of
performance and of changes to the
investment portfolio, and monthly
factsheets with details of the Companys
strategy and performance, the financial
position of the Company and the
underlying diversification of the portfolio,
are made available to investors through
theCompanys website. A copy of investor
presentations are also available on the
Company’s website. The Company also
publishes interim and annual financial
reports which provide shareholders and
other stakeholders with more detail on
theportfolio and an update on the
performance of the Company.
A structured programme of shareholder
presentations by the Manager to
institutional shareholders takes place
following the publication of the Annual
Report and quarterly updates. In addition,
the Chairman and the Board members are
available to meet shareholders.
NBPE also holds an annual Capital Markets
Event webinar. Last years event was held
virtually on 6 October 2022 to
updateshareholders and research analysts
on the Companys performance and
investment activities during the year.
Arecording of the event is available on
theCompanys website.
The Company maintains a website which
contains comprehensive information
aboutthe Company. Detailed information
is presented on the Company’s investment
strategy, share information, the Investment
Managers platform and team, insights
from the Investment Manager’s team of
investment professionals, investment
performance, as well as an investor centre,
which has a library of all publications
anddetails of how to register for
Companynotifications.
The Board receives regular updates from
the Companys brokers and is kept
informed of all material discussions with
investors and analysts, which helps the
Directors develop their understanding
ofshareholders’ views and expectations.
Adetailed list of the Company’s major
shareholders is reviewed at each
Boardmeeting.
William Maltby
Chairman
24 April 2023
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Directors’ report
The Directors present their annual financial
report and consolidated financial
statements of NB Private Equity Partners
Limited and its subsidiaries for the year
ended 31 December 2022.
Principal activity
NBPE is a closed-ended investment
company, which invests in direct private
equity backed companies, and is registered
in Guernsey. The Company’s registered
office is PO Box 26, Floor 2, Trafalgar Court,
Les Banques, St. Peter Port, Guernsey GY1
4LY. The Company’s Class A Ordinary Shares
are listed and admitted to trading on the
Main Market of the London Stock Exchange
under the symbol “NBPE” and “NBPU”,
corresponding to the Sterling and U.S.
Dollar quotes, respectively. NBPE has 2024
ZDP Shares admitted to trading on the
Specialist Fund Segment under the symbol
“NBPS” (see Note 1 of the consolidated
financial statements).
Articles of Incorporation
Holders of the Company’s Class A Ordinary
Shares enjoy the rights set out in the
Company’s Articles of Incorporation and
The Companies (Guernsey) Law, 2008, as
amended. Holders of the Class A Ordinary
Shares have the right to receive notice of
general meetings of the Company and have
the right to vote at all general meetings;
however, Class A Ordinary Shareholders
have no right to vote on a 2024 ZDP
Liquidation Resolution or a 2024 ZDP
Reconstruction Resolution (as such terms
are defined in the Company’s Articles of
Incorporation). The Company’s Articles of
Incorporation may be amended by special
resolution in a general meeting.
Purchase of shares
The Company is authorised, in accordance
with Section 315 of the Companies
(Guernsey) Law 2008, as amended (the
“Companies Law”), subject to the Listing
Rules made by the United Kingdom
Financial Conduct Authority and all other
applicable legislation and regulations,
tomake market acquisitions (within the
meaning of Section 316 of the Companies
Law) of its own Class A Shares (as defined
inthe Companys Articles of Incorporation),
which may be cancelled or held as treasury
shares, provided that:
Investment policy
The Companys investment policy is set out
on page 62.
Political donations
andpolicy
The Company does not pay any political
donations in cash or in-kind.
Directors
As of 31 December 2022, the Board had
fiveIndependent Directors: William Maltby,
Wilken von Hodenberg, Trudi Clark,
JohnFalla and Louisa Symington-Mills.
The Directors review their independence
and offer themselves up for re-election
annually.
The biographical information also includes
a list of other public company directorships
for each of the Directors. In its consideration
of any new or additional Directors, the
Board seeks to make the most appropriate
appointments, taking into full account
thebenefits of diversity, including gender.
More information on the Boards approach
to diversity can be found on page52 and
NBPE’s diversity policy is available on
thewebsite.
i. The maximum number of Class A Shares
authorised to be purchased under this
authority shall be 7,009,478 Class A
Shares (being 14.99 per cent. of the Class
A Shares in issue (excluding Class A Shares
held in treasury)) as at 12 May 2022;
ii. The minimum price (exclusive of expenses)
which may be paid for a Class A Share is
U.S.$0.01;
iii. The maximum price (exclusive of
expenses) which may be paid for a Class A
Share shall be not more than an amount
equal to the higher of (a) 5 per cent.
above the average mid-market value of
the Class A Shares on the regulated
market where the repurchase is carried
out for the five business days prior to the
day the purchase is made; and (b) the
higher of (i) the price of the last
independent trade and (ii) the highest
current independent bid price, in each
case on the regulated market where the
purchase is carried out; and
Directors’ report
The Directors’ report should
be read in conjunction
withthe Strategic report
(pages 2 to 46) and the
Remuneration report
(pages63 to 65).
59
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
such authority expires on the date which is
15 months from the date of passing of the
resolution or, if earlier, at the end of the
Company’s Annual General Meeting to be
held in 2023 (unless previously renewed,
revoked or varied by the Company by
special resolution) save that the Company
may make a contract to acquire Class A
Shares under this authority before its expiry
which will or may be executed wholly or
partly after its expiration and the Company
may make an acquisition of Class A Shares
pursuant to such a contract.
The authority will only be exercised if the
Directors believe that to do so would be in
the best interest of shareholders generally.
Any shares purchased under this authority
would be at a discount to net asset value
(NAV) per share and therefore accretive
tothe NAV per share for the remaining
shareholders.
Investment Manager
The Company is managed by the NB
Alternatives Advisers, LLC pursuant to an
Investment Management Agreement,
dated 2 May 2017. Subject to the Board’s
overall strategic direction and instructions,
the Investment Manager makes all of the
Company’s investment decisions. The
Manager has been appointed since 2007,
and remains appointed, unless terminated
by the Company with 30 days prior written
notice and approved by an ordinary
resolution or with immediate effect under
certain conditions. The Manager is
responsible for the day-to-day
management of the Company, sourcing,
evaluating and making investment
decisions related to the Company.
The Manager makes the decisions
regarding individual investments in line
with the investment strategy set by the
Board. The Manager’s team of professionals
is also responsible for managing the
Company’s assets, including monitoring
theCompanys investment portfolio and
assigning valuations to the Company’s
investments based on the Company’s
valuation methodology, which can be
found on page 104. The Board keeps the
performance of the Investment Manager
under continual review. The ongoing
review of the Investment Manager includes
activities and performance over the course
of the year, including, but not limited to,
overall investment performance, portfolio
risk, cash flow projections, assessment of
internal controls, fees payable by the
Company to the Manager, as well as a
review of the Companys peer group.
TheBoard believes the Investment
Manager’s experience, track record, team
and platform is advantageous to the
Company and the Investment Managers
continued appointment is in the best
interest of shareholders.
Dividend policy
The Company instituted a long-term
policyof paying sustainable dividends to
shareholders in 2013. The Company targets
an annualised dividend yield of 3.0% or
greater on NAV, with the goal to maintain
or progressively increase the level of
dividends over time.
Historically, a dividend has been paid
semi-annually in line with NBPE’s
dividendtarget. Prior to each dividend
announcement, the Board reviews the
appropriateness of the dividend payment
in light of macroeconomic activity and the
financial position of the Company. In times
of extraordinary circumstances, the Board
does not guarantee a dividend, but rather
evaluates the suitability of a dividend
payment based on the magnitude of
thesituation.
Dividends are declared in U.S. dollars and
normally paid in pounds Sterling, but the
Company also offers both a currency
election for shareholders wishing to
bepaid in U.S. dollars and a dividend
re-investment plan for shareholders who
wish to re-invest their dividends to grow
their shareholding. Please reference
pages90 and 91 for the credit facility and
ZDP terms regarding dividends.
Results and dividends
The financial results for the year ended
31December 2022 are included in the
consolidated financial statements,
beginning on page 78. As of
31December2022, the NAV attributable
tothe Class A Shares was $1,327.3 million
(2021:$1,480.2 million), which represents
adecrease of $153.0 million (2021: increase
of$428.5 million). On 13 January 2022,
theCompany declared the first semi-annual
dividend of$0.47 per share and on
18July2022 declared an interim dividend
of $0.47 pershare. Both dividends were
approved inlinewith NBPE’s dividend policy
and resulted in total dividends of $0.94
pershare ($44 million) paid during 2022.
Including the dividend payment, the
NAVtotal return for the year was (7.5)%
(2021:44.8%), assuming the re-investment
of dividends on the ex-dividend date.
Fee analysis
NBPE’s rate of ongoing charges, as
definedby the Association of Investment
Companies (“AIC”) ratio, was 1.90% for
theyear ended 31 December 2022
(2021:1.96%). The ongoing charges were
calculated in accordance with the AIC
methodology and exclude interest and
financing costs and other items not
deemed to be ongoing in nature and
therefore may differ from the total expense
ratio found in Note 12 of theconsolidated
financial statements onpage 97, which was
prepared in conformity with U.S. GAAP.
Thecomplete methodology can be found
on the AIC’swebsite.
Total ongoing expenses in 2022 were
$25.6million (2021:US$26.8 million), or
1.90%, based on the average 2022 NAV.
Note that percentages of ongoing charges
are based on the average 2022 NAV and
may differ from contractual rates based on
2022 private equity fair value. Other
ongoing charges consisted of fees and
other expenses to third-party providers
forongoing services to the Company. In
accordance with the AIC methodology, the
performance fee payable to the Investment
Manager is excluded from thecalculation.
Ongoing Charge
Value
(US$ in m)
% Ongoing
Charge
Management fee 21.1 1.57%
Fund
administration fee 1.3 0.10%
Other expenses 3.2 0.24%
Total Ongoing
Charges 25.6 1.90%
Directors’ report
60
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Approximately 97% of the direct
investment portfolio (measured on
31December 2022 fair value) is on a
nomanagement fee, no carried interest
basis to the underlying sponsor.
At the Company level, NBPE’s management
fee is 1.5% of private equity fair value
(payable quarterly) and a 7.5%
performance fee after achieving a 7.5%
hurdle rate. The Directors believe these
feesare favourable relative to other listed
direct funds, which often carry higher
overall fee levels and listed fund of funds,
which typically have a double layer of fees
(charged at the vehicle level and underlying
fund level).
The Directors believe the fee efficiency
from the Companys co-investment
strategy provides investors with diversified
private equity access at alower total
costthan most other listed private
equityvehicles.
Share capital
As at 31 December 2022, 46,761,030 Class A
Shares were issued and outstanding;
3,150,408 Treasury Shares, representing
6.3% of the Company’s issued share capital,
were held as at 24 April 2023, being the
latest practical date before publication of
this document.
Major shareholders
As of 31 December 2022, insofar as is
known to NBPE, the shareholders below
held, either directly or indirectly, greater
than 5.0% of the Class A Shares in issue
(excluding Class A Shares held in treasury).
Note that the amounts below may
havesubsequently fluctuated after
31December 2022:
Shareholder Shares held
% Ownership
of Class A
Shares
Quilter Cheviot 6,195,562 13.3%
Evelyn Partners LLP 4,185,458 9.0%
City of London
Investment
Management 3,154,338 6.8%
Cazenove Capital 2,842,489 6.1%
New Jersey Division
of Investment 2,475,000 5.3%
Risks and Risk Management
The Group is exposed to financial risks such
as price risk, interest rate risk, credit risk and
liquidity risk, and the management and
monitoring of these risks are detailed on
the Principal Risks and Uncertainties on
pages 43 to 44 and in Note 3 to the
Consolidated Financial Statements on
pages 87 to 90.
Annual Report
After due consideration, the Board
believesthe Annual Report and Accounts,
taken as a whole, are fair, balanced and
understandable and is therefore of
theopinion that the Annual Report
provides the information necessary
forshareholders to assess the position,
performance, strategy and business
modelof the Company.
The Board recommends that the Annual
Report, the Report of the Directors and
theIndependent Auditors’ Report for
theyearended 31 December 2022 are
received and adopted by shareholders
anda resolution concerning this will be
proposed at the AGM.
Independent Auditors
The Directors will propose the
reappointment of KPMG Channel Islands
Limited as the Companys Auditors, and
resolutions concerning this, and the
remuneration of the Company’s Auditors
will be proposed atthe AGM.
At the time that this report was approved,
so far as each of the Directors is aware:
There is no relevant audit information of
which the Auditors are unaware; and
Each Director has taken all the steps they
ought to have taken to make themselves
aware of any audit information and to
establish that the Auditors are aware of
that information.
Annual General Meeting
The Companys AGM will be held in
Guernsey at Floor 2, Trafalgar Court,
LesBanques, St Peter Port, GY1 4LY,
Guernsey at 1:45pm on 15 June 2023.
Formal notice will be sent to registered
shareholders in advance.
Subsequent events
Significant subsequent events have been
disclosed in Note 13 to the Consolidated
Financial Statements.
By order of the Board:
William Maltby
Chairman
24 April 2023
Directors’ report
61
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Investment Objective and Policy
Investment objective
The Companys investment objective is to
produce attractive returns by investing
mainly in the direct equity of private
equity-backed companies while managing
investment risk through diversification
across asset class, vintage year, geography,
industry and sponsor. The vast majority of
direct investments are made with no
management fee/no carried interest
payable to third-party private equity
sponsors, offering greater fee efficiency
than other listed private equity companies.
NBPE seeks capital appreciation through
growth in net asset value (NAV) over time
while returning capital by paying a
semi-annual dividend.
Investment policy
In order to achieve its investment objective,
the Company intends to maintain a
diversified portfolio of private equity
related assets composed predominantly
ofdirect private equity investments,
butwhich may also include private
debtinvestments and private equity
fundinvestments.
Diversification and
investmentguidelines
The Company intends to maintain portfolio
diversification across some or all of the
following metrics: private equity asset class,
investment type, vintage year, geography,
industry and sponsor.
Diversification is dynamic and varies
according to where the most attractive
opportunities arise. However, no single
exposure to an investee entity will account
for more than 20% of the Company’s gross
assets (as at the time of making
such investment).
Cash and short-term investments
In addition to the investments referred to
above, the Company may also hold cash
and may temporarily invest such cash in
cash equivalents, money market
instruments, government securities,
asset-backed securities and other
investment grade securities, pending
investment in private equity related assets
or opportunistic investments. The
Company may also utilise (either directly
orvia investment in a collective investment
vehicle) the services of an affiliate of the
Investment Manager or a third party to
manage this excess cash. If a third party or
an affiliate of the Investment Manager is so
appointed, the Company may pay a market
rate for those services.
In addition, the Company may make other
opportunistic investments from time to
time, provided that such investments will
account for no more than 10% of the
Company’s gross assets at the time the
opportunistic investment is made without
approval from a majority of the Board and,
in any event, no more than 20% of the
Company’s gross assets at the time the
opportunistic investment is made.
The Companys investments are made
across different levels of the capital
structure of investee entities. There are
norestrictions on the type or form of
investments or securities which the
Company may hold. The Company may
make its investments in primary or
secondary markets and either directly or
indirectly through intermediary holding
vehicles or collective investment vehicles
(including co-investment vehicles or
otherfunds) managed by either an
affiliateof the Investment Manager
orthird-party managers.
Investment restrictions
The Company will not invest more than
10per cent., in aggregate, of its total
assetsin other UK-listed closed-ended
investment funds.
Investment Objective and Policy
62
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Remuneration report
The Board has established a Nomination
and Remuneration Committee (“NRC”)
toassist the Board with remuneration
duties. Details on the NRC’s responsibilities
can be found onpage 57. During a
remuneration review, the NRC takes into
account the time commitments and
responsibilities of the Directors and other
factors which it deems necessary, including
the recommendations of the AIC Code and
any relevant legal requirements. The NRC
also takes into consideration relevant
remuneration datacollated in respect of
comparable companies. The NRC meets
once per year and reports to the Board
onall matters within its duties and
responsibilities. TheCompany’s
remuneration policy isavailable on the
Company’s website.
Details of the NRC’s activities during the
year can be found on page 57.
The below table reflects actual fees paid for
2021 and 2022 and the expected fees for
2023 (using an increase of 6% versus the
GPRI rate of 8.5% as at 31 December 2022):
2023 2022 2021
Chairman £80,231 £75,690 £70,625
Chairman of
the Audit
Committee £68,612 £64,728 £60,500
Senior
Independent
Director £63,078 £59,508 £51,750
Non-Executive
Directors £57,5 45 £54,288 £50,500
Subsidiary
appointments
(pro-rata from
1 June 2021) £11,066 £10,440 £5,000
* The amount reported in the 2021 Annual Report
inregards to the SID remuneration was £57,420.
However, the fee, adjusted for Guernsey Retail Price
Index, should have been £59,508 and the table
above represents the corrected figure.
Directors’ appointment
The Companys Memorandum and Articles
of Incorporation provides the requirements
of the company regarding the appointment
and removal of Directors, a copy of which is
available for inspection from the Registered
Office of the Company. No Director has a
service contract with the Company.
Components of
annualremuneration
The Company pays a fee to the Independent
Directors for their work related to the
Company’s business. The fees for the
Directors are determined within the limit
set out in the Companys Articles of
Incorporation. The present limit is an
aggregate of £400,000 per annum.
Thistotal limit cannot be changed
withoutseeking shareholder approval
atageneral meeting.
The fees, which are subject to an annual
increase based on the rise in the Guernsey
Retail Price Index (“GRPI”), subject to a 1%
per annum minimum, are paid quarterly in
arrears. For the 12 months to 31 December
2022, the GRPI increased to 8.5%,
compared to 4.4% in 2021. While the
Directors’ fees are subject to an increase at
the rate of GRPI, the Board also considers
any increase in the context of the increasing
regulatory and governance demands and
market trends for directors’ fees when
proposing any increase. Having undergone
this assessment the Directors consider an
increase of 6% to be appropriate. Directors
are not entitled to any bonus, long-term
incentive plans or other benefits.
Notice period
There is no director resignation notice
period stipulated within the Company’s
Articles of Incorporation, any Director may
resign in writing to the Board at any time.
Statement of consideration
of conditions elsewhere in
the Company
The Company does not have any operations
and therefore no employees. As a result,
the Board does not consider pay and
employment conditions of any employees.
Statement of consideration
of shareholder views
The Board welcomes feedback and places a
significant importance on communication
with shareholders. The Board noted that
99.45% of shareholders voted in favour of
the Directors’ remuneration at the AGM
held in 2022.
Remuneration report
63
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Directors’ remuneration
and aggregate shareholder
distributions
The tables to the right compare the total
Directors’ remuneration paid with total
distributions to shareholders for the years
ended 31 December 2022 and 2021. While
this disclosure is a statutory requirement,
the Directors view this as not a meaningful
comparison as the Company has no
operations, and therefore, no employees
and the Companys objective is long-term
NAV growth over time, of which dividends
form only a portion of a Shareholders’
overall return.
2022 2021
Directors
Remuneration $387,647 $361,516
2022 2021
Dividends paid $43,964,768 $33,675,142
Share buybacks _
Total
shareholder
distributions $43,964,768 $33,675,142
Remuneration report
$50m
$30m
$40m
$20m
$10m
Directors’
Remuneration
Dividends Paid Total Shareholder
Distributions
$387,647
$43,964,768
$43,964,768
$361,516
$33,675,141
Share Buybacks
No share
buybacks
$33,675,141
2021 2022
Relative importance of spend on pay
Remuneration by Director and year
2022 2021
Trudi Clark* £59,508 £53,000
John Falla* £69,948 £63,000
Wilken von Hodenberg £59,508 £51,750
William Maltby £75,690 £70,625
Louisa Symington-Mills £54,288 £27,5 83
The Chairman of the Board, William Maltby, was the highest paid Director for the year 2022.
* The two Guernsey resident Directors (Trudi Clark and John Falla) also act as directors for the Guernsey
subsidiaries for which they each received an annual fee of £5,220 for the 12 months to 31 December 2022.
Shareholdings of the Directors
The Directors’ interests in Class A Shares of $0.01 each as at 31 December 2022 were as follows:
31 December
2022
31 December
2021
Trudi Clark 6,433 6,433
John Falla 10,000 10,000
Wilken von Hodenberg* 99,425 97,541
William Maltby** 23,298 23,298
Louisa Symington-Mills 1,350
* Total includes a closely associated person related to Wilken von Hodenberg who holds 45,712.5 shares
ofthe Company. Furthermore, the total reported in the 2021 Annual Report was 89,316. However,
itshould have stated 97,541 and the table above reflects the corrected figure.
** Total includes a closely associated person related to William Maltby who holds 5,465 shares of
theCompany.
64
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Performance graph
In setting the Directors’ remuneration,
consideration is given to the size and
relative performance of the Company.
