AIG Private Equity 2008 Annual Report

AN N UAL R E PORT 2008

FACTS AND F IGURES

Company profile

AIG Pr ivate Equity Ltd. is a Swiss investment com-

pany with an object ive to achieve long-term capital

growth for shareholders by investing in a diversif ied

por tfol io of private equity funds and privately held

operat ing companies. The same team that manages

private equity investments for American International

Group, Inc. acts as investment advisor for AIG Private

Equi ty Ltd . With nine years of operat ing his tor y

in a variety of market condit ions, AIG Private Equity

Ltd. has a sol id track record and a mature por tfol io

of funds and direct investments. AIG Private Equity

Ltd. is l is ted on the S IX Swiss E xchange under the

t icker symbol “APEN”.

Valuation as of December 31, 2008

Closing price per share CHF 37.95

Net asset value per share CHF 91.86

(applying fair values)

Exchange rate USD/CHF 1.0673

Exchange rate EUR/CHF 1.4856

Number of shares outstanding 3 929 185

Market capital izat ion CHF 149 112 571

Swiss Security Number

915.331

ISIN: CH0009153310

Ticker: APEN

Trading Information

Reuters: APEZn.S

Bloomberg: APEN

Telekurs: APEN

www.aigprivateequity.com

CONTENTS

Chairman’s Statement 2

Management Report

– Review 2008 and Outlook 4

– Overview of 20 Largest Investments 8

Financial Report

– AIG Private Equity Group 20

Consol idated Financial Statements 2008

– Corporate Governance 57

– AIG Private Equity Ltd. 66

Financial Statements 2008

2

CHAIRMAN’S STATEMENT

valuat ions. The ef fect of th is can be seen in the Company’sNAV, which decl ined substant ia l ly in the four th quar ter. The Company also experienced l iquidity constraints in the four thquar ter as distributions from existing investments dropped dra-mat ica l ly and the Company’s lenders requested ear ly repay-ment of the Company’s USD 100 mi l l ion credi t l ine. F inal ly ,AIG, the Company’s founder, sponsor and investment advisorwas forced to accept a substantial investment by the US fed-eral government and plans to sel l many of i ts operat ing busi-nesses ( inc luding the Company’s investment advisor , AIGInvestments and AIG Private Bank).

Investment income was down sharply as exi ts were scarcewith buyers struggl ing to secure debt f inancing for new deals.At the same t ime the Company recorded substant ia l wr i te-downs from long term assets. The Company is required to per-form an impairment analysis on a quar terly basis . At year-endfund managers marked down the value of por tfol io companiesmainly due to mult iples of public comparables coming down –especial ly in the four th quar ter. This led to signif icantly lowervaluat ions across the por tfol io even for companies that weretracking budget.

With fewer distributions but capital draw downs from fundsremaining at high levels in the f irst three quar ters of 2008, theCompany drew down i ts credi t l ine and issued preference shares from its subsidiary in Bermuda. As per the end of thethird quar ter the Company breached covenants under the cre-dit agreement with the banking consor t ium and a supplemen-tary agreement to the loan agreement was s igned. In returnfor the Company maintaining an early prepayment schedule,the banking syndicate agreed to waive cer ta in f inancia l covenants. In Apri l 2009 the Company proposed to the bank -ing syndicate a s tandst i l l agreement unt i l Ju ly 2009 as i t

Dear Shareholders

2008 was a disappointing year. The global f inancial cr is is thatbegan in 2007 intensif ied sharply fol lowing the bankruptcy ofLehman Brothers in September 2008, and credit markets cameto a near standst i l l , with lenders unwil l ing to assume counter-par ty r isk. Uncer tainty and lack of credit had a signif icant im-pact on an already weak real economy, with most developedeconomies contract ing sharply in the four th quar ter. Publ icequity markets turned in their worst per formance in decades,with many major indices down 30–40% or more for the year.Pr ivate equi ty va luat ions and act iv i ty have been par t icular ly impacted due to the lack of credi t for new transact ions or exi ts and the leveraged nature of buyout investments, whichtends to ampl i fy equi ty losses in per iods of dec l in ing asset

EDUARDO LEEMANN, Chairman of the Board

3

CHAIRMAN’S STATEMENT

Despite the diff iculties faced by the Company, we believe thereare many successful investments in the portfolio that wil l beginto demonstrate their value when markets and the global eco-nomy stabi l ize.

Eduardo LeemannChairman of the Board

became evident that the prepayment schedule could not be maintained. During that period the Company is exploring var ious ref inancing opt ions . The abi l i ty of the Company to secure s table f inancing to fund ex is t ing investment commit-ments wi l l c lear ly have a mater ia l impact on the out look forreturns to our equity holders.

The global economy has continued to deteriorate in 2009,with large contract ions expected for major economies in thef i rs t quar ter and a substant ia l s lowing of growth in largeremerging economies such as China and India. While there aresome s igns of s tabi l izat ion in credi t and equi ty markets , i tseems l ike ly that any recovery wi l l be a long, s low process . Valuat ions wil l stay under pressure unti l economic confidenceis restored and credit markets begin to function more normally.

DR. CHR ISTIAN WENGER, Vice Chairman

ROBERT THOMPSON, MemberDR. ROGER SCHMID, Member

DR. ERNST MÄDER, Member

4

MANAGEMENT REPORT

The f irst three quar ters ref lected results from a normal weakperiod with NAV decreasing 9.7% and the share price 40.3%.The four th quar ter was characterized by the signif icant turmoilon the f inancial markets. Financial inst i tut ions came under si-gnif icant stress and in some cases were in need of governmentsuppor t . Credit markets froze and the interbank market cameto a standst i l l . Equity markets lost fur ther terrain in the f i rstpar t of the four th quar ter, recovering somewhat towards theyear-end. Al l of the above impacted private equity investmentsand led to a severe contract ion in transact ion volume in thefour th quar ter.

Aside from the signif icant valuation changes,the weakening of the USD (Q4: –4.6%; 2008: –5.8%) and the Euro (Q4: –5.8%; 2008: –10.2%)had a negative impact on NAV as had the l istedpor tfol io investments.

E xi ts were dif f icult to achieve as equity mar-kets were volat i le and weak in 2008 result ing inone of the worst I PO environments in manyyears. Addit ional ly , secondary transact ions, thesale of a por t fol io company to another pr ivateequi ty sponsor , dec l ined s igni f icant ly as debt f inancing was diff icult to secure in the first threequar ters and v i r tual ly imposs ib le to f ind in the four th quar ter. As a result of the restr ictedtransact ion volume, the Company’s investmentincome was substantial ly lower than in the pre-

vious year. The sale of three of the top 20 investments at thebeginning of 2008 at good mult iples contr ibuted strongly toinvestment income. Addit ional ly , the Company unwound thecontractual agreements in the second quar ter. The contractualagreements were entered into in 1999 shor t ly after inceptionof the Company. The agreements provided the Company withinstant e xposure to a mature pr ivate equi ty por t fo l io of 65 private equity funds with vintages ranging from 1986 to 1999.As that por tfol io continued to exi t underly ing por tfol io com-panies, the remaining fair value of the contractual agreementsdecreased continuously to CHF 38.8 mil l ion at the end of thef i rs t quar ter 2008. Near ly hal f of the fa i r va lue was concen-trated in four funds: Doughty Hanson I I I , Palamon EuropeanEquity, Apollo IV and Blackstone I I I . As a result of the unwind-ing of the contractual agreements , the Company received

Rev iew 2008 and Out look

Quarterly Investment Income from 2004 to 2008

Investment Income in TCHF

AIG Private Equity Ltd. (the “Company”) recorded a disappointing result in

a very challenging market environment in 2008. The turmoil in the financial

markets has had a material negative impact on the Company. The frozen

debt markets, weak equity markets and weak global economy impacted

valuations and led to a substantial decrease in distributions from existing

investments. The Company’s net asset value (“NAV”) per share decreased

49.6% from CHF 182.13 to CHF 91.86. The Company’s share price decreased

77.7% and ended the year at CHF 37.95.

Q1

2004

Q2

2004

Q3

2004

Q4

2004

Q1

2005

Q2

2005

Q3

2005

Q4

2005

Q1

2006

Q2

2006

Q3

2006

Q4

2006

Q1

2007

Q2

2007

Q3

2007

Q4

2007

Q1

2008

Q2

2008

Q3

2008

Q4

2008

5

MANAGEMENT REPORT

direct l imited par tnership interests in these four funds equi-valent to i ts exist ing indirect interests and received cash pro-ceeds equal to NAV for the remaining funds covered by theagreements . Tota l cash proceeds f rom the unwinding of thecontractual agreements were USD20.3 mi l l ion and the fa i rva lue of the four funds t ransferred to the Company’s d i rectownership totaled USD 15.4 mil l ion.

The wr i te-down on non-current assets amounted to CHF 223.0 mil l ion (2007 CHF 10.1 mil l ion). In accordance withI FRS requirements , the Company considers any investment(whether fund or direct investment) wi th a fa i r va lue belowcost for more than twelve months as impaired. In addition, anyinvestment with a fair value more than 30% below cost wil l beconsidered impaired regardless of the leng th the investmentwas held below cost . In contrast to other tests , the majori ty ofthe wr i te-downs were caused by the la t ter category. Lower valuat ion mult iples and the weak economic environment ledto this s i tuat ion. Addi t ional ly , wi th fewer e x i ts , we recordedmore funds that remained below cost for more than twelvemonths. Since impairments are taken automatical ly under thepol ic y , an impairment does not necessar i ly ref lect manage-ment’s opinion that the affected fund or direct investment wil lul t imately return a loss.

Top 20 investments

The Company’s top 20 investments por tfol io recorded anotheryear of h igh turnover , wi th a tota l of ten new investments joining the top 20 in the course of the year. Three ful l saleswere achieved at at t ract ive mult iples in spi te of a very chal-lenging market environment. Overal l we are pleased with the

per formance of the top 20 investments and are aware that atleast one is looking to generate l iquidity for investors in 2009.See page 8 for detai led information on the por tfol io of top 20investments.

Investment Program

The Company added s ix funds and no direct investments to i ts por t fo l io in 2008. The commitments to the s ix funds are divided up into f ive fol low-on funds and one new fund.

The Company made commitments to two new funds in2008 with an investment focus on Nor th America: BlackstoneCapital Par tners VI (USD 25 mil l ion) and Ares Corporate FundI I I (USD 20 mil l ion). Blackstone Capital Par tners V I wi l l pur-sue large-scale private equity focusing on investments in largecap businesses, both in the U.S. and international ly. Targetedsectors include large industr ials , communicat ions and media,and energy among others; with par ticular focus on out-of-favorsectors and under-appreciated industr ies . The Company has invested in numerous prior Blackstone funds. Ares I I I makesmajor i ty and shared-control investments in d is t ressed andunder-capital ized middle market companies. Ares I I I continuesto pursue a wide variety of transact ions including buyouts, re-capi ta l izat ions , growth equi ty , d is t ressed for control invest -ments and investments in debt secur i t ies wi th equi ty- l ikereturns. The Company is already a l imited par tner in Ares I I .

Two European funds were added to the por t fo l io wi th commitments total ing EUR 40 mil l ion: Advent International VI(EUR 20 mil l ion) and CVC European Equity Par tners V (EUR 20mi l l ion) . Advent V I wi l l cont inue to pursue the s t rategy Advent has fol lowed in prior funds, focusing on the fol lowing

ANDREW FLETCHERCONRADIN SCHNE IDER

6

MANAGEMENT REPORT

sectors: Business/Financial Services, Retai l/Consumer, Health-care, Technology/Media/Telecom and Industr ials. Advent’s aimwith fund VI is to invest in control buyout transactions of com-panies in Western Europe (majori ty) and Nor th America. TheCompany has invested in Advent V in 2005 (and sold the stakein the four th quar ter) . CVC V wi l l cont inue the investment s t rategy that CVC has adopted for many years for i ts pr iorfunds; invest ing pr imar i ly in lead, control buyouts on a pan European bas is in deals wi th enterpr ise va lues typica l ly in excess of EUR 1bi l l ion. The Company has invested in a widevariety of funds managed by CVC.

One new fund, TowerBrook Capi ta l Par tners I I I (USD 20mill ion), has its investment focus on both Europe and the USA.TowerBrook I I I pursues control-oriented private equity invest-ments in large and middle market companies, par tnering withhighly capable management teams and seeking s i tuat ions characterized by complexity.

One fund was added to the Rest-of-the-World/Asia por t ionof the por t fo l io : Founta inVest China Growth Capi ta l Fund (USD 7.5 mil l ion). FountainVest wi l l target equity investmentsthat have a strong nexus with China. In par t icular , the Fundwil l target oppor tunit ies to invest in sizable, privately-ownedenterprises in China that are entering high growth stages ledby local entrepreneurs. The Fund wil l target equity investmentsof USD 50 mil l ion to USD 200 mil l ion in 10-15 companies pri-mari ly in the i) consumers & l i festyles, i i) bui lders/developersand i i i) resources & alternat ive energy sectors.

Unfunded commitments as of year end amounted to approximately CHF 744 mil l ion or 117% of total assets. Gen-era l ly , we e xpect funds to invest over a per iod of approx i -mately f ive years.

Direct Investments

In 2008 the Company made no new direct investments butmade three fo l low-on investments in Advanstar Communi-cations, Thomas Nelson Publishing and Falcon Farms for a totalof CHF 1.35 mil l ion. The Company’s por tfol io of direct invest-ments has decl ined fur ther in 2008. The main reason werelower valuat ions recorded for a number of direct investments.Especial ly impacted were CapMark and MVLF. CapMark, act ivein the commerc ia l rea l estate sector , and MVLF, a leverage f inance fund holding a por tfol io of mezzanine and second l ienloans, were par t icular ly hit .

At year end, d i rect investments accounted for 7.1% of invested assets ( including the investments in loans). This re-presents a decrease of nearly f ive percentage points over theprior year.

Liquidity

Capital cal ls remained at high levels in the f irst three quar ters.The st i l l fa i r ly high volume of cal ls goes back to specia l izedfund managers investing in debt securit ies at discounts or fundmanagers buying debt of por t fol io companies at a discount ,and a lso ref lects a large number of t ransact ions that wereagreed in the second half of 2007 and the f irst half of 2008,but that eventual ly closed in 2008.

In order to fund capi ta l ca l l s the Company increased in January 2008 the credit l ine with the banking consor t ium toUSD 100 mil l ion. Due to distr ibutions slowing down and capi-ta l cal ls remaining at high levels for the f i rst three quar ters ,the bank faci l i ty was ful ly ut i l ized and the Company’s subsi-diary in Bermuda issued USD 150 mil l ion in preferred sharesto an AIG group company.

1. Diversification by Investment Focus as of December 31, 2008Expressed as % of invested assets applying fair values

2. Investment Framework as of December 31, 2008Expressed as % of total assets applying fair values

Venture 5.1%

Mezzanine 2.8%

Development Capital 4.7%

Buyout 87.4%

AIG 3rd-Party Direct TotalFunds Funds InvestmentsPortfolio Portfolio Portfolio

Developed MarketsEurope 2.1% 38.0% 2.6% 42.7%Nor th America 5.8% 35.2% 6.4% 47.4%

Other Markets 3.3% 4.1% 0.1% 7.5%Total 11.2% 77.3% 9.1% 97.6%

7

MANAGEMENT REPORT

At the end of th i rd quar ter the Company breached covenants on i ts USD 100 mil l ion credit faci l i ty. Towards year-end the Company and the lenders s igned a supplementar yagreement to the loan agreement. In return for the Companymaintaining an early prepayment schedule, the banking syn -dicate agreed to waive two f inancia l covenants . The prepay-ment schedule provides for var ious payments wi th the f ina lpayment due June 30, 2009.