Aperformance graph which measures
theCompanys total shareholder return
(share price and dividends) (“TSR”)
overtheperiod from 31 December 2013
against that ofabroadequity market index
is shown below. This is calculated by
reference to the Companys share price
including dividendre-investment.
Remuneration report
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
NBPE Total Shareholder Return FTSE All-Share Total Return
300
200
100
Total Shareholder Return
Resolution to approve
Directors’ remuneration
Whilst Guernsey-registered companies
arenot obliged to prepare and publish
aDirectors’ Remuneration report, an
ordinary resolution will be put to the
shareholders seeking approval of the
Remuneration report within the Annual
Report and Accounts; this vote will be
advisory only, but the Directors of the
Company will take the outcome of the
voteinto consideration when reviewing
and setting the Directors’ remuneration.
In addition, to facilitate the temporary
increase of the size of the Board as detailed
on page 57, a resolution to approve an
increase in the annual aggregate director
fee limit, from £400,000 to £450,000, will
be put forth at the Company’s upcoming
Annual General Meeting.
On behalf of the Board:
Trudi Clark
Chair
24 April 2023
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Report of the Audit Committee
Role of the Audit
Committee
The Audit Committee assisted the Board
incarrying out its responsibilities in relation
to the financial reporting requirements,
riskidentification and management,
andthe assessment of internal controls.
Italso managed the Companys
relationship with KPMG.
The primary function of the Audit
Committee is to provide oversight and
reassurances to the Board, specifically
withregard to:
The Company’s financial reporting,
including finalisation of its Annual
Reports;
Audit arrangements, including
competency and independence of the
external Auditors;
Risk management, including identifying
and managing the Companys
principalrisks;
Internal controls; and
The Company’s governance framework.
Composition of the
Committee
The Audit Committee is comprised of
fourof the Board Directors, namely
JohnMartyn Falla, Trudi Clark, Wilken von
Hodenberg and Louisa Symington-Mills.
John Martyn Falla, who brings significant
expertise as an accountant, is the Chair
ofthe Committee. In accordance with
bestpractice governance, the Chairman,
William Maltby, resigned from the
AuditCommittee during the year.
Committee meetings
The Audit Committee meets at least three
times a year and met four times in 2022.
AllCommittee members were present at
these four meetings. Only members and
the secretary of the Audit Committee have
the right to attend Audit Committee
meetings. However, the Chairman of the
Board and representatives of the
Investment Manager and the Administrator
are invited to attend Audit Committee
meetings on a regular basis, and other
non-members may be invited to attend
allor part of the meeting as and when
appropriate and necessary. The Company’s
Independent Auditor, who is currently
KPMG, is also invited on a regular basis.
TheAudit Committee determines, in
conjunction with the Independent Auditor,
when to meet with the Auditor.
Meetings of the Audit Committee generally
take place prior to the Company Board
meeting and the Committee reported to
the Board as part of a separate agenda
item, on the activities of the Audit
Committee and matters of particular
relevance to the Board in the conduct of
their work.
The Audit Committee meets with the
Independent Auditor without the Manager
and Administrator present to seek their
views on the quality of the control
environment and the processes around the
preparation of the financial statements.
Report of the Audit Committee
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Key areas of focus
During 2022, the Audit Committee was
involved with monitoring valuations and
evaluating the Companys capital position
and key financial ratios. In addition, the
Audit Committee reviewed valuation
analysis prepared by the Investment
Manager on a quarterly basis, which
includes cash flow forecasts and the
performance of the underlying
investments. Such information is used to
evaluate the impact on the Company’s
capital structure and allocation.
The Audit Committee also conducted
areview of auditor independence,
effectiveness, and reviewed the full-year
audit plan with the Investment Manager
and KPMG. In addition, the Audit
Committee reviewed and held detailed
discussions on the Annual Report and
consolidated financial statements
including a robust assessment of the
principal risks, as well as reviewing and
challenging the viability analysis before
itsapproval.
The key areas of focus for the Committee
for the year 2022 were:
Financial statements and reportingmatters
The Audit Committee review with the
Investment Manager, MUFG Capital
Analytics and KPMG the appropriateness of
the semi-annual and annual financial
statements. The Committee focuses on,
among other matters:
The quality and acceptability of
accounting policies and practices;
The clarity of the disclosures and
compliance with financial reporting
standards and relevant financial
governance reporting requirements;
Material areas in which significant
judgments have been applied or therehas
been discussion with KPMG; whether the
annual financial report and consolidated
financial statements, taken as a whole, are
fair, balanced and understandable and
provide the information necessary for
shareholders to assess the Company’s
performance, business model and
strategy; and
Any correspondence from regulators in
relation to financial reporting.
To aid its review, the Audit Committee
considered reports from the Investment
Manager, Fund Administrator, the
Company Secretary, and also reports from
the Independent Auditor on the outcomes
of their half-year review and annual audit.
During the year, the Audit Committee
reviewed the Company’s Annual Report
and interim financial statements for the
period ending 30 June 2022 (the “Interim
Financial Statements”) before
recommending approval to the Board.
TheCommittee considered the Interim
Financial Statements and Annual Report
tobe fair and balanced, and provided
theCompany’s shareholders with the
information necessary to assess the
Company’s performance, business model
and strategy, and was satisfied that
narratives provided were consistent with
allnumerical disclosures.
In addition, the Audit Committee met
KPMG Dallas, the Administrator and
members of the Neuberger Berman finance
team in person in October 2022.
Audit planning and
key audit matters
The Audit Committee provided oversight
tothe planning of the audit inrespect of the
Company’s annual accounts for the period
ending 31December 2022. The following
table details the key audit matters andhow
the Company’s Independent Auditor
addressed them:
Valuation of investments
The valuation of the Company assets are
considered a significant area of focus as it
represents the majority of the NAV for the
Group. The Auditors made enquiries with
the Investment Manager to understand
theprocesses and procedures around
operational due diligence, ongoing
monitoring of the underlying investments
and the control over the valuations of all
private equity investments. The Auditors
then tested the design and implementation
of the controls which monitor and approve
the valuation of investments.
The Independent Auditors did not report
any significant differences between the
valuations used by the Company and the
work performed during their testing
process. Similar to prior years, the
Independent Auditors noted they had
utilised their in-house valuation experts to
assist with the audit of valuations and used
a number of techniques to evaluate the
valuation of selected income investments.
Report of the Audit Committee
67
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Audit planning and
key audit matters (continued)
The Audit Committee noted that the
Investment Manager’s valuation
methodology for direct equity investments
begins with the most recently available
financial information obtained from
theunderlying companies or sponsors.
TheInvestment Manager noted to the
AuditCommittee that the valuation
process used by the Investment Manager
was consistent with the prior year. For
investments where the Manager was
invested in the same security at the same
underlying cost basis as the lead private
equity sponsor, the Investment Manager
utilised the practical expedient valuation
methodology. Generally, this approach
relied on using the best information from
the private equity sponsor, including but
not limited to: audited financial statements,
co-investment holding vehicle financial
statements or capital accounts, or other
financial information deemed reliable by
the Investment Manager. The Independent
Auditor reviewed the supporting financial
information for investments valued under
the practical expedient methodology.
Management override of controls
The Auditors reviewed accounting
estimates for biases by evaluating whether
judgements and decisions in making
accounting estimates, even if individually
reasonable, indicated a possible bias. They
additionally reviewed the minutes of both
the Board and the AuditCommittee.
Compliance with the AIC Code
of Corporate Governance
The Audit Committee continued to monitor
the Companys governance framework and
compliance with the AIC Code of Corporate
Governance (the “AIC Code”). In 2022, the
Audit Committee undertook a review of
the Companys compliance with the AIC
Code’s stipulated provisions. The Audit
Committee proposed that certain updates
be made to provide a clearer reflection of
the Companys manner of compliance and
remains satisfied that the Company
upholds satisfactory compliance with the
provisions of the AIC Code.
Report of the Audit Committee
Internal control and
risk assessment
During the year, the Audit Committee
received reports from the Investment
Manager, who as AIFM assesses the
Company’s internal controls on anongoing
basis, and reviewed any changes to
significant risks.
Each quarter, the Board receives a formal
risk report from the Investment Manager,
which provides a summary of the elevated
residual risks to the Company. The Audit
Committee monitored the key areas of
elevated risk including those that are not
directly the responsibility of the Investment
Manager. The Investment Manager has
established an internal control framework
to provide reasonable, but not absolute,
assurance on the effectiveness of internal
controls operated on behalf of its clients.
Annually, and in accordance with Provision
33 of the AIC Code, the Board undertakes a
full review of the Company’s business risks
which have been analysed and recorded in
the principal risks and uncertainties matrix.
Following the review, the Audit Committee
confirmed that it was satisfied with the key
underlying assumptions of the viability
statement and the resulting forecast
prepared. The Audit Committee regularly
discussed the heightened external risks
associated with the Ukraine war, therelated
economic sanctions against Russia and
thegeneral market conditions, including,
but not limited to, rising interest rates,
heightened inflation, operational
performance of underlying investments
and other matters. They also considered
the impact of climate change both on the
investment risk environment, but also on
the emerging regulatory requirements for
disclosures by investing entities on such
matters. Theprincipal risks and
uncertainties of the Company and
respective controls are outlined in the risk
matrix as set out on pages 43 to 44
oftheStrategic Report.
The effectiveness of the internal controls at
the Investment Manager is assessed by the
Investment Manager’s compliance and risk
department on an ongoing basis. In the
second half of the year, the Board met the
Investment Manager in person at the
Managers headquarters in New York, NY
to discuss all aspects of the Company’s
portfolio, investment management and
operations, including the mechanisms for
their review of the Company’s internal
controls; this is discussed in more detail on
pages 57 and 58. The Audit Committee
subsequently met to review the findings
from this meeting in the context of the
control environment and was satisfied
withthe internal controls of the
InvestmentManager.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Report of the Audit Committee
Terms of engagement
The Audit Committee reviewed the audit
scope and fee proposal through
engagement letters and Audit Committee
reports issued by KPMG to the Directors.
The Committee approved the fees for
auditservices for 2022 after a review of the
level and nature of work to be performed.
The Board was satisfied that the fees
wereappropriate for the scope of the
workrequired.
The Independent Auditors were
remunerated $260,000 in relation to the
2022 annual audit (2021 fee: $210,000).
They received a fee of $40,000 in relation
totheir review of the interim financial
statements, which was unchanged from
the prior year.
Auditor effectiveness
The Audit Committee received a detailed
audit plan from the Auditors, identifying
their assessment of the key risks. For the
2022 financial year, the significant risk
identified was the valuation of investments.
This risk is tracked through the year and
theAudit Committee challenged the work
done by the Auditors to test management’s
assumptions. The Audit Committee
assessed the effectiveness of the audit
process in addressing these matters
through the reporting received from the
Auditors at both the half-year and year-end
meetings. In addition, the Audit Committee
sought feedback from the Investment
Manager and MUFG Capital Analytics on
the effectiveness of the audit process.
For the 2022 financial year, the Audit
Committee was satisfied that there had
been appropriate focus and challenge
onthe primary areas of audit risk and
assessed the quality of the audit process
tobe appropriate.
Internal control and
risk assessment (continued)
Furthermore, the Management
Engagement Committee undergoes an
annual review whereby the Investment
Manager and the Company’s service
providers populate responses regarding
their control environment and internal
control systems, which are reported to the
Audit Committee.
The Audit Committee confirms that it
reviewed the effectiveness of the
Company’s system of internal controls
forthe year ended 31 December 2022
andthrough to the approval date of this
annual financial report and that no issues
were noted.
Internal audit
The Company itself does not have an
internal audit function, but instead relies
onthe internal audit functions and
departments of the Investment Manager
and other service providers. The Audit
Committee notes the independent
segregation of duties due to having
separate Investment Management,
Administrator and Depository functions.
Due to the presence of an internal audit
function within the Investment Manager,
the Audit Committee is satisfied that the
control environment is sufficient to mitigate
risks to the Company.
69
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Independent audit
andappointment
KPMG is NBPE’s Independent Auditor.
KPMG performed an audit of the
Company’s consolidated financial
statements in accordance with applicable
law and International Standards on
Auditing (UK). Prior to beginning the
audit,the Audit Committee received a
report from the Independent Auditors
andreviewed the scope of the audit,
identified significant audit risk and areas
ofaudit focus as well as the terms of the
audit engagement.
Non-audit work Description
Review of Interim
FinancialStatements
A review of the Companys interim financial statements was
undertaken by KPMG in 2022.
There was no other non-audit work
performed by KPMG during the year other
than described above. The Audit
Committee was satisfied that the level of
non-audit services did not conflict with
their statutory audit responsibilities.
The Audit Committee reviewed the
effectiveness and independence of the
Auditor and believes that the performance
of the Independent Auditor remains
satisfactory, and that they provide effective
challenge to the Board and the Investment
Manager. The Audit Committee continues
to monitor the performance of the
Committee evaluation
The Board underwent an external
evaluation during 2022. This encompassed
the contribution made by the Board’s
Committees, including an appraisal of the
respective Committee Chairs and an
evaluation of the competence and
performance of the Audit Committee and
its individual members in understanding
the security of the Company’s Annual
Report and Accounts prior to publication.
The external evaluator was satisfied that
the Audit Committee was chaired
efficiently and inclusively and that a
proactive approach was taken to prepare
for relevant regulatory changes. Among
recommendations made by the external
evaluator for the Board to consider, the
evaluator recommended the
commencement of the succession planning
for the Chair of the Audit Committee to
allow for sufficient handover and
onboarding as required.
As with previous years, the Audit
Committee will conduct a self-appraisal
ofits performance for 2023.
Terms of reference
The Audit Committee’s terms of reference
were reviewed during the year and the
Audit Committee concluded that they
remained relevant and up to date. The
terms of reference can be found on our
website atwww.nbprivateequitypartners.
com/en/investors/corporate-governance.
Conclusion
As Audit Committee Chairman, I was
pleased with the work performed during
the year. In addition, I was satisfied with the
level of work performed by the Investment
Manager, and the Administrator in relation
to the preparation of the Companys
consolidated financial statements and the
thoroughness of the year-end audit process
conducted by KPMG.
John Martyn Falla
Audit Committee Chairman
24 April 2023
Report of the Audit Committee
The Audit Committee understands the
importance of auditor independence
and,during 2022, the Audit Committee
reviewed the independence and objectivity
of KPMG. The Audit Committee received
areport from KPMG describing its
independence, controls and current
practices to safeguard and maintain
auditor independence. KPMG confirmed
that they did not perform any work with
respectto the preparation of the financial
statements or valuations, the taking of
management decisions, or provision
ofinvestment advice.
The Audit Committee also focused on
thenon-audit services, which requires
theconsent of the Audit Committee,
adescription of which is shown in the
tablebelow.
Independent Auditor annually and
considers their independence and
objectivity, having due regard to the
appropriate guidelines. KPMG were
reappointed after an open tender process
completed in 2019.
The Audit Committee has a policy to
conduct a tender process at least every
10years and to rotate auditors at least
every20 years, as recommended by the
UKStatutory Auditors and Third Country
Auditors Regulations 2016.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Statement of directors’ responsibilities
Annual financial report
and consolidated
financialstatements
The Directors are responsible for
preparingthe annual financial report
andconsolidated financial statements
inaccordance with applicable law
andregulations.
Company law requires the Directors to
prepare consolidated financial statements
for each financial year. Under the law they
have chosen to prepare the consolidated
financial statements in conformity with U.S.
generally accepted accounting principles
(“U.S. GAAP”) and applicable law.
The Directors are responsible for keeping
proper accounting records that are
sufficient to show and explain the
Company’s transactions and 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, 2008 (as amended). They
are responsible for such internal controls as
they determine is necessary to enable the
preparation of financial statements that are
free from material misstatement, whether
due to fraud or error, and have general
responsibility for taking such steps as are
reasonably open to them to safeguard the
assets of the Company and to prevent and
detect fraud and other irregularities.
Under company law the Directors must not
approve the consolidated financial
statements unless they are satisfied that
they give a true and fair view of the state of
affairs of the Group and of its profit or loss
for that period. In preparing these financial
statements, the Directors are required to:
Select suitable accounting policies and
then apply them consistently;
Make judgments and estimates that are
reasonable, relevant and reliable;
State whether applicable accounting
standards have been followed,
subject to any material departures
disclosed and explained in the
financial statements;
Assess the Group’s ability to continue as a
going concern, disclosing, as applicable,
matters related to going concern; and
Use the going concern basis of accounting
unless liquidation is imminent.
Disclosure of information
to Auditor
The Directors confirmed that, so far as they
were each aware, there is no relevant audit
information of which the Companys
Auditor was unaware; and each Director
took all the steps that he/she ought to have
taken as a Director to make himself/herself
aware of any relevant audit information
and to establish that the Company’s
Auditor is aware of that information.
Statement of Directors responsibilities
71
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Responsibility statement
ofthe Directors in respect
of the annual financial
report
The Directors confirmed that, to the best
oftheir knowledge:
The consolidated financial statements,
prepared in conformity with U.S. GAAP,
give a true and fair view of the assets,
liabilities, financial position and profit
orloss of the Company and the
undertakings included in the
consolidation taken as a whole as
required by the Disclosure Guidance and
Transparency Rules (“DTR”) 4.1.12R and
are in compliance with the requirements
set out in The Companies (Guernsey) Law,
2008 (as amended); and
The annual financial report includes a fair
review of the information required by DTR
4.1.8R and DTR 4.1.11R of the Disclosure
Guidance and Transparency Rules, which
provides an indication of important
events that have occurred since the end
ofthe financial year and the likely future
development of the Company and a
description of principal risks and
uncertainties during the year.
We consider that the annual financial
report and consolidated financial
statements, taken as a whole, are fair,
balanced and understandable and provide
the information necessary for shareholders
to assess the Companys position and
performance, business model and strategy.
The Directors are responsible for the
maintenance and integrity of the corporate
and financial information included on
theCompanys website, and for the
preparation and dissemination of financial
statements. Legislation in Guernsey
governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
By order of the Board
William Maltby
Director
John Martyn Falla
Director
Date: 24 April 2023
Statement of Directors’ responsibilities
72
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Financials
74 Independent Auditor’s Report
78 Consolidated financial statements
83 Notes to consolidated financial statements
Financials
73
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Independent Auditors report
Independent Auditors report
to the members of NB Private Equity Partners Limited
Our opinion is unmodified
We have audited the consolidated
financialstatements of NB Private Equity
Partners Limited (the “Company”) and
itssubsidiaries (together, the “Group”),
whichcomprise theconsolidated balance
sheet and the consolidated condensed
schedule of private equity investments
asat31December 2022, the consolidated
statements of operations and changes innet
assets and cash flows for the year then ended,
and notes, comprising significant accounting
policies and otherexplanatory information.
In our opinion, the accompanying
consolidated financial statements:
give a true and fair view of the financial
position of the Group as at 31 December
2022, and of the Group’s financial
performance and cash flows for the year
then ended;
are prepared in accordance with U.S.
generally accepted accounting principles
(“US GAAP”); and
comply with the Companies (Guernsey)
Law,2008.
Basis for opinion
We conducted our audit in accordance with
International Standards on Auditing (UK)
(“ISAs (UK)”) and applicable law. Our
responsibilities are described below. We have
fulfilled our ethical responsibilities under, and
are independent of the Company and Group
in accordance with, UK ethical requirements
including the FRC Ethical Standard as required
by the Crown Dependencies’ Audit Rules
andGuidance. We believe that the audit
evidence we have obtained is a sufficient
andappropriate basis for our opinion.
Key audit matters: our
assessment of the risks
ofmaterial misstatement
Key audit matters are those matters that,
inour professional judgment, were of
mostsignificance in the audit of the
consolidated financial statements and include
the most significant assessed risks of material
misstatement (whether or not due to fraud)
identified by us, including those which had
the greatest effect on: theoverall audit
strategy; the allocation ofresources in the
audit; and directing theefforts of the
engagement team. Thesematters were
addressed in the context of our audit of the
consolidated financial statements as a whole,
and in forming our opinion thereon, and we
do not provide a separate opinion on these
matters. In arriving at our audit opinion
above,the key audit matter was as follows
(unchanged from 2021):
Valuation of private
equityinvestments The risk Our response
$1,401,430,601;
(2021:$1,569,276,895)
Refer to pages 66 to 70
ofthe Audit Committee
Report, pages 79 to 80
ofthe consolidated
condensed schedule
ofprivate equity
investments, note 2
accounting policy and
note 3 disclosures
Basis:
The Group’s private equity
investment portfolio represents
the most significant balance on the
consolidated balance sheet and is
the principal driver of the Group’s
net asset value (2022: 105.4%;
2021: 105.9%). The investment
portfolio is comprised of direct
equity and fund investments
(“Direct Equity Investments”) and
Income Investments (together
the“Investments”).
Certain Direct Equity Investments,
representing 82% of the fair value
of Investments, are valued using
the net asset value as practical
expedient in conformity with U.S.
GAAP to determine the fair value
ofthe underlying Direct Equity
Investments, adjusted if considered
necessary by the Investment
Manager. The remaining Direct
Equity Investments, representing
10% of the fair value of
Investments, are valued using
comparable company multiples,
third party valuation or listed
prices, as applicable.
Income Investments, representing
8% of the fair value of Investments,
are valued based on valuation
models that take intoaccount the
factors relevant to each investment
and use relevant third party market
data where available (“Model
Valuations”). Any remaining
Income Investments are valued
using third party data sources.
Our audit procedures included:
Controls evaluation:
We tested the design and implementation
ofthe Investment Manager’s review control
inrelation to the valuation of Investments.
Challenging managements’
assumptions and inputs including
useof KPMG valuation specialist:
For all Investments we assessed the
appropriateness of the valuation technique
used to estimate fair value.
For a selection of Direct Equity Investments,
chosen on the basis of their fair value:
We confirmed their fair values to supporting
information, including audited information
where available, such as: financial
statements, limited partner capital account
statements, lead sponsor or co-investor
information or other information provided
by the underlying funds’ general partners,
investee managers or similar.
For investments using a guideline public
companies multiple approach, we obtained
the valuation provided by the sponsor and
assessed assumptions based on observable
market data. We assessed the reliability of
information obtained.
For unaudited information we either
obtained the information directly or assessed
the Investment Manager’s process for
obtaining this information and conducted
retrospective testing to confirm its reliability.
For audited information, we assessed the
appropriateness of the accounting
framework utilized and whether the audit
opinion wasmodified.
For listed Direct Equity Investments we
independently priced these to athird
partysource.
74
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Valuation of private
equityinvestments The risk Our response
Risk:
The valuation of the Group’s
Investments isconsidered a
significant area of our audit,
giventhat it represents the
majority of the net assets of
theGroup. The valuation risk
incorporates both a risk of fraud
and error given the significance
ofestimates and judgements
thatmay be involved in the
determination of fair value.
For a selection of Income Investments, chosen
on the basis of their fair value, where market
quotes were available, we used our KPMG
valuation specialist to independently value
them based on prices obtained from third
party pricing vendors.
For the remaining population of Income
Investments, we made a selectionof
ModelValuations, chosen on the basis of
theirfair value. Wecorroborated key inputs
inthe Model Valuations to supporting
documentation such as management
accounts. With the support of ourKPMG
valuation specialist, we challenged the key
assumptions used, such as comparable
multiples and market yields.
Assessing transparency:
We also considered the Group’s disclosures
(see Note 3) in relation to the use of estimates
and judgments regarding the fair value of
investments and the Group’s investment
valuation policies adopted and the fair value
disclosures in note 2 and note 3 for conformity
with U.S. GAAP.
Independent Auditors report
Going concern
The directors have prepared the consolidated
financial statements on the going concern
basis as they do not intend toliquidate the
Group or the Company ortocease their
operations, and as they have concluded that
the Group and the Companys financial
position means that this is realistic. They have
also concluded that there are no material
uncertainties thatcould have cast significant
doubt over their ability to continue as a going
concern for at least a year from the date of
approval of the consolidated financial
statements (the “going concern period”).
In our evaluation of the directors’ conclusions,
we considered the inherent risks to the Group
and the Company’s business model and
analysed how those risks might affect the
Group and the Company’s financial resources
or ability tocontinue operations over the
going concern period. The risks that we
considered most likely to affect the Group and
the Company’s financial resources or ability
tocontinue operations over this period were:
Availability of capital to meet operating
costs and other financial commitments;
The ability of the Group to comply with
debtcovenants; and
The ability of the Company to repay the
outstanding Zero Dividend Preference
shares upon their maturity
We considered whether these risks could
plausibly affect the liquidity in the going
concern period by comparing severe, but
plausible downside scenarios that could
arisefrom these risks individually and
collectively against the level of available
financial resources indicated by the
Group’sfinancial forecasts.
We considered whether the going concern
disclosure in note 2 to the financial statements
gives a full and accurate description of the
directors’ assessment ofgoing concern.
Our conclusions based on this work:
we consider that the directors’ use of the
going concern basis of accounting in the
preparation of the consolidated financial
statements is appropriate;
we have not identified, and concur with
thedirectors’ assessment that there is not,
amaterial uncertainty related to events
orconditions that, individually or
collectively, may cast significant doubt
onthe Group and the Company’s ability to
continue as a going concern forthe going
concern period; and
we have nothing material to add or
drawattention to in relation to the directors’
statement in the notes to theconsolidated
financial statements onthe use of the going
concern basis of accounting with no material
uncertainties that may cast significant doubt
over the Group and the Company’s use of
that basis for the going concern period, and
that statement is materially consistent with
the consolidated financial statements and
our audit knowledge.
However, as we cannot predict all future
events or conditions and as subsequent
events may result in outcomes that are
inconsistent with judgements that were
reasonable at the time they were made,
theabove conclusions are not a guarantee
that the Group and the Company will
continue in operation.
Our application of materiality andan
overview of the scope ofour audit
Materiality for the consolidated financial statements
as a whole was set at $27,100,000, determined with
reference toa benchmark of group net assets of
$1,329,213,546, of which it represents approximately
2.0% (2021: 2.0%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were
performed to a lower threshold, performance
materiality, so as toreduce to an acceptable level the
risk thatindividually immaterial misstatements in
individual account balances add up to amaterial
amount across the financial statements as a whole.
Performance materiality for the Group was set at
75.0% (2021: 75.0%) of materiality for the financial
statements as a whole, which equates to $20,300,000.
We applied this percentage in our determination of
performance materiality because we did not identify
any factors indicating an elevated level of risk.
We reported to the Audit Committee anycorrected
oruncorrected identified misstatements exceeding
$1,350,000, inaddition to other identified
misstatements that warranted reporting on
qualitative grounds.
Our audit of the Group was undertaken tothe
materiality level specified above, which has informed
our identification of significant risks of material
misstatement and the associated audit procedures
performed in those areas as detailed above.
The group team performed the audit of theGroup as if
it was a single aggregated setof financial information.
The audit was performed using the materiality level
set out above and covered 100% of total group
revenue, total group profit before tax, and total group
assets and liabilities.
75
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Fraud and breaches of lawsand
regulations – ability to detect
Identifying and responding to risks of
material misstatement due to fraud
To identify risks of material misstatement due
to fraud (“fraud risks”) we assessed events or
conditions that could indicate an incentive or
pressure to commit fraud or provide an
opportunity to commit fraud. Our risk
assessment procedures included:
enquiring of management as to the Group’s
policies and procedures to prevent and
detect fraud as well as enquiring whether
management have knowledge of any
actual, suspected or alleged fraud;
reading minutes of meetings of those
charged with governance; and
using analytical procedures to identify any
unusual or unexpected relationships.
As required by auditing standards, and taking
into account possible incentives orpressures
to misstate performance andour overall
knowledge of the control environment,
weperform procedures to address the risk
ofmanagement override ofcontrols, in
particular the risk that management may be in
a position to makeinappropriate accounting
entries, and the risk of bias in accounting
estimates such as valuation of unquoted
investments. On this audit we do not believe
there is a fraud risk related to revenue
recognition because the Group’s revenue
streams are simple in nature with respect
toaccounting policy choice, and are easily
verifiable to external data sources or
agreements with little or no requirement
forestimation from management. We did
notidentify any additional fraud risks.
The Group is subject to other laws and
regulations where the consequences of
non-compliance could have a material effect
on amounts or disclosures in the consolidated
financial statements, for instance through
theimposition of fines or litigation or impacts
on the Group and the Companys ability to
operate. We identified financial services
regulation as being the area most likely to
have such an effect, recognising the regulated
nature of the Group’s activities and its legal
form. Auditing standards limit the required
audit procedures to identify non-compliance
with these laws and regulations to enquiry of
management and inspection of regulatory
and legal correspondence, ifany. Therefore
ifa breach of operational regulations is not
disclosed to us or evident from relevant
correspondence, an audit willnot detect
thatbreach.
Context of the ability of the audit
todetect fraud or breaches of
laworregulation
Owing to the inherent limitations of an audit,
there is an unavoidable risk that wemay not
have detected some material misstatements
in the consolidated financial statements,
eventhough we have properly planned and
performed our audit in accordance with
auditing standards. Forexample, the further
removed non-compliance with laws and
regulations is from the events and
transactions reflected in the consolidated
financial statements, the less likely the
inherently limited procedures required by
auditing standards would identify it.
We performed procedures including:
identifying journal entries and other
adjustments to test based on risk criteria
andcomparing any identified entries to
supporting documentation;
incorporating an element of unpredictability
in our audit procedures; and
assessing significant accounting estimates
for bias
Further detail in respect of valuation of
unquoted investments is set out in the
keyaudit matter section of inthisreport.
Identifying and responding to
risksof material misstatement
duetonon-compliance with laws
andregulations
We identified areas of laws and regulations
that could reasonably be expected to havea
material effect on the consolidated financial
statements from our sector experience and
through discussion withmanagement (as
required by auditingstandards), and from
inspection ofthe Group’s regulatory and
legalcorrespondence, if any, and discussed
with management the policies and
procedures regarding compliance with laws
and regulations. As the Group is regulated,
ourassessment of risks involved gaining an
understanding of the control environment
including the entity’s procedures for
complying with regulatory requirements.
The Group is subject to laws and regulations
that directly affect the consolidated financial
statements including financial reporting
legislation and taxation legislation and we
assessed the extent of compliance with these
laws and regulations as part of our procedures
on the related financial statement items.
In addition, as with any audit, there remains
ahigher risk of non-detection of fraud, as this
may involve collusion, forgery, intentional
omissions, misrepresentations, or the override
of internal controls. Our audit procedures are
designed to detect material misstatement.
We are not responsible for preventing
non-compliance or fraud and cannot be
expected to detect non-compliance with
alllaws and regulations.
Other information
The directors are responsible for the other
information. The other information comprises
the information included in the annual
financial report but does not include the
consolidated financial statements and our
auditor’s report thereon. Our opinion on the
consolidated financial statements does not
cover the other information and we do not
express an audit opinion or any form of
assurance conclusion thereon.
In connection with our audit of the
consolidated financial statements, our
responsibility is to read the other information
and, in doing so, consider whether the other
information is materially inconsistent with
theconsolidated financial statements or
ourknowledge obtained in the audit, or
otherwise appears to be materially misstated.
If, based on the work we have performed, we
conclude that there is a material misstatement
of this other information, we are required to
report that fact. We have nothing to report
inthis regard.
Independent Auditors report
76
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Disclosures of emerging
andprincipal risks and
longerterm viability
We are required to perform procedures
toidentify whether there is a material
inconsistency between the directors’
disclosures in respect of emerging and
principal risks and the viability statement,
andthe consolidated financial statements
and our audit knowledge. We have nothing
material to add or draw attention to in
relationto:
the directors’ confirmation within the
viability statement (pages 45 and 46) that
they have carried out a robust assessment of
the emerging and principal risks facing the
Group, including those that would threaten
its business model, future performance,
solvency or liquidity;
the emerging and principal risks disclosures
describing these risks and explaining how
they are being managed or mitigated;
the directors’ explanation in the viability
statement (pages 45 and 46) as to how they
have assessed the prospects of the Group,
over what period they have done so and why
they consider that period to be appropriate,
and their statement as to whether they have
a reasonable expectation that the Group will
be able to continue in operation and meet
its liabilities as they fall due over the period
of their assessment, including any related
disclosures drawing attention to any
necessary qualifications or assumptions.
We are also required to review the viability
statement, set out on pages 45 and 46 under
the Listing Rules. Based on the above
procedures, we have concluded that the
above disclosures are materially consistent
with the consolidated financial statements
and our audit knowledge.
We have nothing to report on
other matters on which we are
required to report by exception
We have nothing to report in respect of the
following matters where the Companies
(Guernsey) Law, 2008 requires us to report
toyou if, in our opinion:
the Company has not kept proper
accounting records; or
the consolidated financial statements are
not in agreement with the accounting
records; or
we have not received all the information
andexplanations, which to the best of our
knowledge and belief are necessary for
thepurpose of our audit.
Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement
setout on pages 71 and 72, the directors are
responsible for: the preparation of the
consolidated financial statements including
being satisfied that they give a true and fair
view; such internal control as they determine
is necessary to enable the preparation of
consolidated financial statements that are
free from material misstatement, whether
due to fraud or error; assessing the Group
andCompany’s ability to continue as a going
concern, disclosing, as applicable, matters
related to going concern; and using the going
concern basis of accounting unless liquidation
is imminent.
Auditor’s responsibilities
Our objectives are to obtain reasonable
assurance about whether the consolidated
financial statements as a whole are free
frommaterial misstatement, whether
duetofraud or error, and to issue our
opinioninanauditor’s report.
Corporate governance disclosures
We are required to perform procedures
toidentify whether there is a material
inconsistency between the directors’
corporate governance disclosures and
theconsolidated financial statements and
ouraudit knowledge.
Based on those procedures, we have
concluded that each of the following is
materially consistent with the consolidated
financial statements and our audit
knowledge:
the directors’ statement that they consider
that the annual financial report and
consolidated financial statements taken as a
whole is fair, balanced and understandable,
and provides the information necessary
forshareholders to assess the Group’s
position and performance, business model
and strategy;
the section of the annual financial report
describing the work of the Audit Committee,
including the significant issues that the audit
committee considered in relation to the
financial statements, and how these issues
were addressed; and
the section of the annual financial report
that describes the review of the
effectiveness of the Group’s risk
management and internal control systems.
We are required to review the part of
Corporate Governance Statement relating to
the Group’s compliance with the provisions of
the UK Corporate Governance Code specified
by the Listing Rules for our review. We have
nothing to report in this respect.
Reasonable assurance isa high level of
assurance, but does not guarantee that an
audit conducted in accordance with ISAs (UK)
will always detect amaterial misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material if,
individually or in aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the basis
of the consolidated financial statements.
A fuller description of our responsibilities
isprovided on the FRC’s website at
www.frc.org.uk/auditorsresponsibilities.
The purpose of this report and
restrictions on its use by persons
other than the Companys
members as a body
This report is made solely to the Company’s
members, as a body, in accordance with
section 262 of the Companies (Guernsey) Law,
2008 and, in respect of any further matters on
which we have agreed to report, on terms we
have agreed with the Company. Our audit
work has been undertaken so that we might
state to the Company’s members those
matters we are required to state to them in
anauditors report and for no other purpose.
To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone
other than the Company and the Company’s
members, as a body, for our audit work, for this
report, or for the opinions we have formed.
Neale Jehan
For and on behalf of KPMG Channel
Islands Limited
Chartered Accountants and
RecognisedAuditors
Guernsey
24 April 2023
Independent Auditors report
77
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Consolidated financial statements
2022 2021
Assets
Private equity investments
Cost of $840,971,544 at 31 December 2022 and $870,294,049 at 31 December 2021 $1,401,430,601 $1,569,276,895
Cash and cash equivalents 7,034,276 116,486,687
Other assets 2,662,851 3,524,339
Distributions and sales proceeds receivable from investments 199,924 280,977
Total assets $1,411,327,652 $1,689,568,898
Liabilities and share capital
Liabilities:
ZDP Share liability $72,800,912 $161,985,696
Carried interest payable to Special Limited Partner 37,341,460
Payables to Investment Manager and affiliates 5,177,372 5,801,910
Accrued expenses and other liabilities 4,126,709 2,206,415
Net deferred tax liability 9,113
Total liabilities $82,114,106 $207,335,481
Share capital:
Class A Shares, $0.01 par value, 500,000,000 shares authorised,
49,911,438 shares issued and 46,761,030 shares outstanding $499,115 $499,115
Class B Shares, $0.01 par value, 100,000 shares authorised,
10,000 shares issued and outstanding 100 100
Additional paid-in capital 496,559,065 496,559,065
Retained earnings 839,456,403 992,368,962
Less cost of treasury stock purchased (3,150,408 shares) (9,248,460) (9,248,460)
Total net assets of the controlling interest 1,327,266,223 1,480,178,782
Net assets of the noncontrolling interest 1,947,323 2,054,635
Total net assets $1,329,213,546 $1,482,233,417
Total liabilities and net assets $1,411,327,652 $1,689,568,898
Net asset value per share for Class A Shares and Class B Shares $28.38 $31.65
Net asset value per share for Class A Shares and Class B Shares (GBP) £23.59 £23.37
Net asset value per 2022 ZDP Share (Pence) 123.08
Net asset value per 2024 ZDP Share (Pence) 121.04 116 .11
The consolidated financial statements were approved by the Board of Directors on 24 April 2023 and signed on its behalf by
William Maltby John Falla
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated Balance Sheets
31 December 2022 and 31 December 2021
78
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Consolidated financial statements
Consolidated Condensed schedules of private equity investments
31 December 2022 and 31 December 2021
Private equity investments Cost Fair Value
Unfunded
Commitment
Private Equity
(1)
Exposure
2022
Direct equity investments
NB Alternatives Direct Co-investment Program A $46,212,909 $39,055,204 $18,274,463 $57,329,667
NB Alternatives Direct Co-investment Program B 74,940,419 174,540,368 20,794,076 195,334,444
NB Renaissance Programs 7,791,651 20,790,191 10,537,743 31,327,934
NB Healthcare Credit Investment Program (Equity) 1,599,864 8,018 4,146,718 4,154,736
Marquee Brands 26,133,313 28,544,245 3,410,816 31,955,061
Direct equity investments
(2)(3)
574,858,103 1,023,499,804 3,731,282 1,027,231,086
Total direct equity investments $731,536,259 $1,286,437,830 $60,895,098 $1,347,332,928
Income Investments
NB Credit Opportunities Program 27,823,406 39,650,000 11,981,976 51,631,976
NB Specialty Finance Program 27,70 8, 871 27,524,276 15,000,000 42,524,276
Income investments 44,071,383 40,148,251 40,148,251
Total income investments $99,603,660 $107,322,527 $26,981,976 $134,304,503
Fund investments 9,831,625 7,670, 24 4 8,169,742 15,839,986
Total investments $840,971,544 $1,401,430,601 $96,046,816 $1,497,477,417
2021
Direct equity investments
NB Alternatives Direct Co-investment Program A $46,142,215 $45,903,484 $18,274,463 $64,177,947
NB Alternatives Direct Co-investment Program B
(3)
83,646,928 192,329,730 21,476,452 213,806,182
NB Renaissance Programs 9,677,956 20,844,892 14,059,072 34,903,964
NB Healthcare Credit Investment Program (Equity) 2,545,471 1,256,065 4,146,718 5,402,783
Marquee Brands 26,015,569 32,688,590 3,410,816 36,099,406
Direct equity investments
(2)
568, 497, 871 1,137,186,554 31,455,857 1,168,642,411
Total direct equity investments $736,526,010 $1,430,209,315 $92,823,378 $1,523,032,693
Income Investments
NB Credit Opportunities Program 33,911,457 49,004,673 11,981,976 60,986,649
NB Specialty Finance Program 39,064,395 38,882,486 15,000,000 53,882,486
Income investments 45,607,166 37,226,870 37, 226, 870
Total income investments $118,583,018 $125,114, 029 $26,981,976 $152,096,005
Fund investments 15,185,021 13,953,551 9,537,154 23,490,705
Total investments $870,294,049 $1,569,276,895 $129,342,508 $1,698,619,403
(1): Private equity exposure is the sum of fair value and unfunded commitment.
(2): Includes direct equity investments into companies and co-investment vehicles.
(3): This includes investment(s) above 5% of net asset value. See Note 3.
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Consolidated financial statements
Consolidated Condensed schedules of private equity investments
31 December 2022 and 31 December 2021
Geographic diversity of private equity investments
(1)
Fair Value
2022
Fair Value
2021
North America $1,024,091,245 $1,135,687,289
Europe 325,117,876 376,021,623
Asia / rest of world 52,221,480 57,567,983
$1,401,430,601 $1,569,276,895
Industry diversity of private equity investments
(2)
2022 2021
Consumer 19.9% 19.5%
Technology / IT 18.0% 18.2%
Industrials 15.3% 18.2%
Financial services 14.3% 9.8%
Business services 12.2% 13.8%
Healthcare 10.0% 9.7%
Diversified / undisclosed / other 5.3% 6.2%
Communications / media 2.6% 2.7%
Energy 1.3% 0.9%
Transportation 1.1% 1.0%
100.0% 100.0%
Asset class diversification of private equity investments
(3)
2022 2021
Direct Equity Investments
Mid-cap buyout 47.1% 49.0%
Large-cap buyout 32.4% 30.0%
Special situation 7.8% 8.0%
Growth equity 4.8% 4.0%
Income investments 7.7% 8.0%
Growth / venture funds 0.2% 1.0%
100.0% 100.0%
(1): Geography is determined by location of the headquarters of the underlying portfolio companies in funds and direct co-investments. A portion of our fund investments may relate to cash or other assets or liabilities
that they hold and for which we do not have adequate information to assign a geographic location.
(2): Industry diversity is based on underlying portfolio companies and direct co-investments which may be held through either co-investments or NB-managed vehicles.