In order to repay debt and increase l iquidity the Companysold 7 por tfol io funds (CVC I I I , CVC IV, CVC Tandem, Advent V,Sun Capital V, KRG I I I and Avista) in the secondary market. Inreturn for the sale of these funds the Company received pro-ceeds of CHF 76.8 mil l ion. Unfunded commitments that werereleased with the sale of the funds amounted to CHF 39 mil-l ion. The impact on the NAV for the por t fo l io funds was CHF –6.75 per share.

In the four th quar ter debt was reduced by CHF 37.2 mil -l ion, ref lect ing a f i rst repayment under the loan with the ban-k ing syndicate and repaying loan balances wi th AIG Pr ivateBank and HSBC Bank of Bermuda which provided shor t termfaci l i t ies to fund capital cal ls .

Outlook

The f i rs t quar ter 2009 led to a worsening of the overa l l picture. Equity markets per formed poorly before recovering inMarch. While there have been signs of stabi l izat ion in creditmarkets , they are s t i l l not funct ioning at anywhere near the levels of recent years and cer tain lenders (such as CDOs) havedisappeared f rom the scene – perhaps permanent ly. In l inewith i ts impairment pol icy the Company recorded substantialwri te downs on i ts investments. I t is l ikely that there wi l l befur ther pressure on valuat ions as economic weakness affects

operat ing resul ts and publ ic equi ty markets ref lect reduced valuat ion mult iples. There are, however, many profi table com-panies in the por t fol io . Mult ip le expansion from the currentdepressed levels wi l l have a material posit ive impact on valu -at ions as f inancial markets and the global economy stabi l ize.

L iquidi ty remains the key issue for the board and the management, and we are working to streng then and sol idi fythe Company’s balance sheet and f inancial s i tuat ion. Discus -s ions with the banking syndicate are ongoing and a stand st i l lunti l July 15 was proposed. This t ime period al lows the Com-pany to pursue various options to resolve the l iquidity issues.

In 2009 the Company sold fur ther funds (EMP I I , CognetasI I , Berkshire VI I , Doughty Hanson I I I , EQT I I I , EQT IV, EQT V(50%), Lion Capital I I (50%), Calyle IV, Diamond Castle (40%),KRG IV (20%), P lat inum I I (50%)). In return for the sa le ofthese funds the Company received proceeds of CHF 37.9 mil-l ion. Unfunded commitments that were released with the saleof the funds amounted to CHF 78.9 mil l ion. The impact on theNAV for the por tfol io funds was CHF –11.23 per share.

The Company got of f to a chal lenging s tar t in 2009. Management and the board of d i rectors are under tak ing a l lsteps to refinance the Company in a way that provides the bestreturns for shareholders.

3. Diversification by Vintage Year as of December 31, 2008Expressed as % of invested assets applying fair values

4. Diversification by Region as of December 31, 2008Expressed as % of invested assets applying fair values

Nor th America 48.6%

Other regions 7.7%

Europe 43.7%

8

MANAGEMENT REPORT

Por t fo l io turnover was high, wi th a tota l of ten new invest -ments jo ining the top 20. This was due to a mix ture of new investments, secondary sales, and valuat ion changes. Ref lect-ing the por tfol io as a whole, the top 20 investments por tfol iocont inues to be wel l -d ivers i f ied, wi th the fol lowing industr yweightings: 34.1% services, 21.5% energy, 19.2% communica-t ions, 9.3% medical & health, 8.5% industr ial , and 7.4% con-sumer. The F inancia l Ser v ices sector (8 .4% in 2007) is notrepresented in the top 20 investments por tfol io anymore, dueto pressure on valuat ions of por tfol io companies act ive in thefinancial industry. The Semiconductor sector (4.4% in 2007) isalso not represented due to the valuat ion adjustment of Free-scale at year end. The matur i ty of the top 20 investments isgett ing a l i t t le older with the average holding period increas -ing to 22.2 months (30.12.2007: 19.2 months). The minimum

fair value for inclusion in the top 20 investment por tfol io wasaround CHF 3.8 mil l ion (2007: 5.1 mil l ion) with the averageamounting to about CHF 6.6 mil l ion (2007: CHF 8.6 mil l ion).

Top 20 Portfolio Performance

At year end Geoservices , an upstream oi l f ie ld services com-pany with headquar ters located in the Paris suburbs, was thelargest investment for the Group. Nearly 100% of i ts businessact iv i ty takes place outside France on a worldwide basis in atleast 50 different locations spread over al l continents. I ts mainbusiness l ines are Mud Logging, Wel l Intervent ion and FieldSurvei l lance. I t took the top spot from Capmark, which drop-ped f rom the Top 20 a l together. In the second posi t ion is Kinder Morgan , which is up f rom the seventh spot in 2007after sol id per formance and a substant ial add-on investmentin Q3 2008. Kinder Morgan is one of the largest pipeline trans-por ters and terminal operators in Nor th America . Third is Thomas Nelson Publishing , which mainta ins i ts hold on thenumber three spot. Thomas Nelson/Faith Media, is the leadingpublisher of Christ ian-oriented books, Bible reference books,and translat ions of the Christ ian Bible, and also sel ls seculart i t les to mainstream commercial markets. The fastest-growingsegment of the business is the Gospel Music Channel, with agood subscript ion base. Thomas Nelson Publ ishing is one ofthree direct investments the Group has in the Top 20, with theother two being Knowledge Universe Education at number fourand Acosta at number seventeen. Knowledge Universe Edu-cat ion is a leading global education company serving a widerange of s tudents , f rom infants and toddlers to pr imary andsecondary students. At number f ive, up from posit ion seven-

Top 20 Inves tments

As of December 31, 2008, the total fair market value of the Group’s twenty

largest holdings was CHF 131.6 million. While this represents a 23.6%

decrease from the value of the top 20 investments portfolio at the end of

2007, it also represents a larger share (36.5%) of the Group’s NAV due

to the decrease in the overall value of the Group’s assets by 25.3% over

the course of the year.

9

MANAGEMENT REPORT

teen in 2007, rounding out the top f ive is Numéricâble , thenumber one cable operator in France, serving more than 99%of French cable subscribers.

There are ten new entrants into the Top 20 this year withtwo being new investments for the Group. The new invest -ments in 2008 were Ersol Thin Film (Ventizz IV) and Rhythm(Ares I I ) . Ersol Thin F i lm GmbH is par t ia l ly owned by ErsolSolar Energy AG, a German l isted company that produces andmarkets high-qual i ty s i l icon-based photovol ta ic products . InJune 2008, i t was announced that Ersol Energy AG wil l be soldto Rober t Bosch AG. In connection with this transact ion, Ven-t izz’s posit ion in Ersol Thin Fi lm wil l be purchased in 2011 ata f ixed price. (The Company wil l value i ts posit ion in Ersol atthe discounted present value of the expected proceeds fromthe forward sale) . Rhy thm, aka Guitar Center , is the leadingmusical instrument retai ler that is approximately 4 t imes thesize of i ts largest competi tor. The Company operates throughthree business uni ts : Gui tar Center Reta i l S tores (214 reta i l stores), Direct Response (onl ine and catalog businesses), andMusic & Ar ts (97 stores providing rental band and orchestraequipment) . The other new entrants into the Top 20 are HDSupply, Ports America, Ziggo (Dutch Cable Conglomerate),OGF, Spie, Mater Private Care, Applus, and Hygenic . HD Sup-ply is one of the largest and most diversi f ied wholesale distr i -butors in the U.S. and Canada, providing top qual i ty productsand value-added services to professional customers in the In-f ras t ructure and Energy , Maintenance, Repair and Improve-ment and Special ty Construct ion markets. Por ts America pro-v ides independent mar ine terminal operat ions to conta inershipping companies, rol l -on/rol l -off shippers, cruise l ines andgeneral cargo and stevedoring services at 24 locat ions alongthe Atlantic as well as the Gulf and West Coasts including NewYork, New Jersey, Philadelphia, Baltimore, Miami, New Orleans,Tampa and Houston. Ziggo (Dutch Cable) was formed by thecombination of three of the four largest cable operators in theNetherlands. The group is the incumbent analogue televis ionprovider to some 3.3 mil l ion homes, approximately 55% of al lDutch households , and a lso provides broadband, te lephonyand digital TV services. OGF is the leader in the French funeralservices market. I ts posit ion is par t icular ly strong in the high-end segment of the market. The company provides a full scopeof services, from organization of burials and cremations, to themanufactur ing of coff ins (French leadership) and the sel l ingof pre-need funera l contracts through i ts large network , orpar tnerships with banks or insurance companies. Spie is thesecond largest provider of mult i - technical contract ing servicesin France (12% market share behind Vinci) . I ts main act iv i ty

Distribution of value in Top 20 2008 vs. 2007

Comparison Top 20 by Maturity 2008 vs. 2007

Comparison Top 20 2008 vs. 2007 by Industry

2008 2007 adjusted for currency dif ferences

10

MANAGEMENT REPORT

i s the provis ion of e lect r ica l , heat ing vent i la t ion and a i r condit ioning (“HVAC”) and mechanical engineering to a widerange of industr ial , commercial and public sector customers.Mater Private Healthcare is Ireland’s leading special ist privatehospital , located in Dublin. I t was establ ished by the Sisters ofMercy in 1986 on a s i te adjacent to the Mater Miser icordiaeUniversity Hospital , one of Ireland’s leading academic teachinghospi ta ls , provid ing Mater wi th access to high-qual i ty con-sultants and medical staff . Mater provides a range of medicalspecial ty services and is considered a centre of excel lence forcardiac and cancer re la ted procedures . Applus is Spain’s leading inspect ion, cer t i f i cat ion, and technologica l ser v icescompany, operat ing g lobal ly through four d iv is ions; Auto Vehicle Inspect ion, Inspect ion and Technical Assistance, Engi-neering, Test ing and Cer t i f icat ion, and Non-Destruct ive Testsand Inspect ions . Last ly , Hygenic , based in Akron, Ohio, i s a leading des igner , manufacturer , and marketer of wel l knowbranded, consumable products to therapy, rehabi l i tat ion, andwellness markets.

There are ten companies dropping out of the Top 20 thisyear with two due to ful l e xi ts , one from a return of capital ,and the rest related to per formance and the overal l weak eco-nomic environment. The two exits were Suomen Asiakastietoand Universal Studios Escape . Suomen As iakast ie to is the leading business and credit information company in Finland.GMT Communicat ions Par tners I I I announced the sale of Suo-men Asiakast ieto in Apri l 2008 and returned more than EUR 6mil l ion to the Group in May. Universal Studio Escape, consists of the two theme parks, Universal Studios Florida and Is landsof Adventure , Ci tyWalk , a d in ing, reta i l and enter ta inment complex, and Universal Studios Florida, a movie- based themepark. In February 2008, the Group sold i ts holding – a longstanding top 20 company with initial investment taking place in2000. I-Med Holdings ( formal ly known as DC A Group) hasdropped out of the Group’s top 20 as a result of the sale of

their “Aged Care” business and thus a return of capital . I -MedHoldings is Austral ia’s largest private diagnost ic imaging net-work and was held trough CVC European Equity Par tners IV,CVC European Equity Par tners Tandem Fund and CVC CapitalPar tners Asia Paci f ic I I . Capmark , a global ly divers i f ied com-pany that provides a broad range of f inancia l ser v ices to investors in commercia l rea l estate-re la ted assets , was theGroup’s largest s ingle investment at the end of 2007. Due tothe decline in the financial markets it had a challenging year in2008 and dropped f rom the Top 20 a l together. EMI , a por t -fo l io company of Terra F i rma Investments I I I , i s one of theworld’s largest music companies. 2008 was a tough market thatwas not favorable to the recorded music industry and after avaluat ion adjustment, in spite of sat isfactory operat ional per-formance, EMI dropped out of the Top 20. Hertz , the world’slargest genera l use car renta l company, which is publ ica l ly l i s ted, e xper ienced a s igni f icant drop in share pr ice (–68%)due to weak g lobal equi ty markets in the four th quar ter. Primesight i s a leading outdoor media owner of var ious sheets, backlight bil lboards and exclusive adver tising contracts.In October there was a return of capi ta l f rom br idge f inan-cing. This, coupled with the valuat ion adjustment resulted in Primesight fal l ing out of the Top 20. Freescale Semiconductor ,a global designer, manufacturer , and marketer of broad l inesemiconductors, was reduced in value due to general weaknessin the semiconductor business dur ing 2007 and a reduct ion in orders f rom i ts pr imary customer, Motorola . PBL Media , Austra l ia ’s largest d ivers i f ied media company, a lso droppedfrom the Top 20 due to valuat ion adjustments fol lowing weakoperat ing per formance. Hema dropped of f the l i s t a f ter a secondary sale of 50% of the Group’s holding in Lion CapitalI I brought the value of the investment down.

Outlook

The majori ty of the company’s top 20 investments per formedaccording to their business plan, while some suffered set-backsas they are act ive in industr ies that feel the impact of a re-cession early in the cycle. Three of the top twenty investmentsat the end of 2007 were e x i ted dur ing 2008, provid ing theCompany with substantial distributions and capital gains. Whilewe do not ant ic ipate s igni f icant exi t act iv i ty through at leastthe f irst half of 2009 (i f not considerably longer), a number oftop 20 investments are wel l posit ioned for exi ts when marketsstabi l ize.