(3): Asset class diversification is based on the net asset value of underlying fund investments and co-investments.
The accompanying notes are an integral part of the consolidated financial statements.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Consolidated financial statements
Consolidated Statements of operations and changes in net assets
For the years ended 31 December 2022 and 31 December 2021
2022 2021
Interest and dividend income (net of foreign withholding taxes of $7,261 for 2022 and $5,180 for 2021) $4,544,339 $5,725,688
Expenses
Investment management and services 21,14 4,589 22,483,005
Carried interest 37,232,789
Finance costs
Credit facility 5,999,532 4,084,128
ZDP Shares 6,039,881 6,942,354
Administration and professional fees 4,485,332 4,324,409
37,669,334 75,066,685
Net investment income (loss) $(33,124,995) $(69,340,997)
Realised and unrealised gains (losses)
Net realised gain on investments, translation of foreign currencies, and forward foreign exchange contracts, net of tax expense (benefit) of $2,260,993
for2022 and $756,098 for 2021 $51,179,567 $212,372,218
Net change in unrealised gain (loss) on investments and forward foreign exchange contracts, net of tax expense (benefit) of $9,113 for 2022 and $0
for2021 (127,109,675) 319,700,846
Net realised and change in unrealised gain (loss) (75,930,108) 532,073,064
Net increase (decrease) in net assets resulting from operations $(109,055,103) $462,732,067
Less net (increase) decrease in net assets resulting from operations attributable to the noncontrolling interest 107,312 (529,393)
Net increase (decrease) in net assets resulting from operations attributable to the controlling interest $(108,947,791) $462,202,674
Net assets at beginning of period attributable to the controlling interest 1,480,178,782 1,051,651,249
Less dividend payment (43,964,768) (33,675,141)
Net assets at end of period attributable to the controlling interest $1,327,266,223 $1,480,178,782
Earnings (loss) per share for Class A Shares and Class B Shares of the controlling interest $(2.33) $9.88
Earnings (loss) per share for Class A Shares and Class B Shares of the controlling interest (GBP) £(1.88) £7.18
The accompanying notes are an integral part of the consolidated financial statements.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Consolidated financial statements
Consolidated Statements of cash flows
For the years ended 31 December 2022 and 31 December 2021
2022 2021
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations attributable to the controlling interest $(108,947,791) $462,202,674
Net increase (decrease) in net assets resulting from operations attributable to the noncontrolling interest (107,312) 529,393
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net realised (gain) loss on investments and forward foreign exchange contracts, net of tax expense (51,179,567) (212,372,218)
Net change in unrealised (gain) loss on investments, translation of foreign currencies, and forward foreign exchange contracts, net of tax expense 127,109,675 (319,700,846)
Contributions to private equity investments (3,664,041) (19,918,366)
Purchases of private equity investments (36,203,158) (147,086,034)
Distributions from private equity investments 55,978,140 105,532,235
Proceeds from sale of private equity investments 63,520,093 281,199,375
In-kind payment of interest income (3,840,330) (4,361,301)
Amortisation of finance costs 647,74 6 719,878
Amortisation of purchase premium/discount (OID), net (56,667) (311,331)
Change in other assets 283,491 1,042,713
Change in payables to Investment Manager and affiliates (37,965,276) 23,345,213
Change in accrued expenses and other liabilities 5,315,280 5,502,828
Net cash provided by operating activities 10,890,283 176,324,213
Cash flows from financing activities:
Dividend payment (43,964,768) (33,675,141)
Redemption of 2022 Zero Dividend Preference Shares (68,100,570)
Borrowings from credit facility 30,000,000 15,000,000
Payments to credit facility (30,000,000) (50,000,000)
Settlement of the forward foreign exchange contract and ongoing hedging activity 5,792,625
Net cash used in financing activities (112,065,338) (62,882,516)
Effect of exchange rates on cash balances (8,277,356)
Net increase (decrease) in cash and cash equivalents (109,452,411) 113, 441,697
Cash and cash equivalents at beginning of period 116,486,687 3,044,990
Cash and cash equivalents at end of period $7,034,276 $116,486,687
Supplemental cash flow information
Credit facility financing costs paid $5,552,971 $3,658,042
Net taxes paid (refunded) $(22,805) $1,268,764
The accompanying notes are an integral part of the consolidated financial statements.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 1 – Description of the Group
NB Private Equity Partners Limited (the “Company”) and its subsidiaries, collectively (the
“Group”) is a closed-ended investment company registered in Guernsey. The registered
office is Floor 2, Trafalgar Court, St Peter Port, Guernsey, GY1 4LY. The principal activity of
the Group is to invest in direct private equity investments by co-investing alongside leading
private equity sponsors in their core areas of expertise. The Company’s Class A Shares are
listed and admitted to trading on the Premium Segment of the Main Market of the London
Stock Exchange (“Main Market”) under the symbols “NBPE” and “NBPU” corresponding to
Sterling and U.S. dollar quotes, respectively. NBPE has a class of Zero Dividend Preference
(“ZDP”) Shares maturing in 2024 (see note 5) which is listed and admitted to trading on the
Specialist Fund Segment of the Main Market of the London Stock Exchange (“Specialist
Fund Segment”) under the symbol “NBPS”.
The Group is managed by NB Alternatives Advisers LLC (“Investment Manager”),
asubsidiary of Neuberger Berman Group LLC (“NBG”), pursuant to an Investment
Management Agreement. The Investment Manager serves as the registered investment
adviser under the Investment Advisers Act of 1940.
Note 2 – Summary of Significant Accounting Policies
Basis of Presentation
These consolidated financial statements present a true and fair view of the financial
position, profit or loss and cash flows and have been prepared in conformity with U.S.
generally accepted accounting principles (“U.S. GAAP”) and are in compliance with the
Companies (Guernsey) Law, 2008 (as amended). All adjustments considered necessary for
the fair presentation of the consolidated financial statements for the periods presented
have been included. These consolidated financial statements are presented in U.S. dollars.
The Group is an investment company and follows the accounting and reporting guidance
in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic
(“ASC”) 946. Accordingly, the Group reflects its investments on the Consolidated Balance
Sheets at their estimated fair values, with unrealised gains and losses resulting from
changes in fair value reflected in net change in unrealised gain (loss) on investments and
forward foreign exchange contracts in the Consolidated Statements of Operations and
Changes in Net Assets. The Group does not consolidate majority-owned or controlled
portfolio companies. The Group does not provide any financial support to any of its
investments beyond the investment amount to which it committed.
The Directors considered that it is appropriate to adopt a going concern basis of
accounting in preparing the consolidated financial statements. In reaching this
assessment, the Directors have considered a wide range of information relating to present
and future conditions including the balance sheets, future projections, cash flows and the
longer-term strategy of the business.
Principles of Consolidation
The consolidated financial statements include accounts of the Company consolidated with
the accounts of all its subsidiaries in which it holds a controlling financial interest as of the
financial statement date. All inter-group balances have been eliminated.
The Companys partially owned subsidiary, NB PEP Investments, LP (incorporated) is
incorporated in Guernsey.
The Companys wholly-owned subsidiaries, NB PEP Holdings Limited, NB PEP Investments I, LP,
NB PEP Investments LP Limited and NB PEP Investments Limited are incorporated in Guernsey.
The Companys wholly-owned subsidiary, NB PEP Investments DE, LP is incorporated in
Delaware and operating in the United States.
Use of Estimates and Judgements
The preparation of the consolidated financial statements in conformity with U.S. GAAP
requires the Directors to make estimates and judgements that affect the reported
amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those estimates.
The following estimates and assumptions were used at 31 December 2022 and
31December 2021 to estimate the fair value of each class of financial instruments:
Cash and cash equivalents – The carrying value reasonably approximates fair value due
tothe short-term nature of these instruments.
Forward currency contracts are revalued using the forward exchange rate prevailing
atthe Consolidated Balance Sheet date.
Other assets (excluding Forward currency contracts) – The carrying value reasonably
approximates fair value.
Distributions and sales proceeds receivable from investments – The carrying value
reasonably approximates fair value.
ZDP Share liability – The carrying value reasonably approximates fair value (see note 5).
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 2 – Summary of Significant Accounting Policies
continued
Use of Estimates and Judgements continued
Carried interest payable to Special Limited Partner – The carrying value reasonably
approximates fair value.
Payables to Investment Manager and affiliates – The carrying value reasonably
approximates fair value.
Accrued expenses and other liabilities – The carrying value reasonably approximates
fairvalue.
Private equity investments – Further information on valuation is provided in the Fair Value
Measurements section below.
Recent Accounting Pronouncements
In June 2022, the FASB issued ASU 2022-03 Topic 820, Fair Value Measurement of Equity
Securities Subject to Contractual Sale Restrictions. ASU 2022-03 amends Topic 820 to clarify
that a contractual sale restriction is not considered in measuring an equity security at fair
value. This update is effective for fiscal years beginning after 15 December 2024, and early
adoption is permitted. The Group has early adopted and this guidance is not expected to
have a material impact on the Group’s financial statements.
Fair Value Measurements
It is expected that most of the investments in which the Group invests will meet the criteria
set forth under FASB ASC 820 Fair Value Measurement and Disclosures (“ASC 820”)
permitting the use of the practical expedient to determine the fair value of the
investments. ASC 820 provides that, in valuing alternative investments that do not have
quoted market prices but calculate net asset value (“NAV”) per share or equivalent, an
investor may determine fair value by using the NAV reported to the investor by the
underlying investment. To the extent ASC 820 is applicable to an investment, the
Investment Manager will value the Group’s investment based primarily on the value
reported to the Group by the investment or by the lead investor / sponsor of a direct
co-investment as of each quarter-end, as determined by the investments in accordance
with its own valuation policies.
ASC 820-10 Fair Value Measurements and Disclosure establishes a fair value hierarchy
thatprioritises the inputs to valuation techniques used to measure fair value. The hierarchy
gives the highest priority to unadjusted quoted prices in active markets for identical
assetsor liabilities (Level 1 measurements) and the lowest priority to unobservable inputs
(Level3measurements). ASC 820-10-35-39 to 55 provides three levels of the fair value
hierarchy as follows:
Level 1: Quoted prices are available in active markets for identical investments as of the
reporting date.
Level 2: Pricing inputs are other than quoted prices in active markets, which are either
directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs are unobservable for the investment and include situations where
there is little, if any, market activity for the investment. The inputs used in the
determination of the fair value require significant management judgement or estimation.
Observable inputs refer broadly to the assumptions that market participants would use in
pricing the asset or liability, including assumptions about risk, based on market data
obtained from sources independent of the Group. Unobservable inputs reflect the Group’s
own assumptions about the assumptions market participants would use in pricing the
asset or liability based on the information available. The inputs or methodology used for
valuing assets or liabilities may not be an indication of the risks associated with investing in
those assets or liabilities. The Group generally uses the NAV reported by the investments as
a primary input in its valuation utilising the practical expedient method of determining fair
value; however, adjustments to the reported NAV may be made based on various factors,
including, but not limited to, the attributes of the interest held, including the rights and
obligations, any restrictions or illiquidity on such interest, any potential clawbacks by the
investments and the fair value of the investments’ portfolio or other assets and liabilities.
Investments that are measured at fair value using the NAV per share (or its equivalent)
practical expedient are not categorised in the fair value hierarchy.
Realised Gains and Losses on Investments
Realised gains and losses from sales of investments are determined on a specific
identification basis. For investments in private equity investments, the Group records its
share of realised gains and losses incurred when the Investment Manager knows that the
private equity investment has realised its interest in a portfolio company and the
Investment Manager has sufficient information to quantify the amount. For all other
investments, realised gains and losses are recognised in the Consolidated Statements of
Operations and Changes in Net Assets in the year in which they arise.
Net Change in Unrealised Gains and Losses on Investments
Gains and losses arising from changes in value are recorded as an increase or decrease in
the unrealised gains or losses of investments based on the methodology described above.
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Notes to consolidated financial statements
Note 2 – Summary of Significant Accounting Policies
continued
Foreign Currency
Assets and liabilities denominated in foreign currencies are translated into U.S. dollar
amounts at the reporting date. Transactions denominated in foreign currencies, including
purchases and sales of investments, and income and expenses, are translated into U.S.
dollar amounts on the date of such transactions. Adjustments arising from foreign
currency transactions are reflected in the net realised gain (loss) on investments and
forward foreign exchange contracts and the net change in unrealised gain (loss) on
investments and forward foreign exchange contracts on the Consolidated Statements
ofOperations and Changes in Net Assets.
The Group’s investments of which capital is denominated in foreign currency are translated
into U.S. dollars based on rates of exchange at the reporting date. The cumulative effect of
translation to U.S. dollars has decreased the fair value of the Group’s foreign investments
by $24,580,105 for the year ended 31 December 2022. The cumulative effect of translation
to U.S. dollars decreased the fair value of the Group’s foreign investments by $27,126,075
for the year ended 31 December 2021.
Other than the ZDP Shares denominated in Sterling (see note 5 and note 6), the Group
hasunfunded commitments denominated in currencies other than U.S. dollars. At
31December 2022, the unfunded commitments that are in Euros and Sterling amounted
to €10,531,115 and £32,138, respectively (31 December 2021: €13,033,970 and £34,225).
They have been included in the Consolidated Condensed Schedules of Private Equity
Investments at the U.S. dollar exchange rates in effect at 31 December 2022 and
31December 2021. The effect on the unfunded commitment of the change in the
exchange rates between Euros and U.S. dollars was a decrease in the U.S. dollar obligations
of $759,592 for 31 December 2022 and a decrease in the U.S. dollar obligations of
$1,196,119 for 31 December 2021. The effect on the unfunded commitment of the change
in the exchange rates between Sterling and U.S. dollars was a decrease in the U.S. dollar
obligations of $5,212 for 31 December 2022 and an increase in the U.S. dollar obligations
of$2,124 for 31 December 2021.
Investment Transactions and Investment Income
Investment transactions are accounted for on a trade date basis. Investments are
recognised when the Group incurs an obligation to acquire a financial instrument and
assume the risk of any gain or loss or incurs an obligation to sell a financial instrument and
forego the risk of any gain or loss. Investment transactions that have not yet settled are
reported as receivable from investment or payable to investment.
The Group earns interest and dividends from direct investments and from cash and cash
equivalents. The Group records dividends on the ex-dividend date, net of withholding tax,
if any, and interest, on an accrual basis when earned, provided the Investment Manager
knows the information or is able to reliably estimate it. Otherwise, the Group records the
investment income when it is reported by the private equity investments. Discounts
received or premiums paid in connection with the acquisition of loans are amortised into
interest income using the effective interest method over the contractual life of the related
loan. Payment-in-kind (“PIK”) interest is computed at the contractual rate specified in the
loan agreement for any portion of the interest which may be added to the principal
balance of a loan rather than paid in cash by the obligator on the scheduled interest
payment date. PIK interest is added to the principal balance of the loan and recorded as
interest income. Prepayment premiums include fee income from securities settled prior to
maturity date, and are recorded as interest income in the Consolidated Statements of
Operations and Changes in Net Assets.
For the year ended 31 December 2022, total interest and dividend income was $4,544,339,
of which $57,782 was dividends, and $4,486,557 was interest income. For the year ended
31 December 2021, total interest and dividend income was $5,725,688, of which $406,544
was dividends, and $5,319,144 was interest income.
Cash and Cash Equivalents
Cash and cash equivalents represent cash held in accounts at banks and liquid investments
with original maturities of three months or less. Cash equivalents are carried at cost plus
accrued interest, which approximates fair value. At 31 December 2022 and 31 December
2021, cash and cash equivalents consisted of $7,034,276 and $116,486,687 of cash,
respectively, primarily held in operating accounts with Bank of America Merrill Lynch.
Cashequivalents are held for the purpose of meeting short-term liquidity requirements,
rather than for investment purposes. As of 31 December 2022 and 31 December 2021,
there were no cash equivalents. Cash and cash equivalents are subject to credit risk to the
extent those balances exceed applicable Federal Deposit Insurance Corporation (“FDIC”)
or Securities Investor Protection Corporation (“SIPC”) limitations.
Income Taxes
The Company is registered in Guernsey as an exempt company. The States of Guernsey
Income Tax Authority has granted the Group an exemption from Guernsey income tax
under the provision of the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and
theGroup has been charged an annual exemption fee of £1,200 (2021: £1,200). Generally,
income that the Group derives from the investments may be subject to taxes imposed by
the U.S. or other countries and will impact the Group’s effective tax rate.
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Notes to consolidated financial statements
Note 2 – Summary of Significant Accounting Policies
continued
Income Taxes continued
In accordance with FASB ASC 740-10, Income Taxes, the Group is required to determine
whether its tax positions are more likely than not to be sustained upon examination by the
applicable taxing authority based on the technical merits of the position. Tax positions not
deemed to meet a more-likely-than-not threshold would be recorded as a tax expense in
the current year.
The Group files tax returns as prescribed by the tax laws of the jurisdictions in which it
operates. In the normal course of business, the Group is subject to examination by U.S.
federal, state, local and foreign jurisdictions, where applicable. The Group’s U.S. federal
income tax returns are open under the normal three-year statute of limitations and
therefore subject to examination. The Investment Manager does not expect that the total
amount of unrecognised tax benefits will materially change over the next twelve months.
Investments made in entities that generate U.S. source investment income may subject the
Group to certain U.S. federal and state income tax consequences. A U.S. withholding tax at
the rate of 30% may be applied on the Group’s distributive share of any U.S. sourced
dividends and interest (subject to certain exemptions) and certain other income that the
Group receives directly or through one or more entities treated as either partnerships or
disregarded entities for U.S. federal income tax purposes.
Investments made in entities that generate business income that is effectively connected
with a U.S. trade or business may subject the Group to certain U.S. federal and state income
tax consequences. Generally, the U.S. imposes withholding tax on effectively connected
income at the highest U.S. rate (generally 21%). In addition, the Group may also be subject
to a branch profits tax which can be imposed at a rate of up to 23.7% of the after-tax profits
treated as effectively connected income associated with a U.S. trade or business. As such,
the aggregate U.S. tax liability on effectively connected income may approximate 44.7%
given the two levels of tax.
The Group recognises a tax benefit in the consolidated financial statements only when it is
more likely than not that the position will be sustained upon examination by the relevant
taxing authority based on the technical merits of the position. To date, the Group has not
provided any reserves for taxes as all related tax benefits have been fully recognised.
Although the Investment Manager believes uncertain tax positions have been adequately
assessed, the Investment Manager acknowledges that these matters require significant
judgement and no assurance can be given that the final tax outcome of these matters will
not be different.
Deferred taxes are recorded to reflect the tax benefit and consequences of future years’
differences between the tax basis of assets and liabilities and their financial reporting basis.
The Group records a valuation allowance to reduce deferred tax assets if it is more likely
than not that some portion or all of the deferred tax assets will not be realised. Management
subsequently adjusts the valuation allowance as the expected realisability of the deferred
tax assets changes such that the valuation allowance is sufficient to cover the portion of the
asset that will not be realised. The Group records the tax associated with any transactions
with U.S. or other tax consequences when the Group recognises the related income
(seenote 7).
Shareholders in certain jurisdictions may have individual income tax consequences
fromownership of the Group’s shares. The Group has not accounted for any such tax
consequences in these consolidated financial statements. For example, the Investment
Manager expects the Group and certain of its non-U.S. corporate subsidiaries to be treated
as passive foreign investment corporations (“PFICs”) under U.S. tax rules. For this purpose,
the PFIC regime should not give rise to additional tax at the level of the Group or its
subsidiaries. Instead, certain U.S. investors in the Group may need to make tax elections
and comply with certain U.S. reporting requirements related to their investments in the
PFICs in order to potentially manage the adverse U.S. tax consequences associated with
theregime.
Forward Foreign Exchange Contracts
Forward foreign exchange contracts are reported on the balance sheets at fair value and
included either in other assets or accrued expenses and other liabilities, depending on each
contract’s unrealised position (appreciated / depreciated) relative to its notional value as of
the end of the reporting periods. See note 6.
Forward foreign exchange contracts involve elements of market risk in excess of the
amounts reflected on the consolidated financial statements. The Group bears the risk of
anunfavourable change in the foreign exchange rate underlying the forward foreign
exchange contract as well as risks from the potential inability of the counterparties to meet
the terms of their contracts.
Dividends to Shareholders
The Group pays dividends semi-annually to shareholders from net investment income and
net realised gains on investments upon approval by the Board of Directors subject to the
passing of the ZDP Cover Test (see note 5) and the solvency test under Guernsey law.
Liabilities for dividends to shareholders are recorded on the ex-dividend date.
Operating Expenses
Operating expenses are recognised when incurred. Operating expenses include amounts
directly incurred by the Group as part of its operations, and do not include amounts
incurred from the operations of the Group’s investments.