11

MANAGEMENT REPORT

TOP 20 INVESTMENTS *Fair Value Percentage

Investment Date Portfolio Company (CHF million) of NAV Type Sector 1 Geography

1 July 2005 Geoservices 14.1 3.9% Buyout Energy Global

2 May 2007 Kinder Morgan 14.1 3.9% Buyout Energy North America

3 June 2006 Thomas Nelson Publishing 13.2 3.6% Buyout Communications North America

4 Jan. 2007 Knowledge Universe Education 10.3 2.9% Buyout Services Global

5 May 2005 Numéricâble 7.0 2.0% Buyout Communications Europe

6 Sept. 2007 HD Supply 6.5 1.8% Buyout Services North America

7 Jan. 2007 Maxam 6.2 1.7% Buyout Industrial Products Europe

8 June 2006 The Nielsen Company (VNU) 6.0 1.7% Buyout Services Global

9 March 2007 Foodvest 5.1 1.4% Buyout Consumer Europe

10 Feb. 2008 Ersol Thin Film 5.1 1.4% Buyout Industrial Europe

11 Nov. 2007 Ports America 5.0 1.4% Buyout Services North America

12 April 2007 Ziggo (f.k.a. Dutch Cable Conglomerate) 5.0 1.4% Buyout Communications Europe

13 July 2008 Rhythm 4.7 1.3% Buyout Consumer North America

14 Oct. 2007 OGF 4.6 1.3% Buyout Services Europe

15 July 2006 Spie 4.5 1.2% Buyout Services Europe

16 Dec. 2007 Mater Private Healthcare 4.5 1.2% Buyout Medical/Health Europe

17 July 2006 Acosta 4.1 1.1% Buyout Services North America

18 Oct. 2007 Ethypharm 4.0 1.1% Buyout Medical/Health Global

19 Nov. 2007 Applus 3.8 1.1% Buyout Services Europe

20 April 2007 Hygenic 3.8 1.1% Buyout Medical/Health North America

Total Fair Value Top 20 Holdings 131.6 36.5%

1 EVCA Definition

* Taking secondary transactions into account that were concluded in 2009

12

MANAGEMENT REPORT

www.geoservices .com

Geoservices is an upstream oi l f ield services company, worldleader on the Mud Logging market with a clear focus on com-plex and offshore projects and the second largest player onthe Wel l Inter vent ion (S l ick l ine) market . Geoserv ices a lso operates on the F ie ld survei l lance market . Company head-quar ters are located near Par is , France. A lmost 100% of i tsbusiness act iv i ty takes place outs ide France on a wor ldwidebas is in at least 50 di f ferent locat ions spread over a l l con-t inents . Geoservices employs over 4 000 people of some 60different nat ional i t ies.

www.kne.com

Kinder Morgan is a leading pipel ine transpor tat ion and energystorage company in Nor th America. Kinder Morgan owns an interest in or operates more than 26 000 miles of pipelines and170 terminals . I t s p ipel ines t ranspor t natura l gas , gasol ine,crude oi l , CO2 and other products , and i ts terminals s tore petroleum products and chemicals and handle bulk materialsl ike coal and petroleum coke.

www.knowledgeu.com

Knowledge Universe Educat ion (KUE) is a leading g lobal educat ion company ser v ing a wide range of s tudents , f rom infants and toddlers to primary and secondary students. TheCompany operates approx imately 1 900 centers in the U.S . ,roughly double the nearest competitor. KUE also offers beforeand after-school tutoring services at approximately 700 schoolsites and an on-l ine education business through its KnowledgeLearning Corporat ion subsid iar y. KUE a lso owns a minor i tystake in k12, a leading operator of web-del ivered curr iculumfor “vir tual char ter schools.”

www.thomasnelson.com

Fai th Media Holdings , LLC, i s a company formed by Inter-Media Advisors to acquire the control l ing interests in ThomasNelson Media , Inc . (“TNM”) and The Gospel Music Channel(“GMC”). TNM is the leading publ isher of Christ ian-or ientedfict ion and non-fict ion books, Bible reference books, and trans-lat ions of the Christ ian Bible. TNM also sel ls secular t i t les tomainstream commercia l markets . GMC is the f i rs t adver t isersuppor ted cable network dedicated to gospel music.

1

2

3 4

13

www.numericable . f r

Numéricâble is the result of a consol idat ion of several cableoperators . The new ent i ty covers 9 mi l l ion households and al l of the largest French urban areas. I t offers a ful l range ofanalogue and dig i ta l pay T V, internet broadband (up to 100Mega) and telephony services. Completel which was acquiredin September 2007, is the third largest business to businessinfrastructure-based telecommunications operator in France. I thas both a nat ional backbone and a DSL network wi th 600 exchanges covering 110 ci t ies in France.

MANAGEMENT REPORT

www.maxam-corp.com

Founded in 1872 by Al f red Nobel , Maxam is a Spanish indu-str ial group with production centers in over 20 countr ies andcommercia l presence in more than 90 countr ies . Maxam is the leader in the development, manufacture and sale of civi le xplosives and ini t iat ion systems for the mining, quarry and infrastructure industr ies in addit ion to a leading producer ofhunting car tr idges and powders for spor t ing use, and demil i -tar izat ion serv ices . Fur thermore, Maxam is a key suppl ier ofraw mater ia ls to the Nitrochemical sector , both for Maxam’s internal needs and for sale to third par t ies.

www.hdsupply.com

HD Supply is one of the largest and most diversif ied wholesaledistr ibutors in the U.S. and Canada, providing top qual i ty pro-ducts and value-added services to professional customers inthe Infrast ructure and Energy , Maintenance, Repair and Im-provement and Specialty Construction markets. The company’spor tfol io of industry- leading businesses special izes in del iver-ing supplies and services to a wide range of customers, with a focus on contractors , bui lders , maintenance profess ionals , government and municipal enti t ies and industr ial businesses.Hal f of the company’s businesses have earned leading posi-t ions in the markets they serve.

5

6

7

2

AIG PR IVATE EQUIT Y GROUP – CONSOLIDATED F INANCIAL STATEMENTS 2008

14

MANAGEMENT REPORT

www.nielsen.com

The Nielsen Company is a global information and media com-pany with leading market posit ions in marketing and consumer

8

www.ersol .de

Ersol Thin Fi lm GmbH, a subsidiary of ersol Solar Energy AG,is a thin f i lm producer of solar modules based on amorphousand microcrystal l ine si l icon. The Thin Fi lm technology is anti-cipated to win significant market shares within the photovoltaicmarket by both allowing for market expansion on the one handand by par t ia l ly subst i tut ing the e x is t ing cr ysta l l ine P V pro-ducts . One major reason for this market development is thereduced requirement for rare s i l icon supply in the th in f i lmtechnology with perspect ives of increasing i ts eff ic iency.

10

www.portsamerica .com

Por ts America provides independent mar ine terminal oper-at ions to container shipping companies, rol l -on/ rol l -off ship-pers, cruise l ines and general cargo and stevedoring services at23 locat ions along the Atlantic and Gulf Coasts including NewYork, New Jersey, Philadelphia, Baltimore, Miami, New Orleans,Tampa and Houston.

11

www.foodvest .co .uk

Foodvest is one of the largest food groups in Europe. Foodvestis a UK registered business and was created in 2006 with themerger of Young’s Seafood in the UK and Findus in Sweden.Today the business is run by a s ingle management team.Young’s Seafood is based in Grimsby, England. Young’s is theUK’s leading seafood producer, with a 40% share of both thefrozen and chi l led seafood market. Findus is based in Malmo,Sweden. Findus is the leading frozen food brand in Sweden,Norway, F in land and France. F indus produces a wide range of products inc luding seafood, vegetables , ready meals andfrozen bakery products.

9

information, televis ion and other media measurement, onl ineintel l igence, mobile measurement, trade shows and businesspublications (Bil lboard, The Hollywood Reporter, and Adweek).The company is act ive in approx imately 100 countr ies , wi thheadquar ters in New York.

15

MANAGEMENT REPORT

www.ziggo.nl

Dutch Cable (since rebranded as Ziggo), is the market leadingcable T V operator in the Netherlands, and was created in 2006through the acquisi t ion of three exist ing cable operators witha combined value of EUR 5.45 bi l l ion.

www.guitarcenter.com

Guitar Center is the leading musical instrument retai ler and isapproximately four t imes the size of i ts largest competitor. TheCompany operates through three business units: Guitar Cen-ter Reta i l Stores (214 reta i l s tores) , Direct Response (onl ineand catalog businesses), and Music & Ar ts (97 stores providingrental band and orchestra equipment).

12

13 R H Y T H M

www.pfg. fr

OGF is the leader of the French funeral services market, withan approximate 2006 market share of 25% in value, and 23%in volumes. I ts posit ion is par t icular ly strong in the high endsegment of the market. The company provides a ful l scope ofservices, from organizat ion of burials and cremations, to themanufactur ing of coff ins (French leadership) and the sel l ingof pre-need funera l contracts through i ts large network , orpar tnerships with banks or insurance companies.

14

Ziggo was created f rom the combinat ion of Kabelcom, Casema and Mult ikabel , which were respect ively the second,th i rd and four th largest cable operators in the Nether lands. Together, the businesses provide cable to over half of all Dutchhouseholds. In 2006, they generated revenues of EUR 989 mil-l ion from 3.3 mil l ion subscribers.

www.spie .eu

Spie is the second largest provider of mul t i - technica l con-tract ing services in France. I ts main act iv i ty is the provision ofelectr ical , heating venti lat ion and air condit ioning and mecha-nical engineering to a wide range of industrial, commercial andpublic sector customers. In addit ion, Spie has developed spe-c ia l i sed business uni ts cover ing Oi l and Gas ser v ices , Com-municat ions and Nuclear act iv i t ies . I t i s a lso act ive outs ideFrance through subsid iar ies in Benelux , Morocco, Germany,Spain and Por tugal . Spie has revenues of around EUR 3.6 bi l -l ion and over 29 000 employees.

15

www.materprivate. ie

Mater Private Healthcare (“Mater”) is Ireland’s leading specia-l ist private hospital , located in Dublin. I t has 202 beds, 5 oper-at ing theatres ( increasing to 7 this year) , 178 special is t con-

16 sultants and over 700 staf f . I t was establ ished by the Sisters of Mercy in 1986 on a si te adjacent to the Mater MisericordiaeUniversity Hospital , one of Ireland’s leading academic teachinghospi ta ls , provid ing Mater wi th access to high-qual i ty con-sultants and medical staff . Mater provides a range of medicalspecial ty services and is considered a centre of excel lence forcardiac and cancer related procedures.

16

MANAGEMENT REPORT

www.ethypharm.com

Ethypharm is one of the world’s leading drug del ivery systems(DDS) companies that provide a range of effect ive solut ionsto opt imize the del iver y of pharmaceut ica l products . The use of Ethypharm’s DDS technologies del ivers impor tant benef i ts inc luding improving the drug’s ef f icacy , enhancing pat ient compliance and comfor t , ex tending the l i fe cycles ofexist ing pharmaceutical products, and reducing the total costof t reatment . E thypharm has launched 50 products in over 70 countr ies.

18

www.acosta.com

Acosta, Inc. is the leading sales and marketing agency (“SMA”)serv ic ing consumer packaged goods (“CPG”) companies in the U.S. and Canada. I ts customer base comprises over 1 300cl ients and includes top t ier global food and beverage manu-facturers . Acosta has roughly 11 000 non-unionized sales as-soc iates deployed at 120 000+ reta i l locat ions to ser ve theGrocery Channel and Strategic Channels, which include mass/c lub, natura l/specia l ty , convenience s tores and drug s tores .Acosta generates revenues through sales commission fees paidby CPGs for in-store merchandising and retai l execut ion ser-vices as well as category management and headquar ter sel l ingservices.

17

www.applus.com

Headquar tered in Barcelona, Applus is Spain’s leading test ing,inspect ion and cer t i f icat ion company and no. 10 in the world,employing over 8 500 people and operat ing in over 25 marketsubsegments in 32 countr ies across 5 cont inents . Applus operates global ly through four divis ions; Auto Vehicle Inspec-t ion, Inspection and Technical Assistance, Engineering, Test ingand Cer t i f icat ion, and Non-Destruct ive Tests and Inspect ions.

19www.hygenic .com

The Hygenic Corporat ion is a leading designer, manufacturer,and marketer of branded, consumable products sold to the-rapy, rehabi l i tat ion, and wellness professionals under the wellknown Thera-Band® and Bio-Freeze® brand names. The Com-pany’s core products inc lude res is tance bands and tubing, topical analgesics, and a broad range of therapy and exerciseproducts used by physical therapists, chiropractors, podiatrists,physical trainers and massage therapists to promote streng th,f lexibi l i ty , and provide pain rel ief for their pat ients.

20

F I NANC IAL R E PORT 2008

20


CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 2008 AND DECEMBER 31, 2007in TCHF

Note 2008 2007Assets

Current assets

– Cash and cash equivalents 2 14 930 26

– Derivat ive instruments 4 – 1 645

– Receivables and prepayments 5 345 1 826

Total current assets 15 275 3 497

Non-current assets

– Loans 1 14 049 18 655

– Investments held as avai lable-for-sale

Direct Investments 1 43 864 101 788

Funds 1, 17 562 891 685 997

Contractual agreements 1, 16 – 41 425

Total non-current assets 620 804 847 865

Total Assets 20 636 079 851 362

Liabilities and Shareholders’ EquityCurrent Liabi l i t ies

– Payables and accrued charges 6 9 479 24 008

– Loans 7 101 947 107 954

– Deferred tax l iabi l i ty 13 – 145

Total current liabilities 111 426 132 107

Preferred shares 7 163 714 –

Total liabilities 275 140 132 107

Shareholders’ Equity

– Share capital 412 500 412 500

– Share capital premium 149 090 149 116

– Treasury stock (at cost) (30 691) (27 847)

– Reserve for stock option plan 18 – 182

– Total Revaluat ion reserve 10 (56 574) 26 772

– Accumulated surplus 158 532 77 948

– Net profi t for the period (271 918) 80 584

Total Shareholders’ Equity 360 939 719 255

Total Liabilities and Shareholders’ Equity 636 079 851 362

Net asset value per shareNumber of shares outstanding at year-end 8 3 929 185 3 949 027

Net asset value per share ( in CHF) 91.86 182.13

The accompanying notes on pages 24 to 52 form an integral par t of these consol idated f inancial statements.

21


CONSOLIDATED INCOME STATEMENT FOR THE PER IOD JANUARY 1 TO DECEMBER 31, 2008 AND JANUARY 1 TO DECEMBER 31, 2007in TCHF

Note 2008 2007Income

Interest income from non-current assets 12 3 268 11 130

Dividend income from non-current assets 12 352 3 165

Net real ized gains on investments 12 16 124 112 053

Interest income from current assets 80 671

Net gain on derivat ive instruments – 2 642

Total Income 20 19 824 129 661

ExpensesManagement fees 14 (11 595) (14 205)

Per formance fees 14 – (13 049)

Service fees 14 (404) (409)

Write-down of non-current assets 11 (223 015) (10 144)

Other operat ing expenses (4 534) (2 764)

Interest expense from loans (7 963) (1 898)

Dividend expense on preferred shares (3 811) –

Net loss on foreign currency exchange (39 616) (5 718)

Net loss on derivat ive instruments (266) –

Total Expenses (291 204) (48 187)

Income before tax expense (271 380) 81 474

Tax expenses 13 (538) (890)

Net profit for the period (271 918) 80 584

Earnings per shareWeighted average number of shares outstanding during the period 9 3 945 028 3 927 921

Net profi t/( loss) per share ( in CHF) – basic 9 (68.93) 20.52

Net profi t/( loss) per share ( in CHF) – di luted 9 (68.93) 20.49


22


CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE PER IOD JANUARY 1 TO DECEMBER 31, 2008 AND JANUARY 1 TO DECEMBER 31, 2007in TCHF

Note 2008 2007Cash Flows from Operating Activities

Purchase of non-current assets * 1 (281 658) (413 270)

Proceeds from return of invested capital in non-current assets * 1 166 125 146 121

Interest income received from current assets 80 673

Net interest income from non-current assets 12 3 432 13 193

Dividends received from non-current assets 12 352 3 165

Net real ized gains on investments 12 9 390 110 863

Proceeds from derivat ive instruments 1 378 1 942

Operat ing costs (4 910) (3 892)

Management & Per formance fees 14 (24 261) (14 662)

Total Cash Flows from Operating Activities (130 073) (155 867)

Cash Flows from Financing ActivitiesProceeds from loans 67 177 107 954

Repayment of loans (68 641) –

Interest paid on l ine of credit (8 057) (1 586)

Proceeds from issuance of preferred shares 157 618 –

Treasury share purchase (5 350) –

Treasury share sale 2 104 8 454

Total Cash Flows generated by/(used in) Financing Activities 144 851 114 822

Foreign Exchange Effect 126 3 892

Increase (decrease) in Cash and Cash Equivalents 14 904 (37 153)

Cash and Cash Equivalents as of January 1 2 26 37 179

Cash and Cash Equivalents as of December 31 2 14 930 26

* The dif ferences to the totals shown in note 1 are explained by currency effects and distr ibution in kind in respect to the unwinding of the contractual agreements


23


STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUIT Y AS OF DECEMBER 31, 2008

AND DECEMBER 31, 2007in TCHF

Share Share Less Reserve Revaluation Accumulated Total

Capital Capital treasury for stock Reserve Surplus Equity

Premium stock option (Deficit)

(at cost) plan

Shareholders’ EquityBalance January 1, 2007 412 500 148 770 (36 207) 156 22 679 77 948 625 846

Transaction in reserve for stock option plan 26 26

Value increase on investments 20 078 20 078

Value decrease on investments due to currency differences (15 985) (15 985)

Transaction in treasury shares 346 8 360 8 706

Total of results included in shareholders’ equity 346 8 360 4 093 12 825Net profit for the period 80 584 80 584

Total Result 346 8 360 26 4 093 80 584 93 409

Total Shareholders’ Equity as of December 31, 2007 412 500 149 116 (27 847) 182 26 772 158 532 719 255

Balance January 1, 2008 412 500 149 116 (27 847) 182 26 772 158 532 719 255Transaction in reserve for stock option plan (182) (182)

Value decrease on investments – – (96 254) (96 254)

Value increase on investments due to currency differences – – 12 908 12 908

Transaction in treasury shares (26) (2 844) – (2 870)

Total of results included in shareholders’ equity (26) (2 844) (83 346) (86 216)Net profit for the period – – (271 918) (271 918)

Total Result (26) (2 844) (83 346) (271 918) (358 134)

Total Shareholders’ Equity as of December 31, 2008 412 500 149 090 (30 691) – (56 574) (113 386) 360 939


24


CORPORATE INFORMATION

AIG Private Equity Ltd. , Zug (“the Company”) is a Swiss stockcorporat ion establ ished under the relevant provis ions of theSwiss Code of Obligations and domiciled in Zug. The Company,together wi th AIG Pr ivate Equi ty (Bermuda) Ltd . and APENFaith Media Holdings LLC (“the Subsidiar ies”), comprises theAIG PE Group (“the Group”). The Company’s shares are l istedon the SIX Swiss E xchange.

The Company’s investment object ive is to achieve longterm capi ta l growth for shareholders by invest ing in pr ivateequity funds. The Company may also make direct investmentsin operat ing companies . A l though the Company may invest directly in fund investments or companies, it is anticipated thatinvestments wil l general ly be made through the Subsidiar ies.

The Company’s Board of Directors is responsible for thepolicies and management of the Company as well as valuationsand the appointment of the investment committee. The sub-s id iar y ’s investment commit tee is responsib le for assess ing the investment oppor tunit ies presented by the manager andthe investment advisor and subsequently making investmentrecommendat ions to the Bermuda Board of Directors for approval . As of December 31, 2008 the Company par t ial ly em-ployed one employee (2007: one) . For informat ion on theGroup’s management p lease refer to Note 14, Managementand Advisory Agreement.

The consol idated f inancia l s tatements are author ized forissue on Apri l 29, 2009 by the Board of Directors. The annualgeneral meeting cal led for June 2, 2009 wil l vote on the f inalacceptance of the consol idated f inancial statements.

ACCOUNTING POLICIES

Basis of preparationThe accompanying consol idated f inancia l s ta tements of theGroup for the year ended December 31, 2008 have been pre-pared in accordance wi th Internat ional F inancia l Repor t ingStandards (IFRS) formulated by the Internat ional AccountingStandards Board (IASB), and comply with Swiss Law and theaccounting provisions of the addit ional rules for the l ist ing ofinvestment companies of the SIX Swiss E xchange.

In prepar ing these f inancia l s tatements management as -sumed the use of the going concern assumption to be appro-priate. The appropriateness of that assumption is disclosed innote 15 (l iquidity r isk).

The consol idated f inancial statements are prepared underthe historical cost convention, except that investments avai l -able- for-sa le and der ivat ive f inancia l inst ruments are s tated at their fair value as disclosed in the accounting pol ic ies here-after.

Basis of consolidationThe consol idated f inancia l s ta tements of the Group inc ludeAIG Private Equity Ltd. and the companies that i t controls. Thiscontrol i s normal ly ev idenced when the Group owns, e i ther direct ly or indirect ly , more than 50% of the voting r ights of acompany’s share capi ta l or i t i s able to govern the f inancia land operating policies of an enterprise so as to benefit from itsactivit ies. Consolidated financial statements are prepared usinguni form account ing pol ic ies for l ike t ransact ions and otherevents in similar circumstances. Subsidiar ies are consol idatedfrom the date on which effect ive control is transferred to theGroup and are no longer consol idated from the date that con-trol ceases. The consolidation is per formed using the purchasemethod. Al l intercompany transact ions and balances are el i -minated. Al l Group companies have a December 31 year end.The scope of consol idat ion current ly inc ludes AIG Pr ivateEqui ty (Bermuda) Ltd . and APEN Fai th Media Holdings LLC,which both are owned 100% by the Company.

NOTES TO THE CONSOLIDATED F INANCIAL STATEMENTS

AIG Pr ivate Equi ty Ltd .

AIG Pr ivate Equi ty (Bermuda) Ltd .

APEN Fai th Media Holdings LLC

100% 100%

25


• The investments of the Group are held as par t of theGroup’s por t fo l io sole ly for the purpose of capi ta l ga insupon sale in the near future.

• As of December 31, 2008 the Group holds ownership in-terests of 20% or more in AIG Hor izon Par tners Fund(36.57%; 20.50% inc luding s ide-by-s ide vehic le ; 2007:36.57%; 20.50% including side-by-side vehicle). Accordingto the l imi ted par tnership agreement of th is fund, theGroup does not have the power to par t ic ipate in the f inancial and operat ing pol icy of the fund. Therefore, thisinvestment is excluded from equity accounting.

Significant accounting judgments and estimatesThe preparat ion of f inancial statements requires managementto make est imates and assumptions that af fect the repor tedamounts of assets and l iabi l i t ies and disclosure of contingentassets and l iabi l i t ies at the date of the f inancia l s ta tements and the repor ted amounts of revenues and expenses duringthe repor t ing per iod. Actual resul ts could di f fer f rom thoseest imates.

The areas involving a higher degree of judgment or com-plexity, or areas where assumptions and est imates are signif i -cant to the f inancial statements are the fol lowing:

• Fair value of f inancial instrumentsThe fair value of f inancial instruments that are not tradedin an active market are determined by using valuation tech-niques. The Group uses i ts judgment to select a variety ofmethods and make assumptions that are not always sup-por ted by observable market pr ices or rates . The use of valuat ion techniques requires management to make est i -mates. Changes in assumptions could affect the repor tedfair value of these investments. The carry ing amounts ofinvestments for which fair values were determined usingvaluat ion techniques amounted to CHF 539.0 mi l l ion(2007: CHF 691.6 mil l ion).

• Share-based paymentsThe Group measures the cost of equity-sett led transactionswith management by reference to fair value of the equityat the date at which they are granted. Est imating fair valuefor share-based payments requires determining the mostappropriate valuat ion model for a grant of equity instru-ments, which is dependent on the terms and condit ions ofthe grant. This also requires determining the most appro-priate inputs to the valuation model including the expectedl i fe of the option, volat i l i ty and dividend yield and makingassumptions about them. The assumptions and model usedfor est imat ing fa i r va lue of share-based payments are

disclosed under “share-based compensation plans” (page30) . The carr y ing amounts of share-based payments forwhich fair values were determined using valuation techniquesamounted to TCHF 0 (2007: TCHF 182).

• ImpairmentManagement per forms an impairment assessment quar terlyto assess prolonged or s ignif icant decl ines in fair value onf inancia l assets avai lable for sa le . Management uses i ts judgement to determine which investments are consideredto be impaired. Changes in assumptions used could affectthe amount of impairments repor ted.

Change in accounting policiesThe accounting pol ic ies adopted are consistent with those ofthe previous f inancial year except as fol lows:

The following interpretation to published standards is man-datory for accounting periods beginning on or after 1 January2008. Adoption of these revised standards and interpretat ionsdid not have any effect on the f inancial per formance or posi-t ion of the Group:• IFR IC 12, ‘Service concession arrangements’ ; and• IFR IC 11, ‘ I FRS 2 – Group and treasury share transact ions’• IFRIC 14, ‘IAS 19 – The limit on a defined benefit asset, mini-

mum funding requirements and their interact ion’ ,• IAS 39 (amended), ‘Financial Instruments: Recogit ion and

Measurement’ .

Summary of significant accounting policiesForeign Currency Transactions– Functional and presentat ion currencyThe group’s investments are mainly held in foreign currenciesdif ferent from the presentat ion currency. Therefore, proceedsfrom these investments are also received in foreign currencies.Investments are general ly held in the Subsidiar ies which areaccounted for in USD. Fur ther, per formance management andcash f low project ions are based on investment currency (pri-mari ly USD and EUR). Accordingly, the Board of Directors con-siders the USD as the currency that most fai thful ly representsthe economic ef fects of the under ly ing t ransact ions , eventsand condit ions of the Group, and the USD is considered to bethe funct ional currency of the Company and i ts subsidiar ies.The presentat ion currency of the f inancial statements is CHF.

26


– Transact ions and balancesForeign currency transactions are translated into the functionalcurrency using the exchange rates prevai l ing at the dates ofthe transact ions. Foreign exchange gains and losses result ingfrom the sett lement of such transact ions and from the trans-la t ion at year-end exchange rates of monetar y assets and l iabi l i t ies denominated in fore ign currencies are recognized in the income statement. Translat ion dif ferences on monetaryitems, such as derivat ives held at fair value through profi t orloss, are repor ted as par t of the fair value gain or loss. Trans-la t ion di f ferences on non-monetar y i tems, such as equi t iesclassi f ied as avai lable-for-sale f inancial assets, are recognizedin equity (reserve from foreign currency translat ion).

– Translat ion to presentat ion currencyThe resul ts and f inancia l pos i t ions of Group companies aretranslated from the funct ional currency into the presentat ioncurrency as fol lows:

• assets and l iabi l i t ies for each balance sheet presented aretranslated at the c los ing rate at the date of that balancesheet;

• income and expenses for each income statement are trans-lated at effect ive exchange rates; and

• al l resul t ing e xchange di f ferences are recognized as a separate component of equity.

Cash and Cash EquivalentsCash includes cash on hand and cash with banks. Cash equi-valents are shor t-term, highly l iquid investments that are rea-di ly conver t ib le to known amounts of cash wi th or ig inalmaturi t ies of three months or less, and that are subject to aninsignificant risk of change of value. Cash and cash equivalentsare recorded at nominal value.

Financial Instruments – Initial recognition and subsequent measurement– Financial assets – Init ia l recognit ionFinancial assets within the scope of IAS 39 are classi f ied as f i -nancial assets at fair value through profit or loss, loans and re-ceivables , held- to-matur i ty investments or avai lable for sa leassets. The Group determines the classi f icat ion of i ts f inancialassets at ini t ia l recognit ion.

Financial assets are recognized init ial ly at fair value plus, inthe case of investments not held at fa ir value through prof i tor loss, direct ly attr ibutable transact ion costs.

Purchases or sales of f inancial assets that require del iveryof assets within a t ime frame establ ished by regulat ion or con-vention in the marketplace (regular way purchases) are recog-nized on the set t lement date , i .e . , the date that the Groupcommits to purchase or sel l the asset . The Group’s f inancialassets include cash and shor t-term deposits , trade and otherreceivables, loan and other receivables, quoted and unquotedfinancial instruments, and derivat ive f inancial instruments.

Financial assets – Subsequent measurementThe subsequent measurement of f inancial assets depends ontheir c lassi f icat ion as fol lows

• Loans and receivables Al l loans and receivables are subsequent ly measured atamor t ized cost using the effect ive interest method. Gainsand losses are recognized in the consol idated incomestatement when the loans and receivables are derecogni-zed or impaired, as wel l as through the amor t izat ion pro-cess.

• Avai lable-for-sale f inancial assets Available-for-sale f inancial assets are subsequently re-mea-sured at fair value with unreal ized gains or losses recogni-zed direct ly in equity unti l the investment is derecognizedor determined to be impaired, at which t ime the cumula-t ive gain or loss recorded in equity is recognized in the in-come statement.

Direct Investments and Fund InvestmentsUnder IAS 39, the Group has designated al l i ts investmentsand secur i t ies as avai lable- for-sa le . This category was chosen as the most appropriate for an investment companyas the Group manages net asset value. An investment, in-c luding contractual agreements , is recognized where theGroup deems i t probable that future economic benef i ts associated with an investment wil l f low to the enti ty , and i t has a cost or value that can be measured rel iably. Thefuture economic benef i t of an investment is i ts potent ia lto contr ibute, direct ly or indirect ly, to the f low of cash andcash equivalents to the enti ty. Al l purchases and sales ofinvestments are recognized when the capital is cal led or adistr ibut ion is received. Cost of purchase includes trans -act ion costs . Interest income and div idend income is recognized in the income statement upon the receipt ofsuch dividends.

27


Contractual AgreementsOn December 22, 1999 the Group entered into three con-tractual agreements with American International Group Inc.that enti t le the Group to receive payments equal to a prorata share of al l distr ibutions from a specif ied l ist of funds,whi le obl i gat ing the Group to make payments equal to apro rata share of al l draw-downs of committed capital tothe same underlying funds. Interest income, dividends andcapital gains relat ing to the contractual agreement are re-cognized in the income statement on a monthly basis whencash is received f rom the counterpar ty. The contractualagreements were wound-up in 2008.

• Financial assets at fair value through profi t or loss Financial assets at fair value through profi t or loss includefinancial assets held for trading and f inancial assets desi-gnated upon init ia l recognit ion at fair value through profi tor loss. Financial assets are classi f ied as held for trading i fthey are acquired for the purpose of se l l ing in the nearterm. This category inc ludes der ivat ive f inancia l inst ru-ments entered into by the Group. Financial assets at fa irva lue through prof i t and loss are carr ied in the balancesheet at fair value. Changes in the fair value of derivat ivef inancial instruments are recorded into the income state-ment.

• Derivat ive Financial InstrumentsThe Company enters into foreign exchange forwards or op-t ion contracts to par t ial ly macro-hedge i ts net exposure inprivate equity investments denominated in foreign curren-cies. These derivative f inancial instruments are held by theCompany and i ts Subsidiar ies.

Financial liabilities – Initial recognitionFinancial l iabi l i t ies within the scope of IAS 39 are classi f ied asf inancia l l iabi l i t ies at fa i r value through prof i t or loss , loansand borrowings, or as der ivat ives des ignated as hedging in-struments in an effective hedge, as appropriate. The Group de-termines the c lass i f icat ion of i ts f inancia l l iabi l i t ies at in i t ia lrecognit ion. Financial l iabi l i t ies are recognized init ia l ly at fairvalue and in the case of loans and borrowings, direct ly attr i -butable transact ion costs.

The Group’s f inancia l l iabi l i t ies inc lude t rade and otherpayables, bank overdraft , loans and borrowings and derivat ivef inancial instruments.