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Notes to consolidated financial statements
Note 2 – Summary of Significant Accounting Policies continued
Carried Interest
Carried interest amounts due to the Special Limited Partner (an affiliate of the Investment Manager, see note 10) are computed and accrued at each period end based on period-to-date
results in accordance with the terms of the Third Amended and Restated Limited Partnership Agreement of NB PEP Investments LP (Incorporated). For the purposes of calculating the
incentive allocation payable to the Special Limited Partner, the value of any fund investments made by the Group in other Neuberger Berman Funds (“NB Funds”) in respect of which the
Investment Manager or an affiliate receives a fee or other remuneration shall be excluded from the calculation.
Note 3 – Investments
The Group invests in a diversified portfolio of direct private equity companies (see note 2). As required by ASC 820, financial assets and liabilities are classified in their entirety based on
the lowest level of input that is significant to the fair value measurement. The Group has assessed these positions and concluded that all private equity companies not valued using the
practical expedient, with the exception of marketable securities, are classified as either Level 2 or Level 3 due to significant unobservable inputs. Marketable securities distributed from
aprivate equity company are classified as Level 1. There were two marketable securities held by the Group as of 31 December 2022 and 31 December 2021.
The following table details the Group’s financial assets and liabilities that were accounted for at fair value as of 31 December 2022 and 31 December 2021 by level and fair value hierarchy.
As of 31 December 2022
Assets (Liabilities) Accounted for at Fair Value
Level 1 Level 2 Level 3
Investments
measured at
net asset value
1
Total
Common stock $4,759,318 $8,987, 311 $– $– $13,746,629
Private equity companies 195,780,024 1,191,903,948 1, 387,683,972
Totals $4,759,318 $8,987, 311 $ 195,780,024 $1,191,903,948 $1,401,430,601
As of 31 December 2021
Assets (Liabilities) Accounted for at Fair Value
Level 1 Level 2 Level 3
Investments
measured at
net asset value
1
Total
Common stock $11, 685,316 $27,192,165 $– $– $38,877,481
Private equity companies 207,680,425 1,322,718,989 1,530,399,414
Totals $11,6 85,316 $27,192,165 $207,680,425 $1,322,718,989 $1,569,276,895
(1) Certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been categorised in the fair value hierarchy. The fair value amounts presented in this table
are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Condensed Schedules of Private Equity Investments.
Significant investments:
At 31 December 2022, the Group’s share of the following underlying private equity company exceeded 5% of net asset value.
Company (Legal Entity Name) Industry Country
Fair Value
2022
Fair Value as a
Percentage of
net asset value
3i 2020 Co-investment 1 SCSp (LP Interest) Consumer/Retail Netherlands $72,177,584 5.44%
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 3 – Investments continued
Significant investments continued:
At 31 December 2021, the Group’s share of the following underlying private equity companies exceeded 5% of net asset value.
Company (Legal Entity Name) Industry Country
Fair Value
2021
Fair Value as a
Percentage of
net asset value
THL Equity Fund VIII Investors (Automate), L.P.
(1)
(LP Interest) Industrials Norway $97,393,384 6.58%
NB Bluebird S.à.r.l.
(1)
(LP Interest) Business Services United Kingdom 87, 293,710 5.90%
(1) The Company is held by NB Alternatives Direct Co-investment Program B and through a direct equity co-investment vehicle.
The following table summarises the changes in the fair value of the Group’s Level 3 private equity investments for the year ended 31 December 2022.
(dollars in thousands)
For the Year Ended 31 December 2022
Large-cap Buyout Mid-cap Buyout Special Situations Growth/Venture Income Investments
Total Private
Equity Investments
Balance, 31 December 2021 $36,269 $93,070 $21,836 $19,279 $37,226 $207,680
Purchases of investments and/or contributions to investments 7, 290 1,760 202 9,252
Realised gain (loss) on investments 8,915 58 387 3,887 13,247
Changes in unrealised gain (loss) of investments still held at the reporting date 2,556 5,501 (9,204) 548 (966) (1,565)
Changes in unrealised gain (loss) of investments sold during the period (9,394) (240) (9,634)
Distributions from investments (513) (18,175) (1,067) (387) (20,142)
Transfers into level 3
Transfers out of level 3 (3,058) (3,058)
Balance, 31 December 2022 $38,312 $84,149 $13,383 $19,789 $40,147 $195,780
There were no transfers into Level 3. Investments were transferred out of Level 3 into Investments Measured at Net Asset Value.
The following table summarises changes in the fair value of the Companys Level 3 private equity investments for the year ended 31 December 2021.
For the Year Ended 31 December 2021
(dollars in thousands) Large-cap Buyout Mid-cap Buyout Special Situations Growth/Venture Income Investments
Total Private Equity
Investments
Balance, 31 December 2020 $25,249 $80,020 $22,725 $19,34 8 $69,334 $216,676
Purchases of investments and/or contributions to investments 12,20 0 15,656 729 28,585
Realised gain (loss) on investments (3,488) (4,414) 5,540 (2,362)
Changes in unrealised gain (loss) of investments still held at the reporting date 1,900 26,126 (223) 1,904 (1,076) 28,631
Changes in unrealised gain (loss) of investments sold during the period 3,343 3,122 1,293 7,75 8
Distributions from investments (3,080) (1,072) (666) (1,410) (37,865) (44,093)
Transfers into level 3
Transfers out of level 3 (27,515) (27,515)
Balance, 31 December 2021 $36,269 $93,070 $21,836 $19,279 $37, 226 $207,680
There were no transfers into Level 3. Investments were transferred out of Level 3 into Investments Measured at Net Asset Value.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 3 – Investments continued
The following table summarises the valuation methodologies and inputs used for private equity investments categorised in Level 3 as of 31 December 2022.
(dollars in thousands)
Private Equity Investments Fair Value 31 December 2022 Valuation Methodologies Unobservable Inputs
1
Ranges (Weighted Average)
2
Impact to Valuation from an
Increase in Input
3
Direct equity investments
Large-cap buyout $38,312 Market Comparable Companies LTM EBITDA 12.8x-21.0x (15.6x) Increase
Mid-cap buyout 84,149 Escrow Value Escrow 1.0x Increase
Income Approach Discount Rate 12.0x Increase
Market Comparable Companies LTM Revenue 3.9x Increase
Market Comparable Companies LTM EBITDA 11.0x-14.3x (13.3x) Increase
Special situations 13,383 Market Comparable Companies LTM EBITDA 9.0x Increase
Market Comparable Companies LTM Net Revenue 2.0x Increase
Escrow Value Escrow 1.0x Increase
Growth / venture 19,789 Market Comparable Companies LTM Net Revenue 1.5x-6.0x (4.6x) Increase
Escrow Value Escrow 1.0x Increase
Income investments 40,147 Market Comparable Companies LTM EBITDA 9.6x-15.8x (14.9x) Increase
Total $195,780
(1) LTM means Last Twelve Months, EBITDA means Earnings Before Interest Taxes Depreciation and Amortisation.
(2) Inputs weighted based on fair value of investments in range.
(3) Unless otherwise noted, this column represents the directional change in the fair value of Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the
unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.
The following table summarises the valuation methodologies and inputs used for private equity investments categorised in Level 3 as of 31 December 2021.
(dollars in thousands)
Private Equity Investments Fair Value 31 December 2021 Valuation Methodologies Unobservable Inputs
1
Ranges (Weighted Average)
2
Impact to Valuation from an
Increase in Input
3
Direct equity investments
Large-cap buyout $36,269 Market Comparable Companies LTM EBITDA 12.0x Increase
Mid-cap buyout 93,070 Escrow Value Escrow 1.0x Increase
Market Comparable Companies LTM EBITDA 8.8x-15.3x (12.6x) Increase
Market Comparable Companies Production multiple ($/Boed) $24, 811 Increase
Market Comparable Companies
Implied transaction
production multiple ($/Boed) $18,343 Increase
Special situations 21,836 Market Comparable Companies LTM EBITDA 7.7x-8.6x (8.5x) Increase
Market Comparable Companies LTM Net Revenue 3.5x Increase
Growth / venture 19,279 Market Comparable Companies LTM Net Revenue 3.0x-6.5x (5.6x) Increase
Escrow Value Escrow 1.0x Increase
Income investments 37, 226 Market Comparable Companies LTM EBITDA 9.6x Increase
Market Comparable Companies LTM EBITDA 17.8x Increase
Total $207,680
(1) LTM means Last Twelve Months, EBITDA means Earnings Before Interest Taxes Depreciation and Amortisation, Boed means Barrels of oil equivalent per day.
(2) Inputs weighted based on fair value of investments in range.
(3) Unless otherwise noted, this column represents the directional change in the fair value of Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the
unobservable input would have the opposite effect. Significant increases and decreases in these inputs in isolation could result in significantly higher or lower fair value measurements.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 3 – Investments continued
Since 31 December 2021, there have been no changes in valuation methodologies
withinLevel 2 and Level 3 that have had a material impact on the valuation of private
equityinvestments.
In the case of direct equity investments and income investments, the Investment Manager
does not control the timing of all exits but at the time of investment, typically expects
investment durations to be meaningfully shorter than fund investments. Therefore,
although some fund and direct investments may take 10-15 years to reach final realisation,
the Investment Manager expects the majority of the Group’s invested capital in the current
portfolio to be returned in much shorter timeframes. Generally, fund investments have a
defined term and no right to withdraw. In the case of fund investments, fund lives are
typically ten years; however, a series of extensions often mean the lives can extend
significantly beyond this. It should be noted that the Group’s fund investments are legacy
assets, non-core to the current strategy and are in realisation mode.
Note 4 – Credit Facility
As of 31 December 2022, a subsidiary of the Company had a $300.0 million secured
revolving credit facility with Massachusetts Mutual Life Insurance Company (“MassMutual”).
The ten year borrowing availability period of the MassMutual Facility expires on
23December 2029, while the MassMutual Facility matures on 23 December 2031. For the
years ended 31 December 2022 and 2021, the borrowings from the MassMutual Facility
were $30,000,000 and $15,000,000, respectively, and the payments to the MassMutual
Facility were $30,000,000 and $50,000,000, respectively. The outstanding balances of the
MassMutual Facility were nil at 31 December 2022 and nil at 31 December 2021.
Under the MassMutual Facility, the Group is required to meet certain portfolio
concentration tests and certain loan-to-value ratios not to exceed 45% through its
8
th
anniversary with step-downs each year thereafter until reaching 0% on its
10
th
anniversary and through maturity. In addition, the MassMutual Facility limits the
incurrence of loan-to-value ratios above 45%, additional indebtedness, asset sales,
acquisitions, mergers, liens, portfolio asset assignments, or other matters customarily
restricted in such agreements. The MassMutual Facility defines change in control as a
change in the Companys ownership structure of certain of its subsidiaries or the event
inwhich the Group is no longer managed by the Investment Manager or an affiliate.
Achange in control would trigger an event of default under the MassMutual Facility.
At31December 2022, the Group met all requirements under the MassMutual Facility.
TheMassMutual Facility is secured by a security interest in the cash flows from the
underlying investments of the Group.
Under the MassMutual Facility, the interest rate was calculated as the greater of either
LIBOR or 1% plus 2.875% (2.75% prior to 1 May 2020) per annum. The Group is required
topay a commitment fee calculated as 0.55% per annum on the average daily balance
ofthe unused facility amount. The Group is subject to a minimum utilisation of 30% of
thefacility size, or $90.0 million, beginning eighteen months after the closing date or
23June 2021. If the minimum utilisation is not met, the Group is required to pay the
amount of interest that would have been accrued on the minimum usage amount less
anyoutstanding advances.
The following table summarises the Group’s finance costs incurred and expensed under
the MassMutual Facility for the years ended 31 December 2022 and 2021.
31 December 2022 31 December 2021
Interest expense $235,545 $548,958
Undrawn commitment fees 1,171,041 1,335,583
Servicing fees and breakage costs 40,722 75,020
Amortisation of capitalised debt issuance costs 264,567 264,567
Minimum utilisation fees 4,287,657 1,860,000
Total Credit Facility Finance Costs $5,999,532 $4,084,128
As of 31 December 2022 and 31 December 2021, unamortised capitalised debt issuance
costs (included in Other assets on the Consolidated Balance Sheets) were $2,376,770 and
$2,641,336, respectively. Capitalised amounts are being amortised on a straight-line basis
over the terms of the applicable credit facility.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 5 – Zero Dividend Preference Shares (“ZDP Shares”)
On 30 September 2022, the 2022 ZDP Shares were redeemed and delisted from the
Specialist Fund Segment.
As of 31 December 2022, there were 50,000,000 ZDP Shares (the “2024 ZDP Shares”)
outstanding at a Gross Redemption Yield of 4.25%. The 2024 ZDP Shares were issued
pursuant to the Initial Placing and Offer for Subscription at a price per 2024 ZDP Share of
100 pence. The holders of the 2024 ZDP Shares will have a final capital entitlement of
130.63 pence on the repayment date of 30 October 2024.
The 2024 ZDP Shares rank prior to the Class A and Class B Shares in respect of repayment of
the final entitlement. However, they rank behind any borrowings that remain outstanding.
They carry no entitlement to income and their entire return takes the form of capital. The
2024 ZDP Shares require the Company to satisfy their respective ZDP Cover Test (the “Test”)
prior to taking certain actions. In summary, the Test requires that for the 2024 ZDPs the
Gross Assets divided by the liabilities adjusting for the final 2024 ZDP liabilities should be
greater than 2.75. The details of the restrictions and the Tests are set out in the ZDP
Prospectus. Unless the Test is satisfied, the Company is not permitted to pay any dividend
or other distribution out of capital reserves. A voluntary liquidation or winding-up of the
Company would require ZDP Shareholder approval where such winding-up is to take effect
prior to the relevant ZDP repayment date.
The following table reconciles the liability for ZDP Shares, which approximates fair value,
for the year ended 31 December 2022 and the year ended 31 December 2021.
ZDP Shares Pounds Sterling U.S. Dollars
Liability, 31 December 2020 £114 ,865,085 $157,014, 827
Net change in accrued interest on 2022 ZDP Shares 2,365,106 3,243,593
Net change in accrued interest on 2024 ZDP Shares 2,364,992 3,243,449
Currency conversion (1,516,173)
Liability, 31 December 2021 £119,595,183 $161,985,696
Net change in accrued interest on 2022 ZDP Shares 1,830,558 2,456,277
Net change in accrued interest on 2024 ZDP Shares 2,465,426 3,200,424
Redemption of 2022 ZDP Shares (63,370,000) (68,100,570)
Currency conversion (26,740,915)
Liability, 31 December 2022 £60,521,167 $72,800,912
The total liability related to the 2022 ZDP Shares was nil and £61,539,442 (equivalent of
$83,352,098) as of 31 December 2022 and 31 December 2021, respectively. The total
liability balance related to the 2024 ZDP Shares was £60,521,167 (equivalent of
$72,800,912) and £58,055,741 (equivalent of $78,633,598) as of 31 December 2022 and
31December 2021, respectively.
As of 31 December 2022, the 2024 ZDP Shares were the only outstanding ZDP share class.
ZDP Shares are measured at amortised cost. Capitalised offering costs are being amortised
using the effective interest rate method. The unamortised balance of capitalised offering
costs of the 2024 ZDP Shares at 31 December 2022 was $255,801 and the unamortised
balance of capitalised offering costs of the 2022 and 2024 ZDP Shares at 31 December 2021
was $638,981.
Note 6 – Forward Foreign Exchange Contracts
The Group may utilise forward foreign currency contracts to hedge, in part, the risk
associated with the Sterling contractual liability for the issued ZDP Shares (see note 5).
As of 31 December 2022 and 31 December 2021, the Group did not hold any active
forward foreign currency contracts.
The below table presents the Group’s forward foreign currency contract held and its effect
on the Consolidated Statements of Operations and Changes in Net Assets during the year
ended 31 December 2021.
For the year ended 31 December 2021
Currency
Purchased
Currency
Sold Counterparty Settlement Date
Unrealised
gain (loss)
Realised
gain (loss)
£75,000,000 $97,585,125 Westpac
Banking
Corporation
14 April 2021 $(4,994,199) $5,792,625
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 7 – Income Taxes
The Group is exempt from Guernsey tax on income derived from non-Guernsey sources.
However, certain of its underlying investments generate income that is subject to tax in
other jurisdictions, principally the United States (“U.S.). The Group has recorded the
following amounts related to such taxes:
31 December 2022 31 December 2021
Current tax expense $2,260,993 $756,098
Deferred tax expense (benefit) 9,113
Total tax expense (benefit) $2,270,106 $756,098
31 December 2022 31 December 2021
Gross deferred tax assets $7,872,867 $11,6 85,030
Valuation allowance (7,872,867) (9,690,782)
Net deferred tax assets 1,994,248
Gross deferred tax liabilities (9,113) (1,994,248)
Net deferred tax assets (liabilities) $(9,113) $–
Current tax expense (benefit) is reflected in Net realised gain/(loss) and deferred tax
expense (benefit) is reflected in Net change in unrealised gain/(loss) on the Consolidated
Statements of Operations and Changes in Net Assets. Net deferred tax liabilities are related
to net unrealised gains and gross deferred tax assets, offset by a valuation allowance, are
related to unrealised losses on investments held in entities that file separate tax returns.
The Group has no gross unrecognised tax benefits. The Group is subject to examination
bytax regulators under the three-year statute of limitations.
Note 8 – Earnings (Loss) per Share
The computations for earnings (loss) per share for the years ended 31 December 2022 and
2021 are as follows:
2022 2021
Net increase (decrease) in net assets resulting from
operations attributable to the controlling interest $(108,947,791) $462,202,674
Divided by weighted average shares outstanding for
Class A Shares and Class B Shares of the controlling interest 46,771,030 46,771,030
Earnings (loss) per share for Class A Shares and
Class B Shares of the controlling interest $(2.33) $9.88
In accordance with Article 104(2) of the Commission Delegated Regulation (EU) No
231/2013 (and the UK version of this regulation which is part of UK law by virtue of the
European Union (Withdrawal) Act 2018), the Group is required to disclose additional
information on the classification of the balances presented within the net realised gain
(loss) on investments and forward foreign exchange contracts, and net change in
unrealised gain (loss) on investments and forward foreign exchange contracts presented
on the Consolidated Statements of Operations and Changes in Net Assets. For the years
ended 31 December 2022 and 2021, the balances include the following:
Classification of Realised Gain (Loss) and Unrealised Gain (Loss)
(1)
31 December 2022 31 December 2021
Realised gain on investments and forward foreign
exchange contracts $85,321,404 $245,140,677
Realised loss on investments and forward foreign
exchange contracts (31,880,844) (32,012,361)
Net realised gain (loss) on investments and forward
foreign exchange contracts $53,440,560 $213,128,316
Unrealised gain on investments and forward foreign
exchange contracts $138,811,079 $407,844,305
Unrealised loss on investments and forward foreign
exchange contracts
(2)
(265,911,641) (88,143,459)
Net unrealised gain (loss) on investments and forward
foreign exchange contracts $(127,100,562) $319,700,846
(1) Above amounts are presented gross and, as such, exclude the tax expense (benefit) reported on the
Consolidated Statements of Operations and Changes in Net Assets
(2) Includes unrealised gain reversal of $76,798,321 and $68,324,306 for the periods ended 31 December
2022 and 2021, respectively, as a result of realised investment transactions.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 9 – Share Capital, Including Treasury Stock
Class A Shareholders have the right to vote on all resolutions proposed at general meetings
of the Company, including resolutions relating to the appointment, election, re-election
and removal of Directors. The Companys Class B Shares, which were issued at the time of
the initial public offering to a Guernsey charitable trust, whose trustee is First Directors
Limited (“Trustee”), usually carry no voting rights at general meetings of the Company.
However, in the event the level of ownership of Class A Shares by U.S. residents (excluding
any Class A Shares held in treasury) exceeds 35% on any date determined by the Directors
(based on an analysis of share ownership information available to the Company), the Class
B Shares will carry voting rights in relation to “Director Resolutions” (as such term is defined
in the Companys articles of incorporation). In this event, Class B Shares will automatically
carry such voting rights to dilute the voting power of the Class A Shareholders with respect
to Director Resolutions to the extent necessary to reduce the percentage of votes
exercisable by U.S. residents in relation to the Director Resolutions to not more than 35%.
Each Class A Share and Class B Share participates equally in profits and losses. There have
been no changes to the legal form or nature of the Class A Shares nor to the reporting
currency of the Companys consolidated financial statements (which will remain in U.S.
dollars) as a result of the Main Market quote being in Sterling as well as U.S. dollars.
Additional paid-in capital (“APIC”) is the excess amount paid by shareholders over the par
value of shares. The Companys APIC is included on the Consolidated Balance Sheets.
The following table summarises the Company’s shares at 31 December 2022 and 2021.