Financial liabilities - Subsequent measurementThe measurement of f inancial l iabi l i t ies depends on their c las-si f icat ion as fol lows:

• Financial l iabi l i t ies at fair value through profi t or lossFinancial l iabi l i t ies at fair value through prof i t or loss in-clude f inancial l iabi l i t ies held for trading and f inancial l ia-bi l i t ies designated upon init ia l recognit ion as at fair valuethrough prof i t or loss . This category inc ludes der ivat ive f inancial instruments entered into by the Group. Gains orlosses on l iabi l i t ies held for trading are recognized in theincome statement . The Group has not des ignated any f inancial l iabi l i t ies as at fair value through profi t or loss.

• Loans and borrowingsAfter ini t ia l recognit ion, interest bearing loans and borro-wings are subsequently measured at amor t ized cost usingthe effect ive interest rate method. Gains and losses are re-cognized in the income statement when the l iabi l i t ies arederecognized as wel l as through the amor t izat ion process.Preference shares, which are mandatori ly redeemable ona specif ic date, are classi f ied as l iabi l i t ies.

Financial Instruments – DerecognitionA f inancia l asset i s derecognized i f , and only i f , the Group either transfers the contractual r ights to receive the cash f lowsof the f inancial asset , or i t retains the contractual r ights to re-ceive the cash f lows of the f inancial asset , but assumes a con-t ractual obl igat ion to pay the cash f lows to one or morerec ip ients , and in doing so t ransfers substant ia l ly a l l of therisks and rewards of the asset .

A f inancia l l iabi l i ty i s derecognized when the obl igat ionunder the l iabi l i ty is discharged, is cancel led or has expired.When an exist ing f inancial l iabi l i ty is replaced by another fromthe same lender on substantial ly dif ferent terms, or the termsof an exist ing l iabi l i ty are substantial ly modif ied, such an ex-change or modi f icat ion is t reated as a derecogni t ion of the original l iabi l i ty and the recognit ion of a new l iabi l i ty , and thedifference in the respect ive carrying amounts is recognized inthe income statement.

28


Financial Instruments – Determination of fair valueThe Group’s investments are pr imar i ly non-current f inancia lassets and market quotat ions are not readi ly avai lable, there-fore these investments are measured at their fair value usingthe most appropriate valuat ion techniques as described in de-ta i l below. The responsibi l i ty for determining the fa ir valuesl ies with the Board of Directors. Although general par tners offunds in which the Group invests and sponsors of the Group’sdirect investments provide valuations of these investments, noindependent ex ternal valuat ion of these investments was con-ducted. Al l fair valuat ions may dif fer s ignif icantly from valuesthat would have been used had ready markets existed. Suchdifferences could be material .

– Direct InvestmentsDirect investment valuations are reviewed on a quar terly basisby the investment advisor. The investment advisor uses infor-mation provided by the lead sponsor of the direct investment.Financial and market per formance is compared with budget in-format ion, data obta ined f rom compet i tors and subsequentrounds of f inancing. The Company reviews and discusses thevaluations with the investment advisor and may independentlyapply adjustments to determine the valuat ion. In determiningthe fair value of an unquoted direct investment, al l appropriateand applicable factors relevant to their value, including but notl imited to the fol lowing are considered:

• Venture capital investments:A new f inancing round that is material in s ize for the com-pany and having new, sophist icated inst i tut ional investorsmaking up a s igni f icant piece of the f inancing round. Aninside round of f inancing does not qual i fy.

• Buy-out/later stage investments for which subsequentrounds of f inance are not antic ipated:Once an investment has been held for one year, an analy-sis of the fair market value of the investments wil l be per-formed. This analysis wi l l typical ly be based on one of thefol lowing methods (depending on what is appropriate forthat par t icular company/industry):– Result of mult iple analysis;– Result of discounted cash f low analysis;– Reference to transact ion prices ( including subsequent

f inancing rounds);– Reference to the valuat ion of other investors;– Reference to comparable companies.

Based on a composite assessment of a l l appropriate andapplicable indicators of fair value, the Group determines thefair values as of the valuat ion date.

– Fund InvestmentsIn determining the fair value of fund investments, the Groupreviews the most recent repor t provided by the fund manager.The Group reviews the valuat ions and fol lowing year-end dis-cusses por t fo l io company per formance wi th each indiv idualfund manager. The fund managers determine fair values of theunder ly ing investments by us ing the same valuat ion techni -ques as for direct investments.

Investments in securit ies and in other f inancial instrumentst raded on recognized exchanges ( inc luding bonds, equi t ies , futures contracts , opt ions, and funds), are valued at the lastrepor ted bid price on the valuat ion date. Investments in secu-rit ies and in other f inancial instruments traded in the over-the-counter market and l i s ted secur i t ies for which no t rade isrepor ted on the valuat ion date are valued at the last repor tedbid and ask price for long and shor t posit ions, respect ively.

– Contractual AgreementsThe contractual agreements are va lued us ing the la test re-por ted net asset value available from the General Par tners andadding or subtract ing subsequent cash f lows.

– Derivat ive Financial InstrumentsFair va lues for der ivat ive f inancia l instruments are obta inedfrom quoted market pr ices, discounted cash f low models, oroption pric ing models as appropriate.

Financial Instruments – Impairment of financial assetsFinancia l inst ruments are rev iewed for impairment at each balance sheet date . For avai lable- for-sa le investments , the cumulat ive gain or loss prev ious ly recognized in equi ty is inc luded in net prof i t or loss for the per iod when there is object ive evidence that the asset is impaired.

An impairment is recorded when there is a s igni f icant (> 30%) or prolonged (> 1 year) decrease in fair value belowcost. Impairments are reflected in revaluation reserves (equity)and in the write-down of long-term assets (income statement).

The avai lable- for-sa le investments are categor ized intothree dis t inct categor ies . The appl icat ion of the impairment pol icy to the individual category of investments is appl ied asfol lows:

29


– Direct InvestmentsDirect investment valuations are reviewed on a quar terly basisby the investment advisor. Financial and market per formanceis compared with budget information, data obtained from com-peti tors and subsequent rounds of f inancing. In case of s igni-f icant deviat ions , va luat ions are adjusted to ref lect currentmarket va lues . I f a d i rect investment has had a fa i r marketvalue below cost for at least a year or in excess of 30%, i t wi l lbe deemed to be impaired and the cumulat ive loss previouslyrecognized in equity wil l be transferred to profit or loss for theperiod.

– Fund InvestmentsFunds where the Company is a direct l imited par tner wi l l bereviewed at each balance sheet date. I f a fund investment hashad a fair market value below cost for at least a year or in ex-cess of 30%, i t wi l l be deemed to be impaired and the cumu-lat ive loss previously recognized in equity wi l l be transferredto profi t or loss for the period.

– Contractual AgreementsAt each balance sheet date the reference funds are reviewedby the Company and investment advisor. I f a reference fundhas l iquidated al l of i ts por tfol io companies and is beyond i tsinvestment period, the Company wil l el iminate the referencefund from the contractual agreements and expense any resi-dual value through the profi t and loss accounts. Addit ional ly ,the Company wi l l inc lude the cumulat ive loss previously re-cognized in equi ty in net prof i t or loss for the per iod i f i tcomes to the conclusion that the future cash f lows of the con-tractual agreements wil l not cover i ts costs. Refer to Note 16for fur ther detai ls on the contractual agreements.

Net Asset Value per Share and Earnings per ShareThe net asset value per share is calculated by dividing the netassets included in the balance sheet by the number of par t ic i -pating shares outstanding at the repor ting date. Basic earningsper share are calculated by dividing the net prof i t attr ibutableto the ordinary shareholders by the weighted average numberof ordinary shares outstanding during the period. Diluted earn-ings per share are ca lculated by adjust ing the weighted average number of ordinary shares outstanding assuming con-version of al l di lut ive potential ordinary shares.

TaxesTax provisions are based on repor ted income. Taxes are calcu-lated in accordance with the tax regulat ions in force in eachcountry where the Group has investments.

– Swit zerlandThe Company is taxed as a holding company in the Canton ofZug. Income, including dividend income and capital gains fromits par t ic ipat ions, is exempt from taxat ion at the cantonal andcommunal level . For Swiss federal tax purposes, income tax atan effect ive tax rate of approximately 7.8% is levied. However,div idend income qual i f ies for the par t ic ipat ion exemption i fthe re lated investment represents at least 20% of the othercompany’s share capital or has a value of not less than CHF 2mi l l ion. The par t ic ipat ion e xempt ion is e x tended to capi ta lga ins on the sa le of a substant ia l par t ic ipat ion ( i .e . a t least20%), which was acquired after January 1, 1997, and was heldfor a minimum holding period of one year. The result of thepar t ic ipat ion exempt ion pursuant to the aforement ioned re-quirements is that d iv idend income and capi ta l ga ins are almost ful ly exempt from taxat ion. In cases where the par t ic i -pat ion exemption is not appl icable, a deferred tax l iabi l i ty wi l lbe calculated for Swiss federal tax purposes.

Provisions for taxes payable on profits earned in the Groupcompanies are calculated and recorded based on the applica-ble tax rate in Swit zerland.

– USAPEN Faith Media Holdings LLC is subject to income and capi-tal gains taxes in the US.

Tax expenses shown in the profi t and loss accounts repre-sent wi thholding taxes paid in var ious jur isdic t ions that theGroup can not rec la im and may inc lude direct taxes paid inSwit zerland or the US. Capital taxes charged to the Companyby the Canton of Zug are included in the operat ing expenses.

Shareholders EquityOrdinary shares are classi f ied as equity. Mandatori ly redeem-able preference shares are classi f ied as l iabi l i t ies . The trans-act ion costs of an equity transact ion, other than in the contex tof a business combination, are accounted for as a deductionfrom equi ty. Equi ty t ransact ion costs are comprised of onlythose incrementa l e x ternal costs d i rect ly a t t r ibutable to theequity transact ion, which would otherwise have been avoided.Equity is comprised of the fol lowing:

30


• Share capital and Share capital premiumRefer to Note 8 for a descript ion and fur ther detai ls on theshare capital and share capital premium.

• Treasury stockTreasury shares are presented in the balance sheet as a de-duction from equity. The acquisi t ion of treasury shares ispresented as a change in equity. No gain or loss is recog-nized in the income statement on the sa le , i ssuance, orcancel lat ion of treasury shares. Considerat ion received ispresented in the financial statements as a change in equity.

• Reserve for stock option planThe reserve for s tock opt ion plan is used to record thevalue of equity-sett led share-based payments provided toemployees, including key management personnel, as par tof their remunerat ion. Refer to Note 18 for fur ther detai lsof these plans.

• Revaluat ion reserveThe revaluation reserve includes the cumulative net changein fair value of avai lable-for-sale investments unti l the in-vestment is disposed of or is determined to be impaired.The translat ion reserve from currency revaluation includesdi f ferences due to fore ign currency t rans lat ion betweenpresentat ion and funct ional currencies . Refer to Note 10for fur ther detai ls to this posit ion.

Capital managementThe investment object ive of the Group is to achieve long-termcapi ta l growth for shareholders by invest ing in a divers i f iedpor tfol io of private equity funds and privately held companies.Refer to Note 8 for fur ther detai ls .

Segment reportingThe sole business segment of the Group is invest ing in privateequity, result ing in no primary segment disclosure. Therefore,the results published in this repor t correspond to the primarysegment-repor t ing format. The geographical analysis of assetsand income is disclosed in Note 20.

ContingenciesContingent l iabi l i t ies are not recognized in the balance sheet.They are disclosed unless the possibi l i ty of an outf low of re-sources embodying economic benefi ts is remote. A contingentasset i s not recognized in the balance sheet but d isc losedwhen an inf low of economic benefi ts is probable.

Share-based compensation plans– Stock option planThe Group operates an equity-sett led, share-based compensa-t ion plan. Costs for stock options granted to the managementare recognized in the income statement in quar terly amountsover the vest ing period star t ing from the grant date and en-ding at the beginning of the exercise period, so that the per-sonnel expenses show the fair amount of compensation paidby the Company to i ts management for their services rende-red. The amounts recognized as cost in the income statementare credited to “Reserves for stock option plan” in equity.

Cost is def ined as the fair market value of the options atgrant date. The fair market value is determined by using a re-cognized option pric ing model.

– Share appreciat ion r ights (SARs)In addit ion to the stock option plan the Group operates a cashset t led, share-based compensat ion plan. The correspondingliabil ity is re-measured at each balance sheet date to fair value,with changes recognized immediately in profi t or loss.

Future changes in accounting policiesThe fol lowing standards, amendments and interpretat ions toexist ing standards have been published and are mandatory forthe group’s accounting periods beginning on or after 1 January2009 or la ter per iods , but the group has not ear ly adoptedthem:

• IAS 1 amended, ‘Presentat ion of f inancia l s ta tements ’ (1 January 2009)

• IAS 23 amended, ‘Borrowing costs’ (1 January 2009)• IAS 27 Amendment, ‘Consol idated and separate f inancial

statements’ (1 July 2009)• IAS 32 and IAS 1 Amendment , ‘Put table f inancia l inst ru-

ments and obl igat ions ar is ing on l iquidat ion’ (1 January2009)

• IAS 39, Financial instruments: ‘Recognit ion and measure-ment − Amendments for e l ig ib le hedged i tems’ (1 Ju ly2009)

31


• IFRS 1 and IAS 27 Amendment, ‘Cost of an investment onfirst- t ime adoption’ (1 January 2009)

• IFRS 2 Amendment, ‘Vest ing condit ions and cancel lat ions’(1 January 2009)

• IFRS 3 Revised, ‘Business combinations and consequentialamendments’ (1 July 2009)

• IFRS 8, ‘Operat ing segments’ (1 January 2009)• IFR IC 13, ‘Customer loyalty program’ (1 July 2008)• IFR IC 15, ‘Agreements for the construct ion of real estate’

(1 January 2009)• IFR IC 16, ‘Hedges of a net investment in a foreign opera-

t ion’ (1 October 2008)• IFR IC 17, ‘Distr ibut ions of non-cash assets to owners ’ (1

July 2009)• IFRIC 18, ‘Transfers of assets from customers’ (1 July 2009) • Various amendments result ing from the May 2008 Annual

Improvements project (1. January 2009 or 1 July 2009):

The Group has not yet evaluated the impact of these changesin deta i l , however , the Group does not e xpect that thesechanges wil l have a signif icant impact on the f inancial posit ionor per formance of the Group. The changes wil l give r ise to ad-dit ional disclosures, including revis ions to accounting pol ic iesand wil l affect future transact ions.

32


AIG Fund PortfolioAIG Altar is Health Par tners I I , L .P.

AIG Blue Voyage Fund, L.P.

AIG Brazi l Special Si tuat ions Fund, L.P.

AIG Brazi l Special Si tuat ions Fund I I , L.P.

AIG Global Emerging Markets Fund I I , L.P.

AIG Global Spor ts & Enter tainment Fund, L.P.

AIG Highstar Capital , L.P.

AIG Highstar Capital I I I Pr ism Fund, L.P.

AIG Horizon Par tners Fund, L.P.

AIG New Europe Fund I I , L.P.

AIG Orion Fund, L.P.

CapVest Equity Par tners, L.P.

CapVest Equity Par tners I I , L .P.

AIG Private Equity Por tfol io L.P. I

Subtotal AIG Funds

Third Party Fund PortfolioInternational FundsAdvent International GPE V- C L.P.

Advent International GPE VI- C L.P.

Aff ini ty Asia Pacif ic Fund I I I , L .P.

Astorg I I I

Astorg IV

Carlyle Europe Par tners I I , L .P.

Carlyle Europe Par tners I I I , L .P.