31 December 2022 31 December 2021
Class A Shares outstanding 46,761,030 46,761,030
Class B Shares outstanding 10,000 10,000
46,771,030 46,771,030
Class A Shares held in treasury - number of shares 3,150,408 3,150,408
Class A Shares held in treasury - cost $9,248,460 $9,248,460
The Company currently has shareholder authority to repurchase shares in the market,
theaggregate value of which may be up to 14.99% of the Class A Shares in issue
(excludingClass A Shares held in treasury) at the time the authority is granted; such
authority will expire on the date which is 15 months from the date of passing of this
resolution or, if earlier, at the end of the Annual General Meeting (“AGM”) of the Company
to be held inJune 2023. The maximum price which may be paid for a Class A Share is an
amount equal to the higher of (i) the price of the last independent trade and (ii) the highest
current independent bid, in each case, with respect to the Class A Shares on the relevant
exchange (being the Main Market).
The Company entered into a new share buyback agreement with Jefferies International
Limited (“Jefferies”) on 5 October 2022.
The Company has not purchased any of its shares during the year ended 31 December 2022
or during the year ended 31 December 2021.
The Company may declare dividend payments from time to time. Prior to each dividend
announcement, the Board reviews the appropriateness of the dividend payment in light
ofmacro-economic activity and the financial position of the Company. The Company
targets an annualised dividend yield of 3.0% or greater on NAV which has been paid out
semi-annually.
Note 10 – Management of the Group and Other Related
PartyTransactions
Management and Guernsey Administration
The Group is managed by the Investment Manager for a management fee calculated at
theend of each calendar quarter equal to 37.5 basis points (150 basis points per annum)
ofthe fair value of the private equity and opportunistic investments. For purposes of this
computation, the fair value is reduced by the fair value of any investment for which the
Investment Manager is separately compensated for investment management services.
TheInvestment Manager is not entitled to a management fee on: (i) the value of any fund
investments held by the Company in NB Funds in respect of which the Investment Manager
or an affiliate receives a fee or other remuneration; or (ii) the value of any holdings in cash
and short-term investments (the definition of which shall be determined in good faith by
the Investment Manager, and shall include holdings in money market funds (whether
managed by the Investment Manager, an affiliate of the Investment Manager or a third
party manager)). For the years ended 31 December 2022 and 2021, the management fee
expenses were $21,144,589 and $22,483,005, respectively, and are included in Investment
management and services on the Consolidated Statement of Operations and Changes in
Net Assets. As of 31 December 2022 and 2021, Investment Management fees payable to
the Investment Manager and its affiliates were $5,177,372 and $5,801,910, respectively.
Ifthe Company terminates the Investment Management Agreement without cause,
theCompany shall pay a termination fee equal to: seven years of management fees,
plusanamount equal to seven times the mean average incentive allocation of the three
performance periods immediately preceding the termination, plus all underwriting,
placement and other expenses borne by the Investment Manager or affiliates in
connection with the Company’s Initial Public Offering.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 10 – Management of the Group and Other Related
PartyTransactions continued
The Group pays to Ocorian Administration (Guernsey) Limited (“Ocorian”), an affiliate
ofthe Trustee, a fee for providing certain administrative functions relating to certain
corporate services and Guernsey regulatory matters affecting the Group. Fees for these
services are paid as invoiced by Ocorian. The Group paid Ocorian $287,062 and $330,096
for the years ended 31 December 2022 and 2021, respectively, for such services. The Group
also paid MUFG Capital Analytics LLC, an independent third party fund administrator,
$1,300,000 and $1,519,263 for the years ended 31 December 2022 and 2021, respectively.
MUFG Capital Analytics LLC receives $1,300,000 annually ($325,000 quarterly) for
administrative and accounting services. These fees are included in Administration and
professional fees on the Consolidated Statements of Operations and Changes in Net Assets.
Directors’ fees are denominated and paid in Sterling and they are based on each Director’s
position on the Company’s Board. Effective on 1 October 2021, Directors’ fees were
increased to account for an inflation adjustment. Directors’ fees are subject to an annual
increase equivalent to the annual rise in the UK retail prices index, subject to a 1% per
annum minimum. As of 31 December 2022, Directors’ fees were as follows: Chairman
receives £75,690 annually (£18,992 quarterly), Audit Chairman receives £64,728 annually
16,182 quarterly), Senior independent Director receives £59,508 annually (£14,877
quarterly), and Non-executive independent Directors each receive £54,288 annually
13,572 quarterly). As of 31 December 2022, an additional fee was assessed in the amount
of £10,440 annually and payable to two Directors (£5,220 each) for serving as Directors on
the Board of the Guernsey Subsidiaries of the Company.
For the year ended 31 December 2022, the Group paid the independent Directors
$375,018 and an additional $12,629 related to services provided to the Guernsey
Subsidiaries of the Company. For the year ended 31 December 2021, the Group paid the
independent Directors $354,694 and an additional $6,822 related to services provided to
the Guernsey Subsidiaries of the Company.
Expenses related to the Investment Manager are included in Investment management and
services on the Consolidated Statements of Operations and Changes in Net Assets.
Administration and professional fees include fees for Directors, independent third party
accounting and administrative services, audit, tax, and assurance services, trustee, legal,
listing and other items.
Related Parties
In order to execute on its investing activities, the Investment Manager may create an
intermediary entity for tax, legal, or other purposes. These intermediary entities do not
charge management fees nor incentive allocations. Additionally, the Group may co-invest
with other entities with the same Investment Manager as the Group.
Special Limited Partners Non-controlling Interest in Subsidiary
An affiliate of the Investment Manager is a Special Limited Partner in a consolidated
partnership subsidiary. At 31 December 2022 and 2021, the non-controlling interest of
$1,947,323 and $2,054,635, respectively, represented the Special Limited Partner’s capital
contribution to the partnership subsidiary and income allocation.
The following table reconciles the carrying amount of net assets, net assets attributable
tothe controlling interest and net assets attributable to the non-controlling interest at
31December 2022 and 2021.
Controlling Interest
Noncontrolling
Interest Total
Net assets balance,
31 December 2020 $1,051,651,249 $1,525,242 $1,053,176,491
Net increase (decrease) in net assets
resulting from operations 462,202,674 529,393 462,732,067
Dividend payment (33,675,141) (33,675,141)
Net assets balance,
31 December 2021 $1,480,178,782 $2,054,635 $1,482,233,417
Net increase (decrease) in net assets
resulting from operations (108,947,791) (107,312) (109,055,103)
Dividend payment (43,964,768) (43,964,768)
Net assets balance,
31 December 2022 $1,327,266,223 $1,947,323 $1,329,213,546
Carried Interest
The Special Limited Partner is entitled to a carried interest in an amount that is, in general,
equal to 7.5% of the Group’s consolidated net increase in net assets resulting from
operations, adjusted by withdrawals, distributions and capital contributions, for a fiscal
year in the event that the Group’s internal rate of return for such period, based on the NAV,
exceeds 7.5%. For the purposes of this computation, the value of any private equity fund
investment in NB Funds in respect of which the Investment Manager or an affiliate receives
a fee or other remuneration shall be excluded from the calculation of the incentive
allocation payable to the Special Limited Partner. If losses are incurred for a period, no
carried interest will be earned for any period until the subsequent net profits exceed the
cumulative net losses. Carried interest is also accrued and paid on any economic gain that
the Group realises on treasury stock transactions (see note 9). Carried interest is accrued
periodically and paid in the subsequent year. As of 31 December 2022 and 31 December
2021, carried interest of nil and $37,341,460 was accrued, respectively.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Notes to consolidated financial statements
Note 10 Management of the Group and Other Related PartyTransactions continued
Private Equity Investments with NBG Subsidiaries
The Group holds limited partner interests in private equity fund investments and direct investment programs that are managed by subsidiaries of NBG (“NB-Affiliated Investments”).
NB-Affiliated Investments will not result in any duplicative NBG investment management fees and carry charged to the Group. Below is a summary of the Group’s positions in
NB-Affiliated Investments.
NB-Affiliated Investments (dollars in millions) Fair Value
(1)
Committed Funded Unfunded
2022
NB-Affiliated Programs
NB Alternatives Direct Co-investment Programs $213.6 $275.0 $235.9 $39.1
NB Renaissance Programs 20.8 40.0 29.5 10.5
Marquee Brands 28.5 30.0 26.6 3.4
NB Healthcare Credit Investment Program 50.0 45.9 4 .1
NB Credit Opportunities Program 39.7 50.0 38.0 12.0
NB Specialty Finance Program 27.5 50.0 35.0 15.0
Total NB-Affiliated Investments $330.1 $495.0 $410.9 $84.1
2021
NB-Affiliated Programs
NB Alternatives Direct Co-investment Programs $238.2 $275.0 $235.2 $39.8
NB Renaissance Programs 20.8 40.0 25.9 14.1
Marquee Brands 32.7 30.0 26.6 3.4
NB Healthcare Credit Investment Program 1.3 50.0 45.9 4.1
NB Credit Opportunities Program 49.0 50.0 38.0 12.0
NB Specialty Finance Program 38.9 50.0 35.0 15.0
Total NB-Affiliated Investments $380.9 $495.0 $406.6 $88.4
(1): Fair value does not include distributions. At 31 December 2022 and 31 December 2021, the total distributions from NB-Affiliated Investments were $421.0 and $374.2, respectively.
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Notes to consolidated financial statements
Note 11 – Risks and Contingencies
Market Risk
The Group’s exposure to financial risks is both direct (through its holdings of assets and
liabilities directly subject to these risks) and indirect (through the impact of these risks
onthe overall valuation of its private equity companies). The Group’s private equity
companies are generally not traded in an active market, but are indirectly exposed to
market price risk arising from uncertainties about future values of the investments held.
The fund investments of the Group each holds a portfolio of investments in underlying
companies. These portfolio company investments vary as to type of security held by
theunderlying partnership (debt or equity, publicly traded or privately held), stage of
operations, industry, geographic location and geographic distribution of operations
andsize, all of which may impact the susceptibility of their valuation to market price risk.
Market conditions for publicly traded and privately held investments in portfolio
companies held by the partnerships may affect their value in a manner similar to the
potential impact on direct co-investments made by the Group in privately held securities.
The fund investments of the Group may also hold financial instruments (including debt
and derivative instruments) in addition to their investments in portfolio companies that
aresusceptible to market price risk and therefore may also affect the value of the Group’s
investment in the partnerships. As with any individual investment, market prices may vary
from composite index movements.
Credit Risk
Credit risk is the risk of losses due to the failure of a counterparty to perform according to
the terms of a contract. The Group may invest in a range of debt securities directly or in
funds which do so. Until such investments are sold or are paid in full at maturity, the Group
is exposed to credit risk relating to whether the issuer will meet its obligations when the
securities come due. Distressed debt securities by nature are securities in companies which
are in default or are heading into default and will expose the Group to a higher than normal
amount of credit risk.
The cash and other liquid securities held can subject the Group to a concentration of credit
risk. The Investment Manager attempts to mitigate the credit risk that exists with cash
deposits and other liquid securities by regularly monitoring the credit ratings of such
financial institutions and evaluating from time to time whether to hold some of the
Group’s cash and cash equivalents in U.S. Treasuries or other highly liquid securities.
The Group’s investments are subject to various risk factors including market and credit risk,
interest rate and foreign exchange risk, inflation risk, and the risks associated with investing
in private securities. Non-U.S. dollar denominated investments may result in foreign
exchange losses caused by devaluations and exchange rate fluctuations. In addition,
consequences of political, social, economic, diplomatic changes, or public health condition
may have disruptive effects on market prices or fair valuations of foreign investments.
Liquidity Risk
Liquidity risk is the risk that the Group will not be able to meet its obligations as they fall
due. The Investment Manager mitigates this risk by monitoring the sufficiency of cash
balances and availability under the Credit Facility (see note 4) to meet expected liquidity
requirements for investment funding and operating expenses.
Contingencies
In the normal course of business, the Group enters into contracts that contain a variety
ofrepresentations and warranties which provide general indemnifications. The Group’s
maximum exposure under these arrangements is unknown, as this would involve future
claims that may be made against the Group that have not yet occurred. The Investment
Manager expects the risk of loss to be remote and does not expect these to have a material
adverse effect on the consolidated financial statements of the Group.
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Notes to consolidated financial statements
Note 12 – Financial Highlights
The following ratios with respect to the Class A Shares and Class B Shares have been
computed for the years ended 31 December 2022 and 2021:
Per share operating performance
(based on average shares outstanding during the year)
For the Year Ended
31 December 2022
For the Year Ended
31 December 2021
Beginning net asset value $31.65 $22.49
Net increase in net assets resulting from operations:
Net investment income (loss) (0.71) (1.48)
Net realised and unrealised gain (loss) (1.62) 11.36
Dividend payment (0.94) (0.72)
Ending net asset value $28.38 $31.65
Total return
(based on change in net asset value per share)
For the Year Ended
31 December 2022
For the Year Ended
31 December 2021
Total return before carried interest (7.36%) 47.47%
Carried interest (3.54%)
Total return after carried interest (7.36%) 43.93%
Net investment income (loss) and expense ratios
(based on weighted average net assets)
For the Year Ended
31 December 2022
For the Year Ended
31 December 2021
Net investment income (loss), excluding carried interest (2.40%) (2.55%)
Expense ratios:
Expenses before interest and carried interest 2.30% 2.44%
Interest expense 0.43% 0.55%
Carried interest 2.95%
Expense ratios total 2.73% 5.94%
Net investment income (loss) is interest income earned net of expenses, including
management fees and other expenses consistent with the presentation within the
Consolidated Statements of Operations and Changes in Net Assets. Expenses do not
include the expenses of the underlying private equity investment partnerships.
Individual shareholder returns may differ from the ratios presented based on differing
entry dates into the Group.
Note 13 – Subsequent Events
On 28 February 2023, the Group paid a dividend of $0.47 per Ordinary Share to
shareholders of record on 20 January 2023.
The Investment Manager and the Board of Directors have evaluated events through
24April 2023, the date the financial statements are available to be issued and have
determined there were no other subsequent events that require adjustment to,
ordisclosure in, the financial statements.
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AIFMD Disclosures
NB Private Equity Partners Limited (the “Fund) AIFMD Disclosure
Addendum to the 2022 Annual Report (Unaudited)
1. Changes To Article 23(1) AIFMD Disclosures
Directive 2011/61/EU on Alternative Investment Fund Managers (“AIFMD”) requires
certain information to be made available to investors in alternative investment funds
(“AIFs”) before they invest and requires that material changes to this information be
disclosed in the annual report of each AIF.
There have been no material changes (other than those reflected in these financial
statements) to this information requiring disclosure.
2. Leverage
For the purposes of this disclosure, leverage is any method by which an AIF’s exposure
isincreased, whether through borrowing of cash or securities, or leverage embedded
inforeign exchange forward contracts or by any other means.
The AIFMD requires that each leverage ratio be expressed as the ratio between an AIF’s
exposure and its net asset value (NAV”), and prescribes two required methodologies,
thegross methodology and the commitment methodology, for calculating such exposure.
Using the methodologies prescribed under the AIFMD, the leverage of the Fund as at
30September 2022 is disclosed below:
Leverage calculated pursuant to the gross methodology: 0.98
Leverage calculated pursuant to the commitment methodology: 0.99
3. Liquidity and risk management systems
The portfolio managers and risk management professionals of NB Alternative Advisers LLC
(the “AIFM”) regularly review the investment performance and the portfolio composition
of the Fund in the light of the Fund’s investment objective, policy and strategy; the principal
risks and investment or economic uncertainties that have been identified as relevant to the
Fund; internal risk measures and the interests and profile of investors.
The AIFM assesses the Fund’s current and prospective need for liquidity on an on-going
basis and ensures that liquidity is available when required. The risk profile of the Fund as
assessed as at 30 September 2022 was as follows:
3.1 Market Risk Profile
The market risk indicators contained in the Annex IV regulatory reporting template were
not applicable to the Fund.
3.2 Counterparty Risk Profile
As at 30 September 2022, the counterparties to which the Fund had the greatest
mark-to-market net counterparty credit exposure, measured as a % of the NAV of the
Fundare listed in the table below:
Ranking Name of Counterparty
NAV percentage
ofthe total
exposurevalue of
thecounterparty
First counterparty exposure Others 1.85
Second counterparty exposure Bank of America Merrill Lynch 0.41
Third counterparty exposure JP Morgan 0.00
As at 30 September 2022, the counterparty risk indicators contained in the Annex IV
regulatory reporting template in respect of mark-to- market credit exposure to the Fund
were not applicable.
3.3 Liquidity Profile
3.3.1 Portfolio Liquidity Profile
100 percent of the portfolio is incapable of being liquidated within 365 days.
The Fund had USD 5,678,456 unencumbered cash available to it.
3.3.2 Investor Liquidity Profile
100 percent of investor equity is incapable of being redeemed within 365 days.
Investorsdo not have any withdrawal or redemption rights in the ordinary course.
However, shares are freely traded on the London Stock Exchange.
3.3.3 Investor Redemption
Does the Fund provide investors with withdrawal / redemption rights in the ordinary
course? No
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AIFMD Disclosures
4. Report on remuneration
The Neuberger Berman Compensation Committee is responsible for the compensation
practices within the Neuberger Berman group, and Neuberger Berman also operates a
structure throughout the group to ensure appropriate involvement and oversight of the
compensation process, so that compensation within the group rewards success whilst
reflecting appropriate behaviours.
Neuberger Berman recognises the need to ensure that compensation arrangements do
not give rise to conflicts of interest, and this is achieved through the compensation policies
as well as through the operation of specific policies governing conflicts of interests.
Neuberger Berman’s compensation philosophy is one that focuses on rewarding
performance and incentivizing employees. Employees at Neuberger Berman may receive
compensation in the form of base salary, discretionary bonuses and/or production
compensation. Investment professionals receive a fixed salary and are eligible for an
annual bonus. The annual bonus for an individual investment professional is paid from
a“bonus pool” made available to the portfolio management team with which the
investment professional is associated. Once the final size of the available bonus pool is
determined, individual bonuses are determined based on a number of factors including
the aggregate investment performance of all strategies managed by the individual
(including the three-year track record in order to emphasize long-term performance),
effective risk management, leadership and team building, and overall contribution to
thesuccess of Neuberger Berman.
Neuberger Berman considers a variety of factors in determining fixed and variable
compensation for employees, including firm performance, individual performance,
overallcontribution to the team, collaboration with colleagues across the firm, effective
partnering with clients to achieve goals, risk management and the overall investment
performance. Neuberger Berman strives to create a compensation process that is fair,
transparent, and competitive with the market.
A portion of bonuses may be awarded in the form of contingent or deferred cash
compensation, including under the “Contingent Compensation Plan”, which serves
asameans to further align the interests of employees with the interest of clients,
aswellasrewarding continued employment. Under the Contingent Compensation Plan
apercentage of a participants compensation is awarded in deferred contingent form.
Contingent amounts take the form of a notional investment based on a portfolio of
Neuberger Berman investment strategies and/or a contingent equity award, and
Neuberger Berman believes that this gives each participant further incentive to operate
asa prudent risk manager and to collaborate with colleagues to maximise performance
across all business areas. The programs specify vesting and forfeiture terms, including
thatvesting is normally dependent on continued employment and contingent amounts
can be forfeited in cases including misconduct or the participants participating in
detrimental activity.
The proportion of the total remuneration of the staff of the AIFM attributable to the Fund,
calculated with reference to the proportion of the value of the assets of the Fund managed
by the AIFM to the value of all assets managed by the AIFM, was USD 2,019,007, representing
USD 507,126 of fixed compensation and USD 1,511,881 of variable compensation. There
were 205 of staff of the AIFM who shared in the remuneration paid by the AIFM.
Compensation by the AIFM to senior management and staff whose actions had a material
impact on the risk profile on the Fund in respect of 2022 was USD 115,376,541 in relation to
senior management and USD 1,407,631 in respect of ‘risk takers’. The compensation figure
for senior management has not been apportioned, while the compensation figure for risk
takers has been apportioned by reference to the number of AIFs whose risk profile was
materially impacted by each individual staff member.
Carried interest accrued to the Special Limited Partner for the years ended 31 December 2022
and 31 December 2021 was nil and USD 37,341,460 respectively. Carried interest is paid in
the year subsequent to the year in which it was accrued.
5. European Taxonomy Regulation
Regulation (EU) 2020/852 (the “Taxonomy Regulation”) requires fund managers such as
the AIFM to disclose the extent of their alignment to the Taxonomy Regulation in the
annual report for each fund they manage. As the Fund is not classified as an Article 8 or
Article 9 fund under Regulation (EU) 2019/2088 (“SFDR”), the following statement must
bedisclosed in the annual report for the Partnership:
The investments underlying this financial product do not take into account the EU criteria
for environmentally sustainable economic activities.