Carlyle Japan Par tners I I , L .P.

CVC Capital Par tners Asia Pacif ic I I , L .P.

CVC Capital Par tners Asia Pacif ic I I I , L .P.

CVC European Equity Fund I I I , L .P.

CVC European Equity Fund IV, L.P.

CVC European Equity Par tners Tandem Fund, L.P.

CVC European Equity Par tners V, L.P.

Cognetas, L.P.

EQT V, L.P.

FountainVest China Growth Capital Fund, L.P.

GMT Communicat ions Par tners I I I , L .P.

Ibersuizas I I , L .P.

Lexing ton Captial Par tners IV, L.P.

Lexing ton Captial Par tners VI , L.P.

Lion Capital Fund I I , L.P.

Mid Europa I I I , L .P.

Odewald Private Equity Par tners I I I , L .P.

PAI Europe IV, L.P.

PAI Europe V, L.P.

Palamon European Equity Fund, L.P.

Sovereign Capital I I , L .P.

Terra Firma Investments I I I

The Third Cinven Fund

The Four th Cinven Fund

Unison Capital Par tners I I

Unison Standby Faci l i ty

Venit zz VI

Subtotal International Funds

Note 1. Long-term assets Investment Schedule as of December 31, 2008Total Write-

downs of non-current assets

in TCHF

–

(539)

(398)

–

–

(1 436)

(42)

–

(9 624)

(5 722)

–

(6 423)

–

(13 452)

(37 636)

–

–

(4 515)

–

–

(9 684)

(9 567)

–

(4 130)

(1 906)

–

–

–

–

(4 935)

–

–

(7 730)

–

–

(2 278)

–

(1 207)

–

–

(2 675)

–

–

(15 396)

(1 553)

(11 664)

–

–

–

(77 240)

Opening Balance at Cost

in TCHF

–

539

2 999

2 183

12 475

3 740

472

13 090

27 855

6 215

533

12 768

9 567

37 952

130 390

13 776

–

5 522

11 446

10 890

23 422

4 834

1 108

14 472

–

5 021

21 383

4 834

–

8 234

6 552

–

16 899

6 152

–

16 268

9 290

1 689

8 697

12 603

68

–

2 433

17 691

5 165

17 188

1 889

272

–

247 797

Opening Balance atFair Market Value

in TCHF

–

352

3 140

2 585

16 651

2 741

275

14 177

23 201

6 224

257

6 714

9 634

33 777

119 729

21 061

–

5 337

20 942

10 740

22 012

4 864

889

15 461

–

5 714

24 181

4 838

–

7 377

6 143

–

20 559

12 410

8 226

15 218

9 351

1 708

8 660

16 567

67

–

2 637

17 763

11 996

17 431

1 957

262

–

294 370

CumulativeGain/Loss 31.12.07

in TCHF

–

(187)

140

402

4 175

(999)

(197)

1 086

(4 654)

9

(276)

(6 054)

66

(4 175)

(10 662)

7 285

–

(184)

9 496

(149)

(1 410)

30

(219)

989

–

694

2 798

4

–

(857)

(409)

–

3 659

6 258

8 226

(1 050)

60

19

(37)

3 964

(1)

–

204

72

6 830

243

68

(10)

–

46 573

Paid in Capital in TCHF

2 673

–

107

1 618

1 270

124

–

10 403

938

4 536

19

–

4 778

187

26 652

4 033

3 970

1 465

–

5 098

3 166

12 854

1 045

1 603

3 980

115

1 800

3 984

4 852

819

3 773

–

3 618

2 485

–

7 642

12 888

1 723

5 685

1 617

5 515

6 859

825

2 165

144

9 441

323

5

7 382

120 874

Returned Capital in TCHF

(31)

–

(237)

–

(31)

(556)

–

(159)

(7 111)

–

(552)

(3 076)

(4 074)

(4 649)

(20 476)

(13 471)

–

–

–

(2 516)

(124)

–

–

(1 497)

(329)

(2 693)

(21 179)

(6 894)

(845)

(230)

(986)

539

(7 635)

(131)

–

(1 251)

–

–

(116)

–

–

–

–

-

(299)

–

–

–

–

(59 656)

33


Cost Value 31.12.08 in TCHF

2 642

–

2 472

3 801

13 714

1 871

430

23 335

12 057

5 030

–

3 269

10 271

20 038

98 931

–

3 970

2 472

11 446

13 471

16 780

8 121

2 153

10 448

1 745

–

–

–

4 007

3 888

9 339

539

5 152

8 506

–

20 381

22 178

2 205

14 266

14 219

2 907

6 859

3 259

4 460

3 458

14 964

2 213

277

7 382

221 068

Fair Value 31.12.08 in TCHF

2 694

420

1 939

2 492

9 971

1 145

471

23 543

10 234

4 939

95

1 634

11 046

21 964

92 587

–

3 279

2 424

23 711

14 004

15 175

9 797

1 800

9 378

1 812

–

–

–

3 705

2 977

6 325

502

6 058

10 989

6 036

19 018

16 261

2 030

9 970

13 506

2 768

5 622

2 342

4 295

2 892

14 370

1 685

285

8 201

221 217

Unrealized Gain31.12.08 in TCHF

52

420

–

–

–

–

41

209

–

–

95

–

775

1 926

3 517

–

–

–

12 265

533

–

1 676

–

–

67

–

–

–

–

–

–

–

906

2 483

6 036

–

–

–

–

–

–

–

–

–

–

–

–

8

818

24 791

Unrealized Loss31.12.08 in TCHF

–

–

(532)

(1 309)

(3 743)

(726)

–

–

(1 823)

(91)

–

(1 635)

–

–

(9 860)

–

(691)

(48)

–

–

(1 605)

–

(353)

(1 070)

–

–

–

–

(302)

(910)

(3 015)

(37)

–

–

–

(1 363)

(5 917)

(175)

(4 296)

(713)

(139)

(1 237)

(917)

(165)

(566)

(594)

(528)

–

–

(24 643)

Realized Gain1.1.08–31.12.08

in TCHF

–

–

–

–

212

–

–

–

2 724

–

250

–

2 785

2 706

8 678

5 815

–

–

–

–

3

–

–

258

–

216

38

–

–

1 598

–

–

6 098

–

891

783

–

–

–

–

–

–

–

–

631

–

–

–

–

16 330

Realized Loss1.1.08–31.12.08

in TCHF

–

–

(172)

–

–

(426)

–

–

(2 287)

–

(487)

–

–

–

(3 372)

–

–

–

–

–

–

–

–

(28)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(28)

Outstanding Commitments

in TCHF

18 652

–

1 175

8 018

1 410

1 247

323

4 857

2 316

25 549

865

173

16 669

1 512

82 766

–

25 998

20 167

1 931

16 936

2 690

35 635

6 213

1 140

12 225

–

–

–

–

1 320

9 443

7 506

14 655

7 287

403

10 613

9 240

11 654

9 076

4 455

25 269

22

5 868

19 192

–

20 232

1 363

5 587

18 393

304 514

OriginalCurrency

USD

USD

USD

USD

USD

USD

USD

USD

USD

EUR

USD

EUR

EUR

USD

EUR

EUR

USD

EUR

EUR

EUR

EUR

JPY

USD

USD

EUR

EUR

EUR

EUR

EUR

EUR

USD

EUR

EUR

USD

USD

EUR

EUR

EUR

EUR

EUR

EUR

GBP

EUR

EUR

EUR

JPY

JPY

EUR

Vintage Year

2007

2000

2000

2007

2005

2000

2000

2007

1999

2007

2000

1999

2007

NA

2005

2008

2007

2003

2007

2003

2007

2006

2005

2008

2001

2005

2007

2008

2001

2006

2008

2006

2006

2000

2006

2007

2007

2007

2005

2007

1999

2005

2007

2001

2007

2005

2007

2007

Realized Loss on Sale of Funds

31.12.08 in TCHF

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(4 338)

–

–

–

–

–

–

–

–

-

(2 442)

(2 004)

(1 923)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(10 707)

34


Third Party Fund PortfolioUS FundsApollo IV, L.P.

Apollo VI , L.P.

Apollo VI I , L.P.

Ares Corporate Fund I I , L.P.

Ares Corporate Fund I I I , L .P.

Avista Capital Par tners (Offshore), L.P.

Blackstone Capital Par tners I I I , L .P.

Blackstone Capital Par tners V, L.P.

Blackstone Capital Par tners VI , L.P.

Carlyle Par tners V, L.P.

Charlesbank Equity Par tners VI , L.P.

CHS Private Equity V, L.P.

Cor tec Group Fund IV, L.P.

Diamond Cast le IV, L.P.

HealthCare Ventures VI I I , L .P.

J .C. Flowers Fund I I , L.P.

KRG Capital Fund I I I , L .P.

KRG Capital Fund IV, L.P.

Madison Dearborn V, L.P.

Mil l Road Capital Par tners, L.P.

New Mountain Investments I I I , L .L.C

Olympus Growth Fund V, L.P.

Plat inum Equity Capital Par tners I I

Polar is Venture V, LP

SFW Capital Par tners Fund, L.P.

Si lver Lake Par tners I I I

Sun Capital Advisors V, L.P.

Technology Crossover Ventures IV, L.P.

Thompson Street Capital Par tners I I , L .P.

TowerBrook Capital Par tners I I , L .P.

TowerBrook Capital Par tners I I I , L .P.

VSS Communicat ions Par tners IV, L.P.

Wellspring Capital Par tners IV, L.P.

WestView Capital Par tners, L.P.

Subtotal US Funds

Contractual Agreements-SWAP

Direct Investments PortfolioAcosta

Advanstar Communicat ions

AMF Bowling Worldwide

Bell-Riddel l Holdings

Body Central

CapMark

Falcon Farms

Flash Global Logist ics

Thomas Nelson Publishing

Her tz

JetDirect Aviat ion

Knowledge Universe Education

Kwik-Fit

Investment Schedule as of December 31, 2008Total Write-


in TCHF

(1 049)

(9 679)

(2 049)

–

–

–

–

–

–

–

–

–

(2 456)

–

–

(17 382)

–

–

–

(1 701)

–

–

(2 332)

(354)

(1 022)

(3 551)

–

(1 193)

(489)

–

–

(4 298)

(532)

–

(48 087)

–

–

(4 082)

–

–

–

(8 256)

(545)

–

–

–

(3 765)

–

–


in TCHF

–

11 338

–

16 700

–

15 569

–

36 012

–

7 745

2 019

6 538

8 224

14 514

1 639

9 462

9 407

191

19 378

1 521

1 824

–

–

2 450

587

3 416

1 203

3 875

3 462

12 096

–

11 753

2 220

2 743

205 887

67 639

4 371

4 548

–

1 621

1 568

10 821

636

1 160

9 035

2 170

3 765

9 656

131


in TCHF

–

12 065

–

19 438

–

14 586

–

35 942

–

7 669

2 618

5 883

6 693

13 566

1 776

8 466

9 559

190

18 611

1 328

1 768

–

–

2 062

575

3 326

1 141

2 343

2 856

12 782

–

10 856

1 842

4 691

202 634

41 425

5 114

4 203

1 699

1 617

1 421

14 455

596

1 088

13 301

4 183

3 503

9 809

2 382


in TCHF

–

728

–

2 738

–

(983)

–

(70)

–

(76)

598

(655)

(1 531)

(947)

137

(995)

152

(1)

(767)

(193)

(56)

–

–

(388)

(12)

(90)

(62)

(1 532)

(606)

686

–

(897)

(377)

1 948

(3 253)

(26 214)

743

(345)

1 699

(3)

(147)

3 634

(40)

(72)

4 266

2 013

(262)

153

2 251


2 464

14 776

6 280

10 798

5 897

10 370

1 374

9 058

–

2 225

1 245

2 633

3 142

5 956

1 286

17 719

4 218

879

2 363

3 133

3 167

3 136

10 718

2 572

435

3 654

2 978

68

2 387

5 178

2 816

2 933

2 646

1 052

149 557

58

–

473

–

–

–

–

329

–

547

–

–

–

–


(612)

(2 811)

(431)

(3 216)

(527)

(22 547)

(4)

(397)

–

(269)

(644)

(492)

(564)

(6 080)

–

(3)

(10 607)

(2)

(2 915)

(17)

(763)

–

(3 325)

–

–

(4)

(3 142)

(403)

–

(313)

(637)

–

–

–

(60 725)

(67 697)

–

–

–

–

–

–

–

–

–

–

–

–

–

35



803

13 624

3 800

24 282

5 370

–

1 370

44 673

–

9 701

2 620

8 679

8 346

14 390

2 925

9 796

–

1 068

18 826

2 937

4 228

3 136

5 060

4 668

–

3 515

–

2 347

5 361

16 961

2 180

10 388

4 334

3 796

239 183

–

4 371

939

–

1 621

1 568

2 565

421

1 160

9 582

2 170

–

9 656

131


825

13 469

3 622

20 732

5 229

–

1 107

29 432

–

7 209

2 641

6 513

7 758

10 186

2 470

9 880

–

1 096

12 328

2 826

3 566

3 140

5 188

4 432

–

3 402

–

1 781

5 051

13 010

2 061

9 582

4 138

6 427

199 102

–

3 736

827

1 289

1 349

1 715

2 107

411

1 025

12 106

1 242

–

9 501

523


22

–

–

–

–

–

–

–

–

–

21

–

–

–

–

84

–

–

–

–

–

4

128

–

–

–

–

–

–

–

–

–

–

2 631

2 891

–

–

–

1 289

–

147

–

–

–

2 524

–

–

–

392


–

(155)

(179)

(3 550)

(140)

–

(263)

(15 242)

–

(2 492)

–

(2 166)

(588)

(4 204)

(455)

–

–

28

(6 498)

(111)

(662)

–

–

(237)

–

(113)

–

(566)

(310)

(3 951)

(119)

(806)

(196)

–

(42 974)

–

(635)

(112)

–

(272)

–

(457)

(10)

(135)

–

(928)

–

(155)

–


in TCHF

55

–

–

–

–

–

–

–

–

–

2

–

–

–

–

–

–

–

39

171

–

–

–

–

–

–

–

–

–

–

–

–

–

–

267

6 596

–

–

–

–

–

–

–

–

–

–

–

–

–


in TCHF

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(707)

–

–

–

–

–

–

–

–

–

–

–

–

–


in TCHF

15

4 135

20 917

1 699

21 509

–

211

11 832

26 683

22 774

2 593

1 663

11 484

6 478

5 102

647

–

24 973

4 206

11 684

17 359

21 408

13 848

5 977

20 370

25 350

–

192

8 429

5 608

19 281

2 185

2 870

3 799

325 279

–

–

–

–

–

–

–

–

–

–

–

–

–

–

OriginalCurrency

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

USD

Vintage Year

1998

2006

2007

2006

2008

2007

1997

2006

2008

2007

2005

2005

2006

2006

2005

2006

2005

2007

2006

2007

2007

2007

2008

2006

2007

2007

2007

2000

2006

2006

2008

2006

2006

2005

2006

2007

2004

2006

2006

2006

2007

2007

2006

2005

2006

2007

2005


31.12.08 in TCHF

–

–

–

–

–

(3 391)

–

–

–

–

–

–

–

–

–

–

(3 019)

–

–

–

–

–

–

–

–

–

(1 039)

–

–

–

–

–

–

–

(7 449)

–

–

–

–

–

–

–

–

–

–

–

–

–

–

36


Direct Investments PortfolioMVLF

National Bedding Company

NXP Semiconductors

SunGard Data Systems

United Surgical Par tners International

Universal Studio Escape

Vanguard Health Systems

Xanodyne

Subtotal Direct Investments

LoansFl int Group (fka. Xsys/Aster)

MVLF Loan

Subtotal Loans

Funds sold in 2009Cognetas I I , L .P.