April 2023
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Schedule of investments
Schedule of investments (unaudited)
Investments Principal Geography Investment Date Description
Fair Value
$ M
Action Europe Jan-20 European discount retailer 72.2
Advisor Group U.S. Jul-19 Independent broker dealer 54.2
Constellation Automotive UK Nov-19 Provider of vehicle remarketing services 53.2
USI U.S. Jun-17 Insurance brokerage and consulting services 50.0
AutoStore (OB.AUTO) Europe Jul-19 Leading provider of automation technology 44.9
Agiliti (NYSE: AGTI) U.S. Jan-19 Medical equipment management and services 40.8
Material Handling Systems U.S./Europe Apr-17 Systems and solutions utilised in distribution centres 39.7
NB Alternatives Credit Opportunities Program Global Sep-16 Diversified credit portfolio 39.7
Cotiviti U.S. Aug-18 Payment accuracy and solutions for the healthcare industry 34.5
Business Services Company U.S. Oct-17 Business services company 32.9
Kroll Global Mar-20 Multinational financial consultancy firm 32.1
BeyondTrust U.S. Jun-18 Cyber security and secure access solutions 29.4
True Potential Europe Jan-22 Wealth management technology platform serving advisors and retail clients 28.7
Marquee Brands Global Dec-14 Portfolio of consumer branded IP assets, licensed to third parties 28.5
NB Specialty Finance Program Global Oct-18 Small balance loan portfolio 27.5
Solenis Global Sep-21 Specialty chemicals and services provider 27.0
GFL (NYSE: GFL) U.S/Canada Jul-18 Waste management services 27.0
Monroe Engineering U.S. Dec-21 Industrial products distributor 26.6
Stubhub U.S. Feb-20 Ticket exchange and resale company 26.4
Engineering Europe Jul-20 Italy-based provider of systems integration, consulting and outsourcing services 25.1
Addison Group U.S. Dec-21 Professional services provider specialising in staffing and consulting services 23.9
Branded Toy Company U.S. Jul-17 Specialty toy company 23.8
Branded Cities Network U.S. Nov-17 North American advertising media company 23.8
Staples U.S. Sep-17 Provider of office supplies through a business-to-business platform and retail 22.8
Auctane U.S. Oct-21 E-commerce shipping software provider 21.9
Bylight U.S. Aug-17 Provider of IT and technology infrastructure cyber solutions 21.9
Excelitas U.S. Nov-17 Sensing, optics and illumination technology 21.7
Petsmart/Chewy (NYSE: CHWY) U.S. Jun-15 Online and offline pet supplies retailer 20.6
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Schedule of investments
Investments Principal Geography Investment Date Description
Fair Value
$ M
Accedian U.S. Apr-17 Network testing equipment and software 20.6
FV Hospital Vietnam Jun-17 Leading hospital provider in Vietnam 20.4
Solace Systems U.S./Canada Apr-16 Enterprise messaging solutions 17.2
Renaissance Learning U.S. Jun-18 K-12 educational software & learning solutions 16.5
Leaseplan Europe Apr-16 Fleet management services 16.5
Chemical Guys U.S. Sep-21 Direct to consumer automotive products brand 15.8
Nextlevel U.S. Aug-18 Designer and supplier of fashion-basic apparel 15.2
Peraton U.S. May-21 Provider of enterprise IT services serving the U.S. government 15.2
Viant U.S. Jun-18 Outsourced medical device manufacturer 15.1
Qpark Europe Oct-17 European parking services operator 15.1
Tendam Spain Oct-17 Spanish apparel retailer 13.7
Exact Netherlands Aug-19 Accounting and ERP software for small to medium-sized businesses 13.7
Real Page U.S. Apr-21 Provides software solutions to the rental housing industry 13.2
CH Guenther U.S. May-18 Supplier of mixes, snacks and meals and other value-added food products for consumers 12.5
Xplor Technologies U.S. Jun-18 Credit card payment processing 11.8
Hub Global Mar-19 Leading global insurance brokerage 10.8
Telxius Europe Oc t-17 Telecommunications infrastructure including fibre-optic cables and telecom towers 10.3
Wind River Environmental U.S. Apr-17 Waste management services provider 9.9
MHS U.S. Mar-17 Provider of repair, maintenance and fleet management services 9.4
Lasko Products U.S. Nov-16 Manufacturer of portable fans and ceramic heaters 9.3
Concord Bio India Jun-16 Active pharmaceutical ingredients manufacturer 8.5
SafeFleet U.S. May-18 Safety and productivity solutions for fleet vehicles 8.5
Italian Mid-Market Buyout Portfolio Europe Jun-18 Italian mid-market buyout portfolio 8.0
Vitru (NASDAQ: VTRU) Brazil Jun-18 Post secondary education company 7.9
Saguaro North America Jul-13 E&P company pursuing unconventional light oil/liquids-rich gas properties 7.8
ZPG UK Jul-18 Digital property data and software company 7.4
Verifone Global Aug-18 Electronic payment technology 7.2
Milani U.S. Jun-18 Cosmetics and beauty products 6.9
ProAmpac U.S. Dec-20 Leading global supplier of flexible packaging 6.9
Healthcare Company – In-home Devices U.S. Jun-18 Provider of pump medications and in-home intravenous infusion 6.2
Plaskolite U.S. Dec-18 Largest manufacturer of thermoplastic sheets in North America 6.0
Syniti U.S. Dec-17 Data management solutions provider 6.0
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Schedule of investments
Investments Principal Geography Investment Date Description
Fair Value
$ M
CrownRock Minerals U.S. Aug-18 Minerals acquisition platform 5.8
Destination Restaurants U.S. Nov-19 U.S. restaurant chain 5.7
Carestream U.S. Apr-16 Utilises digital imaging equipment and captures two billion images annually 5.7
Digital River (Equity) U.S. Feb-15 Digital e-commerce, payments and marketing solutions 5.6
Centro U.S. Jun-15 Provider of digital advertising management solutions 5.4
Healthcare Services Company NA Feb-18 Healthcare services company 4.8
Inflection Energy U.S. Oct-14 Dry gas exploration company in the Marcellus Shale 4.8
Edelman U.S. Aug-18 Independent financial planning firm 4.8
BK China U.S. Nov-18 Franchise of over 800 Burger King locations in mainland China 4.8
Unity Technologies (NYSE:U) U.S. Jun-21 Business platform for app developers 4.7
Looking Glass U.S. Feb-15 Cyber security technology company 4.5
Mills Fleet Farms U.S. Feb-16 Value-based retailer with 35 stores in the Midwest U.S. 3.9
Rino Mastrotto Group Europe Apr-20 Leading producer of premium leather 3.7
Vertiv (NYSE: VRT) U.S. Nov-16 Provider of data centre infrastructure 3.7
Catalyst Fund III North America Mar-11 Legacy fund investment targeting North American companies 3.6
N-Able (NYSE: NABL) U.S. Jul-21 IT management solutions 3.5
SolarWinds (NYSE: SWI) U.S. Feb-16 Provider of enterprise-class IT and infrastructure management software 3.5
Holley (NYSE: HLLY) U.S. Oct-18 Automotive performance company 3.4
Husky Injection Molding U.S. Sep-18 Designs and manufacturers injection moulding equipment 3.1
Brightview (NYSE: BV) U.S. Dec-13 Commercial landscape and turf maintenance 2.6
SICIT Europe Aug-21 Producer of high value-added products such as biostimulants for agriculture 2.6
Snagajob U.S. Jun-16 Job search and human capital management provider 2.5
Uber (NYSE: UBER) Global Jul-18 Provides mobility as a service through a technology platform 2.5
Hydro Europe Apr-20 Largest European manufacturer of hydraulic components 2.3
Boa Vista (BVMF: BOAS3) South America Nov-12 Second largest credit bureau in Brazil 2.2
Aster/DM Healthcare (NSEI: ASTERDM) Middle East Jun-14 Operator of hospitals, clinics and pharmacies 2.2
DBAG Expansion Capital Fund Europe Jan-12 Legacy fund investment targeting investments in Germany 2.1
Corona Industrials South America Jun-14 Building materials company 2.1
Syniverse Technologies U.S. Feb -11 Global telecommunications technology solutions 2.1
Undisclosed Financial Services Company North America May-21 Undisclosed fintech company 1.9
Inetum Europe July-22 IT services and solutions provider headquartered in France 1.8
Innovacare U.S. Apr-20 Operates leading Medicare Advantage plan and Medicaid plan 1.4
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Schedule of investments
Investments Principal Geography Investment Date Description
Fair Value
$ M
Kyobo Life Insurance Co. S. Korea Dec-07 Life insurance in Korea 1.4
Arbo Europe Jun-22 Italian distributor of heating, sanitary, plumbing, and air conditioning system spare parts 1.2
Into University Partnerships UK Apr-13 Collegiate recruitment, placement and education 1.2
Taylor Precision Products U.S. Jul-12 Consumer & food service measurement products 0.8
NG Capital Partners I , L.P. Peru May -11 Legacy fund investment targeting investments in Peru 0.5
CSC Service Works U.S. Mar-15 Provider of outsourced services to laundry & air vending markets 0.5
Bertram Growth Capital II U.S. Sep-10 Legacy fund investment targeting lower middle-market companies 0.4
Bertram Growth Capital I U.S. Sep-07 Legacy fund investment targeting lower middle-market companies 0.3
West Marine U.S. Sep-17 Specialty retailer of boating supplies 0.3
Progenity (NASDAQ: PROG) U.S. Jun-13 Genetic testing company 0.0
Other Direct Equity Investments (9.5)
Other Debt Investments
Other Fund Investments 0.8
Total Portfolio 1,401
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Appendix
Valuation methodology
Equity
It is expected that most of the investments in which the Fund invests will meet the criteria
set forth under FASB ASC 820 Fair Value Measurement (“ASC 820”) permitting the use of
the practical expedient to determine the fair value of the investments. ASC 820 provides
that, in valuing alternative investments that do not have quoted market prices, but
calculate NAV per share or equivalent, an investor may determine fair value by using the
NAV reported to the investor by the underlying investment. To the extent practical
expedient is applicable to an investment, the Manager will value the Fund’s investment
based primarily on the value reported to the Fund by the investment or by the lead investor
of a direct co-investment as of each quarter-end, as determined by the investments in
accordance with its own valuation policies. The Fund generally uses the NAV reported by
the investments as a primary input in its valuation; however, adjustments to the reported
NAV may be made based on various factors, including, but not limited to, the attributes of
the interest held, including the rights and obligations, any restrictions or illiquidity on such
interest, any potential clawbacks by the investments and the fair value of the investments’
investment portfolio or other assets and liabilities. The valuation process for investments
categorised in Level 3 of the fair value hierarchy is completed on a quarterly basis and is
designed to subject the valuation of Level 3 investments to an appropriate level of
consistency, oversight and review. The Manager has responsibility for the valuation process
and the preparation of the fair value of investments reported in the financial statements.
The Manager performs initial and ongoing investment monitoring and valuation
assessments. In determining the fair value of investments, the Manager reviews periodic
investor reports and interim and annual audited financial statements received from the
investments, reviews material quarter-over-quarter changes in valuation, and assess the
impact of macro-market factors on the performance of the investments.
Debt
Debt investments made on a primary basis are generally carried at cost plus accrued
interest, if any. Investments made through the secondary market are generally marked
based on market quotations, to the extent available, and the Manager will take into
account current pricing and liquidity of the security.
For primary issuance debt investments, the Manager estimates the enterprise value of each
portfolio company and compares such amount to the total amount of the company’s debt
as well as the level of debt senior to the Companys interest. Estimates of enterprise value
are based on a specific measure (such as EBITDA, free cash flow, net income, book value or
NAV) believed to be most relevant for the given company and compares this metric in
relation to comparable company valuations (market trading and transactions) based on
the same metric. In determining the enterprise value, the Manager will further consider
thecompanies’ acquisition price, credit metrics, historical and projected operational and
performance, liquidity as well as industry trends, general economic conditions, scale and
competitive advantages along with other factors deemed relevant. Valuation adjustments
are made if estimated enterprise value does not support the value of the debt security the
Company is invested in and securities senior to the Company’s position.
If the principal repayment of debt and any accrued interest is supported by the enterprise
value analysis described above, the Manager will next consider current market conditions
including pricing quotations for the same security and yields for similar investments.
For investments made on a secondary basis, to the extent market quotations for the
security are available, the Manager will take into account current pricing and liquidity.
Liquidity may be estimated by the spread between bid and offer prices and other available
measures of market liquidity, including number and size of recent trades and liquidity
scores. If the Manager believes market yields for similar investments have changed
substantially since the pricing of the security, the Manager will perform a discounted
cashflow analysis, based on the expected future cash flows of the debt securities and
current market rates. The Manager will also consider the maturity of the investment,
compliance with covenants and ability to pay cash interest when estimating the fair value
of debt investments.
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Appendix
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:
future operating results;
business prospects and the prospects of the Companys investments;
the impact of investments the Company expects to make;
the dependence of future success on the general economy and its impact on the
industries in which the Company invests;
the ability of the investments to achieve their objectives;
differences between the investment objective and the investment objectives of the
private equity funds in which the Company invests;
the rate at which capital is deployed in private equity investments, co-investments
and opportunistic investments;
expected financings and investments;
the continuation of the Investment Manager as the service provider and the continued
affiliation with the Investment Manager of its key investment professionals;
the adequacy of the Company’s cash resources and working capital; and
the timing of cash flows, if any, from the operations of the underlying private equity funds
and the underlying portfolio companies.
In some cases, forward-looking statements may be identified 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 the beliefs, assumptions and expectations
of the future performance, taking into account all information currently available to the
Manager. 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 the Manager or are within the Managers control. If a change occurs, the
business, financial condition, liquidity and results of operations may vary materially from
those expressed in the forward-looking statements. Factors and events that could cause
the 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, macroeconomic factors (including but not limited to war, civil unrest, natural
disasters, pandemics, or epidemics) 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 the prospectus relating to the Company’s IPO and the
Company’s prospectus relating to the ZDP Shares.
The foregoing is not a comprehensive list of the risks and uncertainties to which the
Company is subject. Except as required by applicable law, the Manager undertakes no
obligation to update or revise any forward-looking statements to reflect any change in
theManager’s 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 the Company’s forward-looking statements might
not occur. The Manager qualifies any and all of the forward-looking statements by these
cautionary factors.
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Appendix
Alternative performance calculations
Alternative Performance Measures (“APMs”) is a term defined by the European Securities and Markets Authority as “financial measures of historical or future performance, financial
position, or cash flows, other than a financial measure defined or specified in the applicable financial reporting framework.
APMs are used in this report if considered by the Board and the Manager to be the most relevant basis for shareholders in assessing the overall performance of the Company and for
comparing the performance of the Company to its peers, taking into account industry practice.
One-year NAV Total Return Calculation NAV per share (USD) Dividend (USD)
Dividend
Compounding
Factor
NAV per Ordinary Share at year end
as per Statement of Financial
Position in December 2021 (A) $31.65
Semi-annual dividend per Ordinary
Share declared in respect of year $31.18 $0.47 1.0151
Semi-annual dividend per Ordinary
Share declared in respect of year $28.20 $0.47 1.0167
NAV per Ordinary Share at end of
year as per Statement of Financial
Position in December 2022 (B) $28.38
2022 NAV total return per
Ordinary Share (B/A)*C – 1 -7.5%
Product of
dividend
compounding (C) 1.0320
Total Realisation Calculation $ in millions
Proceeds from sale of private equity investments (A) $64
Distributions from private equity investments (B) $56
Interest and dividend income (C) $1
2022 portfolio realisations (A+B+C) $120
Multiple of Capital Calculation
Exit proceeds from full exits over the last five years (A) $466.9
Invested capital into full exits over the last five years (B) $191.1
Multiple on invested capital (A/B) 2.4x
Three-year NAV Total Return Calculation NAV per share (USD) Dividend (USD)
Dividend
Compounding
Factor
NAV per Ordinary Share at year end
as per Statement of Financial
Position in December 2019 (A) $19.11
2020 Semi-annual dividend $18.82 $0.29 1.0154
2020 Semi-annual dividend $17.99 $0.29 1.0161
2021 Semi-annual dividend $22.18 $0.31 1.0140
2021 Semi-annual dividend $28.24 $0.41 1.0145
2022 Semi-annual dividend $31.18 $0.47 1.0151
2022 Semi-annual dividend $28.20 $0.47 1.0167
NAV per Ordinary Share at end of
year as per Statement of Financial
Position in December 2022 (B) $28.38
NAV Total Return per Ordinary
Share (B/A)*C – 1 62.7%
Product of
dividend
compounding (C) 1.0953
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Appendix
Three-year Share Price
Total Return Calculation Share price (GBP) Dividend (GBP)
Dividend
Compounding
Factor
Share price at year end as per
the London Stock Exchange
on 31 December 2019 (A) £12.09
2020 Semi-annual dividend £11.95 £0.22 1.0185
2020 Semi-annual dividend £9.30 £0.23 1.0245
2021 Semi-annual dividend £11.85 £0.23 1.0191
2021 Semi-annual dividend £15.30 £0.30 1.0195
2022 Semi-annual dividend £17.75 £0.34 1.0194
2022 Semi-annual dividend £15.75 £0.39 1.0246
Share price at year end as per
the London Stock Exchange on
31 December 2022 (B) £16.00
Share price total return per
Ordinary Share (B/A)*C – 1 49.8%
Product of
dividend
compounding (C) 1.1323
Realisation Uplift Calculation
Percentage uplift relative to carrying value three quarters prior 1,524%
Total observations 41
Average uplift 37.2%
Adjusted Commitment Coverage
Cash + undrawn committed credit facility (A) $307
Adjusted unfunded private equity exposure (B) $48
Adjusted
*
commitment coverage ratio (A/B) – 1 645%
* Unfunded commitments are adjusted for amounts the Manager believes are unlikely to be called.
Share Price Yield
Annualised dividend based on 2022 dividends (GBP equivalent) (A) £0.69
Share price on 31 December 2022 (B) £16.00
Adjusted commitment coverage ratio (A/B) – 1 4.3%
One Year Shareholder
Total Return Calculation Share price (GBP) Dividend (GBP)
Dividend
Compounding
Factor
Share price at year end as per
the London Stock Exchange
on 31 December 2021 (A) £18.50
Semi-annual dividend per Ordinary
Share declared in respect of year £17.75 £0.34 1.0194
Semi-annual dividend per Ordinary
Share declared in respect of year £15.75 £0.39 1.0246
Share price at year end as per
the London Stock Exchange
on 31 December 2022 (B) £16.00
2022 share price Total Return per
Ordinary Share (B/A)*C – 1 -9.7%
Product of
dividend
compounding (C) 1.0445
Realisation Uplift
Aggregate valuation at 31 December 2021 $131.1
Aggregate realisation value at sale/IPO $139.6
Average uplift 6.4%
Multiple of Capital Calculation 2022 Realisations
Total value from 2022 exits (A) $177.9
Invested capital into 2022 exits (B) $66.4
Multiple on invested capital (A/B) 2.7x
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Glossary
Buyout is the purchase of a controlling interest in a company.
Compound Annual Growth Rate (“CAGR”) represents the annual growth rate of an
investment over a specified period of time longer than one year.
Carried interest is equivalent to a performance fee. This represents a share of the profits
that will accrue to the underlying private equity managers, after achievement of an agreed
preferred return.
Co-investment is a direct investment in a company alongside a private equity fund.
Debt Multiple Ratio of net debt to EBITDA.
Direct equity investments are investments in a single underlying company.
Discount arises when a companys shares trade at a discount to NAV. In this circumstance,
the price that an investor pays or receives for a share would be less than the value
attributable to it by reference to the underlying assets. The discount is the difference
between the share price and the NAV, expressed as a percentage of the NAV. For example,
if the NAV was l00p and the share price was 90p, the discount would be 10%.
Dry powder is capital raised and available to invest but not yet deployed.
EBITDA stands for earnings before interest, tax, depreciation and amortisation, which is
awidely used performance measure in the private equity industry.
Enterprise value is the aggregate value of a company’s entire issued share capital and
netdebt.
Exit is the realisation of an investment usually through trade sale, sale by public offering
(including IPO), or sale to a financial buyer.
FTSE AII-Share Index Total Return is the change in the level of the FTSE AII-Share Index,
assuming that dividends are re-invested on the ex-dividend date.
Full realisations are exit events (e.g. trade sale, sale by public offering, or sale to a financial
buyer) following which the residual exposure to an underlying company
is zero or immaterial.
Fund-of-funds is a private equity fund that invests in a portfolio of several private equity
funds to achieve, compared with a direct investment fund, a broader diversification of risk,
including individual private equity manager risk.
General Partner (“GP) is the entity managing a private equity fund that has been
established as a limited partnership. This is commonly referred to as the Manager.
Initial Public Offering (“IPO”) is an offering by a company of its share capital to the public
with a view to seeking an admission of its shares to a recognised stock exchange.
Internal Rate of Return (“IRR”) is a measure of the rate of return received by an investor in
a fund. It is calculated from cash drawn from and returned to the investor together with the
residual value of the investment.
Last Twelve Months (“LTM”) refers to the timeframe of the immediately preceding
12months in reference to a financial metric used to evaluate the Company’s performance.
Limited Partner (“LP) is an institution or individual who commits capital to a private
equity fund established as a limited partnership. These investors are generally protected
from legal actions and any losses beyond the original investment.
Market capitalisation Share price multiplied by the number of shares outstanding.