Doughty Hanson & Co. I I I , L .P.

Emerging Europe Convergence Fund I I , L .P.

EQT I I I , L .P.

EQT IV, L.P.

Berkshire Fund VI I , L.P.

Carlyle Par tners IV, L.P.

Subtotal Funds sold in Q1 ‘09

Total of all Investments

Investment Schedule as of December 31, 2008Total Write-


in TCHF

(12 478)

(292)

(3 557)

–

–

–

–

(760)

(33 735)

–

–

–

(14 761)

–

–

(4 788)

(6 768)

–

–

(26 317)

(223 015)


in TCHF

14 437

766

3 743

1 236

1 600

4 640

1 867

1 514

79 284

1 544

15 856

17 400

12 320

–

9 907

8 560

12 866

6 143

22 899

72 695

821 092


in TCHF

16 314

756

3 925

1 938

1 547

4 985

850

1 447

95 132

1 915

16 739

18 655

9 421

–

11 862

7 683

18 555

4 878

23 520

75 920

847 865


in TCHF

1 878

(11)

182

701

(52)

345

(1 017)

(67)

15 848

371

883

1 255

(2 899)

–

1 956

(878)

5 690

(1 266)

621

3 225

26 773


–

–

–

–

–

–

–

–

1 350

–

–

–

6 688

5 954

2 541

533

733

2 215

160

18 824

317 316


–

–

–

–

–

(4 640)

(934)

–

(5 574)

–

(2 608)

(2 608)

–

(16)

–

(1 258)

(106)

(323)

(487)

(2 190)

(218 926)

37



1 959

474

186

1 236

1 600

–

–

754

40 392

1 544

13 248

14 792

4 247

5 938

12 447

3 047

6 725

8 036

22 572

63 012

677 378


1 883

392

160

1 384

1 502

–

–

626

41 779

1 677

12 372

14 049

5 150

5 640

8 005

2 483

6 002

6 503

18 289

52 072

620 805


–

–

–

148

–

–

–

–

4 501

133

–

133

903

–

–

–

–

–

–

903

36 736


(75)

(82)

(26)

–

(98)

–

–

(128)

(3 113)

–

(876)

(876)

–

(298)

(4 442)

(565)

(723)

(1 533)

(4 283)

(11 844)

(93 310)


in TCHF

–

–

–

–

–

1 737

–

–

1 737

–

–

–

–

–

–

32

2 981

317

726

4 056

37 665


in TCHF

–

–

–

–

–

–

–

–

–

–

–

–

–

–

–

(68)

–

–

–

(68)

(4 175)


in TCHF

–

–

–

–

–

–

–

–

–

–

–

–

–

474

-

2 005

2 550

24 573

1 912

31 515

744 074

OriginalCurrency

EUR

USD

EUR

USD

USD

USD

USD

USD

EUR

EUR

EUR

USD

EUR

EUR

EUR

USD

USD

Vintage Year

2006

2005

2006

2005

2007

2000

2007

2005

2004

2006

2005

1997

2006

2001

2004

2006

2005


31.12.08 in TCHF

–

–

–

–

–

–

(933)

–

(933)

–

–

–

–

–

–

–

–

–

–

–

(19 089)

38


Note 2: Cash and Cash Equivalents in TCHF

2008 2007Cash at banks 14 930 26Total 14 930 26

For the purpose of the cash f low statement cash and cash equivalents comprise al l cash, shor t-term deposits and other moneymarket instruments, net of shor t-term overdrafts, with an original maturity of three months or less. Cash and cash equivalents areat the ful l disposal of the Company.

The carrying amounts of cash and cash equivalents approximate fair value.

Note 3: Foreign Exchange RatesThe fol lowing exchange rates have been applied to translate the foreign currencies of s ignif icance for the group:

2008 2007Year-end rates: Unit CHF CHFUS dollar 1 USD 1.0673 1.1329Euro 1 EUR 1.4856 1.6544Yen 100 Yen 0.8507 1.0141Average annual rates:US dollar 1 USD 1.0830 1.1943Euro 1 EUR 1.5850 1.6458Yen 100 Yen 0.9594 1.0168

Note 4: Derivative InstrumentsForeign Exchange ForwardAs of December 31, 2008 the Company had no fore ign e x-change forward contracts open.

As of December 31, 2007 the Company had an open foreign exchange forward contract with a notional amount ofUSD 20 mill ion, a positive market value of TCHF 622 and whichmatured Apri l 23, 2008.

Note 5: Receivables and Prepaymentsin TCHF

2008 2007From third par t ies 141 326 From related par t ies:AIG, Inc. – 1 064 AIG Global Investment Group 204 103MVLF – 333 Subtotal 204 1 500 Total 345 1 826

The carrying amounts of the accounts receivable and prepayments approximate fair value.

On December 31, 2007 the Company c losed a fore ign exchange forward contract maturing January 22, 2008, with anot ional amount of USD 30 mi l l ion, resul t ing in a prof i t ofTCHF 1 023.

39


Note 6: Payables and Accrued Charges in TCHF

2008 2007Accrued service- , per formance and management fees 8 283 20 679Accrued carr ied interest contractual agreements and 31 2 264 accrual share-based compensation plan payable to related par t iesAccounts payable and other accrued expenses 1 165 1 065 Total 9 479 24 008

The carrying amounts of the accounts payable and accrued charges approximate fair value.

Note 7:

Borrowings in TCHF

2008 2007Bank Consor t ium 96 057 56 645AIG Private Bank Ltd. 5 890 25 015HSBC Bank of Bermuda – 26 294 Total 101 947 107 954

On January 25, 2008 the Company entered into a long term committed syndicated USD 100 mil l ion back-up credit faci l i ty from a bank consor t ium including Zurcher Kantonalbank (agent), Bank Linth, Schwyzer Kantonalbank, Banque Cantonale Vaudoise, Luzerner Kantonalbank and Migrosbank. On September 30, 2008, the Company breached covenants under the loan agreement(outstanding loan to NAV/market capital izat ion; outstanding commitments to NAV/market capital izat ion). On December 23, 2008,the Company signed a supplementary agreement to the loan agreement with the bank consor t ium. In return for the Companymaintaining an early prepayment schedule, the banking syndicate has agreed to waive two f inancial covenants (outstanding com-mitments in relat ion to net asset value or market capital izat ion and outstanding debt to net asset value or market capital izat ion).The prepayment schedule provides for four payments of which the f i rst payment in the amount of USD 10 mil l ion was made December 24, 2008. On February 18, 2009 the Company repaid USD 3.45 mil l ion. On Apri l 1, 2009, the Company met with thebank consor t ium and proposed a standst i l l unti l July 15, 2009 with no repayments al lowing the Company to explore and executeone of various re f inancing options currently pursued. Currently, the Company is in default on the credit faci l i ty and supplemen-tary agreement. Both agreements, however, were not terminated.

Preferred Sharesin TCHF

2008 2007AIG Global Asset Management Holdings Corp. (AIGGAMH) 163 714 –

On June 19th, 2008, the Subsid iar y entered into an agreement wi th AIGGAMH. The agreement provides for A IGGAMH to purchase up to USD 150 mil l ion in preference shares in the Subsidiary. The init ia l dividend on the preferred shares is 5.25% perannum. The Subsidiary wil l repurchase the issued shares by December 31, 2011.

40


Note 8: Share capitalThe same team that manages pr ivate equi ty investments forAmerican International Group, Inc. acts as investment advisorto the Group. Pr ivate equi ty is an asset c lass consis t ing ofequity investments in companies that are not traded on a pub-l ic stock exchange. Investments typical ly involve a transforma-tional, value-added, active management strategy. Private equityinvestments can be div ided into var ious categor ies : venture capital , mezzanine f inance, buyouts etc. The Group invests inprivate equity funds and co-invests together with these fundsin operat ing companies. The Group’s investment advisor hasa long-term track record in private equity investing and has ac-cess to premier private equity funds, both of which are cr i t icalfactors in achieving expected returns.

Currently, the Group does not intend to pay any dividendsto shareholders but rather to re- invest the proceeds.

Shareholders ’ equi ty/net assets represent (2008: TCHF 360 939; 2007: TCHF 719 255) the capi ta l ava i lable to the

Group to implement and achieve i ts investment goals. Share-holders’ equity includes revaluat ion reserves, which representunreal- ized value increases/decreases on investments held asavai l -able-for-sale and value increases/decreases due to cur-rency translat ion dif ferences.

The share capi ta l of the Company as of December 31, 2008 amounts to CHF 412 500 000 (December 31, 2007: CHF 412 500 000) consis t ing of 4 125 000 regis tered shares (December 31, 2007: 4 125 000) with a par value of CHF 100each. Al l issued shares are ful ly paid. Each share enti t les theholder to par t ic ipate in any distr ibution of income and capital .

As of December 31, 2008 the Company has CHF 206.25mil l ion (2007: CHF 206.25 mi l l ion) author ized share capi ta louts tanding. This author ized share capi ta l wi l l e xpire at theend of May 2009. As of December 31, 2008 the Company hasCHF 206.25 mi l l ion (2007: CHF 206.25 mi l l ion) condi t ionalshare capital outstanding. Other than sales of treasury shares,the company did not raise any new capital in 2008.

Share capital is broken down as follows: Number of Shares

At 1 January 2007 3 896 194– Treasury shares sold 52 833– Treasury shares purchased –At 31 December 2007 3 949 027

At 1 January 2008 3 949 027– Treasury shares sold 15 833– Treasury shares purchased (35 675)At 31 December 2008 3 929 185

The Company can trade in treasury shares in accordance with the relevant guidel ines (Company’s ar t ic les of associat ion, Swisscompany law, l ist ing rules of the SIX Swiss E xchange). Treasury shares are treated as a deduction from the consol idated share-holder’s equity (2008: TCHF 30 691: 2007: TCHF 27 847). During 2008 the Company sold 15 833 (2007: 52 833) shares and pur-chased 35 675 (2007: 0) shares.

The fol lowing major shareholders held shares and voting r ights of 3% and more as of December 31, 2008:

Number of Shares Participation in % Number of Shares Participation in %

2008 2008 2007 2007American International Underwriters Overseas Ltd. 413 500 10.02% 413 500 10.02%AIG Life (Ireland) Ltd. 1 018 881 24.70% 1 083 527 26.27%Ernst Göhner St i f tung 267 000 6.47% 267 000 6.47%AIG Private Bank Ltd. – – 229 284 5.56%AIG, Inc. 373 581 9.06% – –AIG Private Equity Ltd. 195 815 4.75% 175 973 4.27%SUVA, Schweiz. Unfal lversicherungsanstalt 127 500 3.09% 127 500 3.09%Mobil iar 142 500 3.45% NA *AXA Winter thur 167 000 4.05% 167 000 4.05%

* On September 25, 2008, Schweizerische Mobil iar Versicherungsgesel lschaft informed the Company that i ts shareholding has increased above 3%.

41


Note 9. Earnings per Share

Earnings per Share 2008 2007Net ( loss)/profi t per share outstanding (in CHF) – basic (68.93) 20.52 Net profi t per share outstanding (in CHF) – ful ly di luted (68.93) 20.49

Net ( loss)/profi t for the period (in TCHF) (271 918) 80 584 Weighted average of total number of shares outstanding (in 1 000) – basic 3 945 028 3 927 921 Adjustment for share options – 3 978Weighted average of total number of shares outstanding (in 1 000) – di luted 3 945 028 3 931 899

The stock opt ions granted by the Group (note 18) are considered to be potent ia l ordinary shares and have been included in the determinat ion of di luted earnings per share to the ex tent to which they are di lut ive. In June 2008, the last stock opt ions matured.

Note 10: Revaluation Reservein TCHF

2008 2007Reserve from foreign currency translat ion (38 994) (51 902)Reserve from fair value movements of investments (17 581) 78 674Total revaluation reserve at December 31 (56 574) 26 772

Reserve from foreign currency translat ion– at January 1 (51 902) (35 917)– currency translat ion dif ferences during the year 12 908 (15 985)– at December 31 (38 994) (51 902)

Reserve from fair value movements of investments– at January 1 78 674 58 596– Impairments transferred to income statement 223 015 10 144– net real ized (gains)/losses transferred to income statement (16 125) (112 053)– net real ized gains/(losses) from changes in Fair Value (303 145) 121 987– at December 31 (17 581) 78 674

Note 11: Write-downs of Non-Current AssetsFor the year ended December 31, 2008 write-downs on non-current assets were recognized as fol lows:

in TCHF 2008 2007Direct investments 33 735 1 733 Funds 189 280 6 082 Contractual agreements – 2 329 Total 223 015 10 144

For detai ls please see note 1 to the investment table.

42


Note 12: Interest Income, dividends and net realized gains on investments from non-current assets Interest income, net interest income and dividends from non-current assets, and net real ized gains were generated by the threepor tfol ios as fol lows:

in TCHF 2008 2007Interest income from long-term assets:AIG Funds 758 1 590Third Par ty Funds 1 122 7 255Direct Investments 1 387 2 285Total interest income from non-current assets 3 267 11 130

Dividend income from long-term assets:AIG Funds 51 650Third Par ty Funds 301 1 108Direct Investments 0 1 407Total dividend income from non-current assets 352 3 165

Net real ized gains on investments:AIG Funds 3 351 19 631Third Par ty Funds 13 040 85 913Direct Investments (267) 6 509Total net realized gains from non-current assets 16 124 112 053

Note 13: Taxesin TCHF

2008 2007Current income tax 538 890

Reconci l iat ion of income tax calculated with the applicable tax rate:Prof i t/(Loss) before income tax (271 379) 81 474*Applicable tax rate 7.8% 7.8%Income tax (21 168) 6 355Effect from:– income tax payable from current and prior periods – 152– non-taxable profi ts 4 462 (6 355)– increase of valuat ion al lowance on net operat ing loss 16 705 –– deferred taxes (145) 145– non-refundable withholding tax paid 678 593Total income tax expenses 538 890

* The 2007 annual repor t shows the net prof i t for the period instead of the net prof i t before taxes. The total income tax expenses do not change as the non-taxable profi ts change in the same amount.

In 2008, the Group paid TCHF 678 (2007: TCHF 593) non-refundable withholding taxes.

Note 14: Related Party TransactionsRelated Par t ies are individuals and companies where the indi-vidual or company has the abil i ty, directly or indirectly, to con-trol the other par ty or to exercise signif icant influence over theother par ty in making f inancial and operat ing decis ions. Rela-ted par t ies are:

• American International Group, Inc. , New York• AIG Private Bank Ltd. , Zurich• AIG Private Equity Management Ltd. , Bermuda• AIG Global Investment Corp. , New York• Board of Directors, AIG Private Equity AG

43


RELATED PARTY AGREEMENTS

The Group has entered into several agreements with variouscompanies of the American International Group, Inc., New York(“AIG”) which have a signif icant inf luence on the f inancial andoperat ing decis ions of the Group.