Multiple of cost or invested capital (“MOIC” or cost multiple) A common measure of
private equity performance, MOIC is calculated by dividing the fund’s cumulative
distributions and residual value by the paid-in capital.
Net asset value (“NAV) Amount by which the value of assets of a fund exceeds liabilities,
reflecting the value of an investor’s attributable holding.
Net asset value per share (“NAV per share”) is the value of the Companys net assets
attributable to one Ordinary Share. It is calculated by dividing ‘shareholders’ funds’ by the
total number of Ordinary Shares in issue. Shareholders’ funds are calculated by deducting
current and long-term liabilities, and any provision for liabilities and charges, from the
Company’s total assets.
Net asset value per share Total Return is the change in the Company’s net asset value per
share, assuming that dividends are re-invested on the ex-dividend date.
Glossary (unaudited)
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Glossary
Net debt is calculated as the total short-term and long-term debt in a business, less cash
and cash equivalents.
Premium occurs when the share price is higher than the NAV and investors would
therefore be paying more than the value attributable to the shares by reference to the
underlying assets.
Public to private (“P2P”) or take private, is the purchase of all of a listed companys shares
and the subsequent delisting of the company, funded with a mixture of debt and
unquoted equity.
Quoted company is any company whose shares are listed or traded on a recognised
stockexchange.
Realisation proceeds are amounts received by the Company from the sale of a
portfoliocompany, which may be in the form of capital proceeds or income such as
interestor dividends.
Realisations – multiple to cost is the average return from full and partial exits in
theperiod.
Realisations – uplift to carrying value is the aggregate uplift on full and partial exits
Share price Total Return is the change in the Company’s share price, assuming that
dividends are re-invested on the day that they are paid.
Total Return is a performance measure that assumes the notional re-investment of
dividends. This is a measure commonly used by the listed private equity sector and listed
companies in general.
Undrawn commitments are commitments to funds that have not yet been drawn down.
Valuation multiples are earnings or revenue multiples applied in valuing a business
enterprise.
Vintage is the year in which a private equity fund makes its first investment.
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Directors, Advisors and contact information
Board of Directors
William Maltby (Chairman)
Trudi Clark
John Falla
Wilken von Hodenberg
Louisa Symington-Mills
Registered Office
NB Private Equity Partners Limited
P.O. Box 286 Floor 2
Trafalgar Court, Les Banques
St. Peter Port, Guernsey GY1 4LY
Channel Islands
Tel: +44-(0)1481-742-742
Fax: +44-(0)1481-728-452
Investment Manager
NB Alternatives Advisers LLC
325 North St. Paul Street, Suite 4900
Dallas, TX 75201
United States of America
Tel: +1-214 -6 47-9593
Fax: +1-214 -647-9501
Email: IR_NBPE@nb.com
Guernsey Administrator
Ocorian Administration (Guernsey) Limited
Trafalgar Court, Les Banques
St. Peter Port, Guernsey GY1 4LY
Channel Islands
Tel: +44-(0)1481-742-742
Fax: +44-(0)1481-728-452
Fund Service and Recordkeeping Agent
MUFG Capital Analytics LLC
325 North St. Paul Street, Suite 4700
Dallas, TX 75201
United States of America
Independent Auditors
KPMG Channel Islands Limited
Glategny Court
Glategny Esplanade
St. Peter Port, Guernsey GY1 1WR
Tel: +44 (0) 1481 721000
Fax: +44 (0) 1481 722373
Depositary Bank
The Bank of New York
101 Barclay Street, 22nd Floor
New York, NY 10286
United States of America
Tel: +1-212-815-2715
Fax: +1-212-571-3050
Paying Agent
Jefferies International Limited
68 Upper Thames Street
London EC4V 3BJ
Tel: +44 (0) 20 7029 8766
Joint Corporate Brokers
Jefferies International Limited
100 Bishopsgate
London EC2N 4JL
Tel: +44 (0) 20 7029 8766
Stifel Nicolaus Europe Limited
150 Cheapside
London, EC2V 6ET
Tel: +44 (0) 20 7710 7600
Registrar
Link Market Services (Guernsey) Limited
Mont Crevelt House,
Bulwer Avenue
St. Sampsons
GY2 4LH
Guernsey Channel Islands
Directors, Advisors and contact information
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Useful information
Useful information
Financial calendar
Approximate timing
Monthly NAV update
Generally 10-15 days after month-end
Annual financial report
April
Interim Report
September
Key Information Document Update
Annually, following release of the annual financial report.
All announcements can be viewed on the Company’s
website – www.nbprivateequitypartners.com.
Register to receive news alerts
Please register for news alerts on the Companys
website – https://www.nbprivateequitypartners.com/
en/investors/news-and-alerts.
Events timing
Annual General Meeting
15 June 2023 at 1.45pm
Capital Markets Day
5 October 2023 at 2.00pm
Investor update calls
Typically twice a year
Dividends
Semi-annual
Payment of dividends
Dividends are declared in U.S. dollars and paid in
pounds Sterling, but the Company also offers both a
Currency Election for US shareholders and a dividend
re-investment plan for shareholders who wish to reinvest
their dividends to grow their shareholding. The foreign
exchange rate at which dividends declared will be
converted into pounds Sterling will be at the spot rate
priorto the payment of the dividend.
Dividend information
The dividend documents on the Companys website
provide information to Shareholders regarding NBPE’s
Dividend Re-investment Plan and USD Dividend Election
for as well as election forms for each of the options.
Investors should read the dividend documentation
carefully prior to choosing an election. Ifanelection is
notmade, investors will receive cash dividends in Sterling.
Shareholders are advised to consult with a tax advisor
concerning potential tax consequences of an election.
Anyone acting for the account or benefit of a U.S. person
who elects to receive additional shares through the
dividend re-investment plan would need to sign a
QualifiedPurchaser certification, which is available on
the website. The completed forms should be returned
to NBPE’s Investor Relations department by email at
IR_NBPE@nb.com or by the Investment Manager’s
mailingaddress (see page 110 for contact information).
For further information on the Dividend Re-investment
Plan and Currency Election, please contact
the Companys registrar, Link Market Services, at
enquiries@linkgroup.co.uk. Please see Link’s mailing
address below.
Registrar services
Communications with shareholders are mailed to the
address held on the share register. Any notifications and
enquiries relating to registered shareholdings, including
achange of address or other amendment, should be
directed to Link Asset Services.
Address:
Link Asset Services
PXS 1
34 Beckenham Road
Beckenham BR3 4ZF
http://ips.linkassetservices.com/
Email: enquiries@linkgroup.co.uk
By phone:
UK: +44 (0) 333 300 1950
From overseas: +44 20 333 300 1950. Calls outside the
United Kingdom will be charged at the applicable
international rate. Link Asset Services are open between
9.00am and 5.30pm, Monday to Friday, excluding public
holidays in England and Wales.
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Useful information
E-communications for shareholders
NBPE would like to encourage shareholders to receive
shareholder documents electronically, via our website or
email notification instead of hard copy format. This is a
faster and more environmentally friendly way of receiving
shareholder documents.
The online Share Portal from our registrar, Link Asset
Services, provides all the information required regarding
your shares. Through the Share Portal, shareholders
can access details of their holdings in NBPE online.
You can also make changes to address details and dividend
payment preferences online.
Shareholders who wish to receive future communications
via electronic means can register this preference through
the Share Portal (https://www.signalshares.com/).
ISIN/SEDOL numbers
The ISIN, SEDOL numbers and ticker for the Companys
Ordinary Shares are as follows:
£ share class US$ share class
Ticker: NBPE NBPU
ISIN GG00B1ZBD492 GG00B1ZBD492
SEDOL B28ZZX8 BD9PCY4
Information about the 2024 ZDP share classes:
2024
Capital entitlement 130.63p
Maturity 20 Oct 24
GRY at issue 4.25%
Ticker NBP5
ISIN GG00BD96PR19
SEDOL BD96PR1
AIC
The Company is a member of the Association of Investment
Companies (https://www.theaic.co.uk/).
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How to invest
How to invest
NBPE is listed on the London Stock Exchange and its
sharescan be bought and sold just as those of any other
listed company.
A straightforward way for individuals to purchase and hold
shares in the Company is to contact a stockbroker, savings
plan provider or online investment platform. NBPE’s shares
may be purchased under the ticker symbol NBPE.
To help people trying to choose a platform, the Association
of Investment Companies (“AIC”) provides up-to-date
information on the platforms where investment companies
are available, and what you’ll pay to invest on each platform
(https://www.theaic.co.uk/availability-on-platforms).
If you’d prefer to use a financial adviser, advice on how
tofind one can be found at
https://www.thepfs.org/yourmoney/find-an-adviser/.
ISA status
The Companys shares are eligible for tax-efficient
wrappers such as Individual Savings Accounts (“ISAs”),
Junior ISAs, and Self Invested Personal Pensions (“SIPPs”).
Information about ISAs and SIPPs, as well as general
adviceon saving and investing, can be found on the
government’s free and independent service at
www.moneyadviceservice.org.uk.
As with any investment into a company listed on the stock
market, you should remember that:
the value of your investment and the income you get from
it can fall as well as rise, so you may not get back the
amount you invested; and
past performance is no guarantee of future performance.
This is a medium- to long-term investment so you should be
prepared to invest your money for at least five years. If you
are uncertain about any aspect of your decision to invest,
you should consider seeking independent financial advice.
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Endnotes
1
Assumes re-investment of dividends at
theclosing NAV or share price on the
ex-dividend date.
2
Realisations announced in 2022, not all of
which had closed. $120 million received during
2022, of which $17 million was received in 2022
from announced transactions during 2021.
3
Returns are presented on a “gross” basis
(i.e.they do not reflect the management fees,
carried interest, transaction costs and other
expenses that may be paid by investors, which
may be significant and will lower returns).
Past performance is not a guarantee of
future returns. Proceeds include funds that
are currently in escrow, but are expected to
be received and from investments which are
signed but not yet closed.
4
All performance figures assume re-investment
of dividends at NAV on the ex-dividend
date and reflect cumulative returns over the
relevanttime periods shown and are not
annualised returns.
5
Assume re-investment of dividends at NAV on
the ex-dividend date.
6
Revenue & EBITDA Growth: Past performance
is no guarantee of future results. Fair value as
of 31 December 2022 and the data is subject to
the following adjustments: 1) Excludes public
companies. 2) Analysis based on 67private
companies. 3) The private companies included
in the data represent approximately 81% of the
total direct equity portfolio. 4) Six companies
were excluded from the revenue and EBITDA
growth metrics on the basis of the following:
a)one company with a value of $24 million used
an industry-specific metric as a measurement
of cash flow b) one company experienced
extraordinary positive growth rates c) two
companies (less than 1% of direct equity fair
value) had anomalous percentage changes
which the manager believed to be outliers
d) two investments held less than one year.
If all exclusions had been included (except
for investments held less than one year),
LTMRevenue and LTM EBITDA growth would
be higher. Portfolio company operating metrics
are based on the most recently available
(unaudited) financial information for each
company and based on as reported by the lead
private equity sponsor to the Manager as of
31March 2023. Where necessary, estimates
were used, which include pro forma adjusted
EBITDA and other EBITDA adjustments,
pro forma revenue adjustments, run-rate
adjustments for acquisitions, and annualised
quarterly operating metrics. LTM periods as
of 31/12/22 and 30/9/22 and 31/12/21 and
30/9/21. LTM revenue and LTM EBITDA growth
rates are weighted by fair value.
7
The MSCI World Index captures large
and mid-cap representation across 23
Developed Markets (DM) countries. With
1,509 constituents as of 31 December 2022
(1,555 at 2021, 1,585 at 2020), the index
covers approximately 85% (85% at 2021, 85%
at 2020) of the free float-adjusted market
capitalisation in each country (MSCI World
Factsheet, 28 February 2023, the latest
available). The benchmark performance is
presented for illustrative purposes only to show
general trends in the market for the relevant
periods shown. The investment objectives and
strategies in the benchmark may be different
than the investment objectives and strategies
of NBPE and may have different risk and reward
profiles. A variety of factors may cause this
comparison to be an inaccurate benchmark for
any particular fund and the benchmarks do not
necessarily represent the actual investment
strategy of a fund. It should not be assumed
that any correlations to the benchmark based
on historical returns would persist in the future.
Indexes are unmanaged and are not available
for direct investment. Investing entails risks,
including possible loss of principal. Past
performance is no guarantee of future results.
8
Based on 2022 announced realisations.
Represents uplift from valuation versus
31December 2021. Returns are presented
on a “gross” basis (i.e. they do not reflect the
management fees, carried interest, transaction
costs and other expenses that may be paid
by investors, which may be significant and
will lower returns). Past performance is not a
guarantee of future returns. Proceeds include
funds that are currently in escrow, but are
expected to be received and from investments
which are signed but not yet closed.
9
As at 19 April 2023.
10
For illustrative purposes only. The benchmark
performance is presented for illustrative
purposes only to show general trends in
the market for the relevant periods shown.
The investment objectives and strategies of
the benchmarks may be different than the
investment objectives and strategies of a
particular private fund, and may have different
risk and reward profiles. A variety of factors
may cause this comparison to be an inaccurate
benchmark for any particular type of fund and
the benchmarks do not necessarily represent
the actual investment strategy of a fund. It
should not be assumed that any correlations
to the benchmark based on historical returns
would persist in the future. Past performance
is no guarantee of future results. Indexes
areunmanaged and are not available for
directinvestment.
Source: Private equity data from Burgiss.
Represents pooled horizon IRR and first
quartile return for Global Private Equity Buyout
as of September 30, 2022, which is the latest
data available. Public market data sourced from
Neuberger Berman.
The benchmark performance is presented
for illustrative purposes only to show general
trends in the market for the relevant periods
shown. The investment objectives and
strategies of each fund in the benchmark may
be different than the investment objectives
and strategies of NBPE and may have different
risk and reward profiles. A variety of factors
may cause this comparison to be an inaccurate
benchmark for any particular fund and the
benchmarks do not necessarily represent the
actual investment strategy of a fund. It should
not be assumed that any correlations to the
benchmark based on historical returns would
persist in the future. Indexes are unmanaged
and are not available for direct investment.
Investing entails risks, including possible loss
ofprincipal. Past performance is no guarantee
of future results.
11
Approximately 97% of the direct investment
portfolio (measured on 31 December 2022
fair value) is on a no management fee, no
carry basis to underlying third-party GPs.
KeyInformation Document is available on
NBPE’s website.
12
Includes full exits only over the last five years.
Excludes partial exits, recapitalisations and
IPOs until the stock is fully exited. Exit year for
public companies determined by the final sale
of public shares. Proceeds include funds that
are currently in escrow, but are expected to be
received. Returns are presented on a “gross”
basis (i.e.they do not reflect the management
fees, carried interest, transaction costs and
other expenses that may be paid by investors,
which may be significant and may lower returns).
13
Analysis includes direct equity investment exits
over the last five years. For investments which
completed an IPO, the value is based on the
closing share price on the IPO date; however
NBPE remains subject to customary IPO lockup
restrictions or the timing of stock sales at
the GP’s discretion. Returns are presented
on a “gross” basis (i.e. they do not reflect the
management fees, carried interest, transaction
costs and other expenses that may be paid by
investors, which may be significant and may
lower returns).
14
As of December 31, 2022. Represents
aggregate committed capital since inception
in1987, including commitments in the process
of documentation or finalisation.
15
As of December 31, 2022.
16
Includes Limited Partner Advisory Committee
seats and observer seats for PIPCO and
Secondaries since inception as of
December 31, 2022.
17
Reflects Private Investment Portfolios and
Co-investment (“PIPCO”) Managing
Directorsonly.
18
Includes estimated allocations of dry powder
for diversified portfolios consisting of
primaries, secondaries, and co-investments.
Therefore, amounts may vary depending on
how mandates are invested over time.
19
For illustrative and discussion purposes only.
PRI grades are based on information reported
directly by PRI signatories, of which investment
managers totaled 3,404 for 2021, 1,924 for
2020, and 1,119 for 2019 . Note that scores for
the 2021 reporting cycle cannot be compared
to previous years due to the change in PRI
assessment methodology. Unlike previous
years, the indicator scores are assigned one
of five performance bands (from 1 to 5 stars)
instead of six performance bands (from A+ to E).
All PRI signatories are eligible to participate and
must complete a questionnaire to be included.
The underlying information submitted by
signatories is not audited by the PRI or any other
party acting on its behalf. Signatories report
on their responsible investment activities by
responding to asset-specific modules in the
Reporting Framework. Each module houses
a variety of indicators that address specific
topics of responsible investment. Signatories
answers are then assessed and results
are compiled into an Assessment Report.
Neuberger Berman pays a fee to be a member
of PRI and the grades are only available to PRI
members. Ratings referenced do not reflect the
experiences of any Neuberger Berman client
and readers should not view such information
as representative of any particular client’s
experience or assume that they will have a
similar investment experience as any previous
or existing client. Awards and ratings are not
indicative of the past or future performance
of any Neuberger Berman product or service.
Moreover, the underlying information has
not been audited by the PRI or any other party
acting on its behalf. While every effort has
been made to produce a fair representation of
performance, no representations or warranties
are made as to the accuracy of the information
presented, and no responsibility or liability can
be accepted for damage caused by use of or
reliance on the information contained within
this report. Information about PRI grades
is sourced entirely from PRI and Neuberger
Berman makes no representations, warranties
or opinions based on that information.
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NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
Endnotes
20
Valuation & Leverage: Past performance is
noguarantee of future results. Fair value
as of 31 December 2022 and subject to the
following adjustments. 1) Excludes public
companies. 2) Based on 55 private companies
which are valued based on EV/EBITDA metrics.
3) The private companies included in the data
represents 71% of direct equity investment
fair value. 4) Companies not valued on
multiples of trailing EBITDA are excluded from
valuation and leverage statistics. 5) Leverage
statistics exclude companies with net cash
position and leverage data represents 71% of
direct equity investment fair value. Portfolio
company operating metrics are based on the
most recently available (unaudited) financial
information for each company and are as
reported by the lead private equity sponsor
tothe Manager as of 31 March 2023, based on
reporting periods as of 31/12/22 and 30/9/22.
EV and leverage data is weighted by fair value.
21
Information based on company earnings
announcements and investor update
presentations.
22
Source: Fortna announcement.
23
Cinven press release.
24
Source: Pitchbook as of 2022 Q4. Includes
buyout, late stage VC, and growth equity.
Includes completed deals only.
25
Unfunded commitments are adjusted for
amounts the Manager believes are unlikely
to be called. As of 31 December 2022, actual
unfunded commitments are comprised of
$56.8 million, $31.1, and $8.2 million to direct
equity investments, income investments, and
fund investments, respectively. Unfunded
amounts are to funds only and exclude direct
investments committed to but not yet closed.
26
Many of the-firm level processes described
herein are subject to Neuberger Berman’s
policies and procedures, including certain
information barriers within Neuberger
Berman that will, from time to time, limit
communications between the NB Private
Markets team and the public side investment
and ESG teams.
27
Amounts may not add up to 100% due to
rounding. Based on direct investment portfolio
fair value as of 31December 2022; analysis
excludes third-party funds (which are past their
investment period but which may call capital
for reserves or follow-ons) and funds that are
not deemed ESG integrated by the Manager.
In aggregate these exclusions represent
approximately 2.5% of fair value. Adverse
potential reflects investments made prior to
NBPE adopting its Responsible & Sustainable
Investment Policy in 2020.
28
Based on Neuberger Berman Private
EquityAnalysis.
29
Adverse potential reflects investments made
prior to NBPE adopting its Responsible &
Sustainable Investment Policy in 2020.
30
This material is intended as a broad overview of
the portfolio managers’ style, philosophy and
investment process and is subject to change
without notice. The case study discussed does
not represent all past investments. Itshould
not be assumed that an investment in the
case study listed was or will be profitable.
Theinformation supplied about the investment
is intended to show investment process and
notperformance.
31
U.S. Department of Health and Human Services,
Early Childhood Learning & Knowledge Center.
32
Source: download (unpri.org) as at
18 November 2022
33
iCI is a global, practitioner-led community
of private markets firms and investors that
seek to better understand and manage the
risks associated with climate change. Its
members share a commitment to reducing the
carbon emissions of private markets-backed
companies and secure sustainable investment
performance by recognising and incorporating
the materiality of climate risk.
The Net Zero Asset Managers initiative is
an international group of 301 signatory
asset managers with $59 trn in assets under
management, who are committed to
supporting the goal of net zero greenhouse
gas emissions by 2050 or sooner, in line with
global efforts to limit warming to 1.5 degrees
Celsius; and to supporting investing aligned
with net zero emissions by 2050 or sooner.
34
As at 6 March 2023.
115
NB Private Equity Partners Annual Report 2022STRATEGIC REPORT GOVERNANCE FINANCIALS OTHER
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Partners Limited, visit our website, or
contact your Neuberger Berman
Representative.
ir_nbpe@nb.com
US: +1 214 647 9593
UK: +44 (0) 20 3214 9000
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