Service Agreement IAmerican International Company Ltd. , Pembroke, Bermuda, anindirect wholly owned subsidiary of AIG, provides several ad-ministrat ive services for the subsidiary in Bermuda for an an-nual fee of TUSD 95 (TCHF 103; 2007: TCHF 108). This agree -ment is entered into for an indefinite period of t ime and maybe terminated with advance notice of 30 days.

Service Agreement I IAIG Pr ivate Bank Ltd. , Zur ich, a whol ly owned subsid iar y ofAIG, provides administrat ive and accounting services for theGroup. Compensation for these services in 2008 was TCHF 301(2007: TCHF 301). This agreement was transferred February 1,2009 to AIG Investments Swit zerland GmbH, a wholly ownedsubsidiary of AIG, Inc.

Management and Advisory AgreementThe Group has entered into a Management Agreement wi thAIG Pr ivate Equi ty Management Ltd . , Bermuda (“ the Man-ager”) , a whol ly owned subsid iar y of AIG Pr ivate Bank Ltd. , Zur ich. For serv ices rendered, the Manager is ent i t led to re-ceive a management fee at an annual rate equal to 2% of theconsolidated Net Asset Value of the Group on the last businessday of each quar ter before deduct ions or accrual of the management fee and/or per formance fees. The init ia l term ofthe Management Agreement ended December 31, 2005 andwas automatical ly renewed for f ive years unt i l December 31,2010.

In addit ion to the management fee, the Manager wi l l re-ceive quar terly per formance fees from the Group. The per for-mance fee with respect to the Third Par ty Funds Por t fol io isf i f teen per cent (15%) of the increase in the net asset value ofthe Third Par ty Funds Por tfol io for each quar ter in excess ofany basel ine return for such quar ter of f ive per cent (5%) (onan annual bas is) . The per formance fee wi th respect to the Direct Investment Por t fo l io is twenty per cent (20%) of the increase in the net asset value of the Direct Investment Por t-fol io for each calendar quar ter.

Fur thermore both per formance fees are subject to a “highwater mark”, so that no per formance fee wil l be paid with re-spect to a par t icular por t fol io unless the net asset value forthat por tfol io is greater than the previous high net asset value

for the por t fo l io ( increased, in the case of the Third Par tyFunds Por tfol io at the rate of 5% annual ly).

The Manager has entered into an advisory agreement withAIG Global Investment Corp. , New York, a wholly owned sub-sidiary of AIG, to act as investment advisor with respect to theThird Par ty Funds Por tfol io and Direct Investments Por tfol io.

For i ts ser v ices provided under the management agree-ment, the advisor is ent i t led to receive an advisory fee fromthe Manager. The in i t ia l term of the advisory agreement matured December 31, 2005 and was automatical ly ex tendedunti l December 31, 2010.

In 2008 the management agreement resul ted in AIG re ceiving management fees amounting to TCHF 11 595 (2007:TCHF 14 205) and per formance fees amount ing to TCHF 0(2007: TCHF 13 049) from the Group.

Refer to notes 1, 5, 6, and 11 for more information on re-lated par t ies.

MATERIAL TRANSACTIONS

Cash and Cash EquivalentsAs of December 31, 2008 the Group has cash and cash equi-va lents tota l ing TCHF 216 (2007: TCHF 26) on a current ac-count basis with AIG Private Bank Ltd. , Zurich.

Capital Calls from AIG Fund Investments

2008 2007Investments (in million) CHF USD CHF USD

AIG Horizon Par tners Fund L.P. 0.9 0.9 1.8 1.5AIG Brazi l Special Si tuat ions Fund I L.P. 0.1 0.1 0.2 0.2AIG Brazi l Special Si tuat ions Fund I I L.P. 1.6 1.5 2.2 1.8AIG Orion Fund L.P. 0.0 0.0 0.0 0.0AIG Blue Voyage Fund L.P. 0.0 0.0 0.0 0.0AIG Global Spor ts & Enter tainment L.P. 0.1 0.1 0.2 0.2AIG Highstar Capital L.P. 0.0 0.0 0.0 0.0AIG Highstar Capital I I I Pr ism L.P. 10.4 9.6 24.6 20.4AIG Private Equity Por tfol io L.P. 0.2 0.2 0.5 0.4AIG Global Emerging Markets L.P. , I I 1.3 1.2 5.1 4.1

2008 2007Investments (in million) CHF EUR CHF EUR

AIG New Europe I I L.P. 4.5 2.8 6.2 3.8


2008 Base Variable Other Total Share-All figures in CHF Compensation Compensation*1 Compensation**1 20081 holdings2 SARs3

Board of DirectorsEduardo Leemann 60 000 2 000 8 193 70 193 200 –Erich Hor t (unti l May 2007) 12 500 500 1 469 14 469 – –Dr. Ernst Mäder 30 000 1 500 3 560 35 060 – –Dr. Roger Schmid 30 000 2 000 – 32 000 750 –Rober t Thompson – – – – – –Dr. Christ ian Wenger 30 000 2 000 – 32 000 – –Total Board of Directors 162 500 8 000 13 222 183 722 950 –

Management BoardAndrew Fletcher 250 120 – 31 898 282 018 6 668 –Conradin Schneider – – – – 3 000 –Total Management Board 250 120 – 31 898 282 018 3 000 –

* Attendance fee 1 in CHF** Social securi ty payments 2 number held at year end

3 number granted during year

PersonnelTwo members of the Board of Directors of the Company areemployees of other companies within the AIG Inc., Group. Withthe except ion of the Chairman of the Board, AIG execut ivesserv ing on the Board of Directors and the Investment Com-mit tee of the Group do not receive remunerat ion f rom theGroup for their services. Remuneration of directors for the year2008: TCHF 169 (2007: TCHF 190). Refer to note 18 for sharecompensat ion schemes granted to the management board.One of the members of management is employed by the Com-

pany. One of the members of management is a member of theboard of directors of MV Leveraged Finance Ltd. (see also Note1 MVLF). The Subsidiary in Bermuda made an equity invest-ment (EUR 10 mil l ion) and a loan investment (EUR 20 mil l ion) in th is ent i ty in the four th quar ter 2006. In the course of 2008, the Subsid iar y received div idends of TCHF 0 (2007:TCHF 1 651), principal repayments on the loan of TCHF 2 608(2007: TCHF: 1 399) and loan interest amounting to TCHF 716(2007: TCHF 1 845).

2007 Base Variable Other Total Share-All figures in CHF Compensation1 Compensation*1 Compensation**1 20071 holdings2 SARs3

Board of DirectorsEduardo Leemann 60 000 2 500 6 967 69 467 200 –Erich Hor t (unti l May 2007) 30 000 2 000 2 936 34 936 – –Dr. Ernst Mäder 30 000 2 500 2 909 35 409 – –Win Neuger – – – – – –Dr. Roger Schmid 30 000 1 500 – 31 500 750 –Rober t Thompson (as from May 2007) – – – – – –Dr. Christ ian Wenger 17 500 1 500 – 19 000 – –Total Board of Directors 167 500 10 000 12 812 190 312 950 –

ManagementAndrew Fletcher 242 319 – – 242 319 1 000 15 000Conradin Schneider – – – – 3 334 7 500Total Management 242 319 – – 242 319 4 334 22 500


3 number granted during year44

45


At 31.12.08 in TCHF < 1 month 1–3 months 3 months–1 year Non-interest bearing Total

AssetsFinancial assets avai lable for sale – – – 606 755 606 755Loans 14 049 – – – 14 049Other receivables 345 – – – 345Cash at bank 14 930 – – – 14 930

LiabilitiesBorrowings 27 236 – 74 711 – 101 947Preferred Shares – – 163 714 – 163 714Payables and accrued charges 9 479 – – – 9 479

At 31.12.07 in TCHF < 1 month 1–3 months 3 months–1 year Non-interest bearing Total

AssetsFinancial assets avai lable for sale – – – 829 210 829 210Loans 18 655 – – – 18 655Other receivables – – – 3 471 3 471Cash at bank 26 – – – 26

LiabilitiesPayables and accrued charges – – – 24 008 24 008Borrowings 107 954 – – – 107 954Preferred Shares – – – – –Other payables – – – 145 145

Note 15: Financial Risk ManagementStrategy in using Financial Instruments The object ive of the Group is to achieve long- term capi ta lgrowth for shareholders by invest ing in a diversi f ied por tfol ioof pr ivate equi ty funds and pr ivate ly held operat ing com -panies.

The Group’s act iv i t ies e xpose i t to a var iety of f inancia lr isks, namely market r isk ( including interest rate r isk, currencyrisk and other price r isks), l iquidity r isk and credit r isk. Man -agement observes and manages these r isks. These r isks couldresult in a reduction of the Group’s net assets.

The Group seeks to minimize these r isks and adverse ef fects by consider ing potent ia l impacts f rom the f inancia lmarkets. The Group manages these r isks, where necessary, viacol laborat ion with service par tners that are market leaders intheir respect ive area of exper t ise. Addit ional ly , the Group hasinternal guidel ines and pol ic ies in place to ensure that trans-act ions are effected in a consistent and di l igent manner.

Market Risk• Interest rate r isk

The Group is subject to cash f low interest rate r isk due tofluctuations in the prevail ing levels of market interest rates.

This r isk ar ises primari ly from loans (higher/lower LIBORrate at ref inancing date; see schedule below). These loanshave a var iable interest rate corresponding to the LIBORrate plus a margin. The majori ty of the Group’s assets arenon interest bearing. The Group has not applied an in terestrate hedge due to the shor t term matur i ty prof i le of theloans and because the Group has no long term vis ibi l i ty ofi ts cash f lows due to i ts business act iv i ty.The table below summarizes the Group’s exposure to in -terest rate r isks. I t includes the Group’s assets and l iabi l i -t ies at fair values, categorized by the earl ier of contractualre-pric ing or maturi ty dates.

At 31 December 2008, should interest rates change by 0.3%(30 basis points) (2007: 0.3%) with al l other variables remain-ing constant, the increase in equity for the year would be ap-proximately TCHF 261 (2007: TCHF 268).

The Group’s management monitors interest rates on a re-gular basis and informs the Board of Directors accordingly ati ts quar terly meetings.

46


At 31.12.08 (in 1 000) USD EUR GBP JPY CHF Total

AssetsCash and cash equivalents 5 871 9 050 – – 9 14 930Other current assets 204 – – – 141 345Loans receivable – 14 049 – – – 14 049Investments (avai lable for sale) 383 406 217 238 2 342 3 769 – 606 755Total Assets 389 481 240 337 2 342 3 769 150 636 079

Payables and accrued charges 8 546 – – – 932 9 478Loans payable 101 947 – – – – 101 947Preferred Shares 163 714 – – – – 163 714Deferred tax l iabi l i ty – – – – – –Total Liabilities 274 207 – – – 932 275 139Total Equity – – – 360 940 360 940Total Liabilities and Equity 274 207 – – – 361 872 636 079

At 31.12.07 (in 1 000) USD EUR GBP JPY CHF Total

AssetsCash and cash equivalents – – – – 26 26Other current assets 1 387 439 – – 1 645 3 471Loans receivable – 18 655 – – – 18 655Investments (avai lable for sale) 488 748 334 716 2 637 3 109 – 829 210Total Assets 490 135 353 810 2 637 3 109 1 671 851 362

Payables and accrued charges 2 407 – – – 21 601 24 008Loans payable 107 954 – – – – 107 954Deferred tax l iabi l i ty – – – – 145 145Total Liabilities 110 361 – – – 21 601 132 107Total Equity – – – – 719 255 719 255Total Liabilities and Equity 110 361 – – – 741 001 851 362

• Currency r iskThe net asset value per share is calculated in CHF, the pre-sentat ion currency of the Company. However , as theGroup’s investments are largely denominated in USD andEuro, the Company wil l be exposed to a cer tain degree ofcurrency r isk , which can adversely af fect per formance.Fluctuat ions in foreign currency exchange rates affect thenet asset va lue of the investments and therefore of theGroup. The Group can enter into currency contracts to mi-t igate these currency r isks . Such t ransact ions are basedupon decis ions made by the FX Committee that meets atleast on quar ter ly basis . Over the past several years , theFX Commit tee decided to take appropr ia te measures to

mit igate the impact of currency f luctuat ions on the netasset value (see note 4 for detai ls on current hedge trans-actions). Addit ionally, the Group regards loans in the samecurrencies as its assets as a measure to mitigate the impactof currencies on the net asset value.

I f the USD were to change 1%, with al l other var iables heldconstant, i t would result in a change in shareholders equity ofCHF 1.2 mil l ion (2007: CHF 3.8 mil l ion).

If the EUR were to change 1%, with al l other variables heldconstant, i t would result in a change in shareholders equity ofCHF 2.4 mil l ion (2007: CHF 3.5 mil l ion).

47


The Group’s currency posi t ion is monitored on a regularbasis . The FX Committee meets at least on a quar terly basis toreview its strategy and make appropriate adjustments. The FXexposure is reviewed by the board of directors at the quar terlymeetings.

• Other price r isksOther price r isks ( i .e. changes in market prices other thanfrom interest ra te r isks or currency r isk) may af fect thevalue of the investments held as avai lable-for-sale by theGroup. Other price r isks ar ise mainly from the uncer taintyabout future valuat ions of the investments held as avai l -able-for-sale by the Group. Investments held avai lable-for-sale amounted to TCHF 606 755 (2007: TCHF 829 210). Forthese investments the Group calculates the correspondingfair value on a monthly basis . Please see the “AccountingPolic ies” for more information on the fair value process aswell as Note 1.The Group’s investment advisor per forms e x tens ive due di l igence pr ior to recommending any fund or d i rect in-vestment, including an analysis of the potential r isks of theinvestment. The Group and the investment advisor monitorinvestments by analyz ing regular repor ts and through direct contact wi th genera l par tners and company man -agement . Investment recommendat ions are approved bythe Board of Directors pr ior to commitment . Investmentper formance is rev iewed at every board meet ing. Valua -t ions are updated on a monthly basis by taking new cur-rency rates, stock price at the end of the month for l istedpor tfol io companies and new repor ts from por tfol io fundsavailable to the Group into account. Fur thermore the Com-pany discusses fund per formance with the investment ad-v isor and takes par t in por t fo l io funds annual meet ings .Detailed valuations are established at year-end by speakingeither in person or via telephone with fund managers andthe investment advisor and are ult imately signed off by theBoard of Directors. I f the value of the investments (based on year-end values)had increased or decreased by 35.99% with a l l other var iables held constant , the impact on the shareholders ’equity would have been CHF 218.4 mil l ion (2007: 1.47%,CHF 12.2 mil l ion).An increase/decrease of 35.99% would impact the prof i tand loss statement by CHF 104.5 million/CHF –261.2 million.The Company is exposed to a variety of market r isk factorswhich may change s igni f icant ly over t ime. As a resul t ,

measurement of such exposure at any given point in t imemay be di f f icu l t g iven the complex i ty and l imi ted t rans -parency of the underlying investments. Therefore, a sensi-t iv i ty analys is is deemed of l imited explanatory value ormay be misleading.

Liquidity riskDue to the specif ic nature of private equity funds of the typein which the Company invests, immediate and ful l investmentof assets is not always possible. Commitments made by a pri-vate equity investor in a private equity fund typical ly results inactual investments being made over a period of up to six years.Based on the Group’s experience i t is expected (on a por tfol iobasis) that the maximum net amount invested in a fund wi l lbe approximately 60% of a commitment. In order to reach ful linvestment, the Group appl ies an over-commitment strategy.Outstanding commitments amounted to CHF 744 mi l l ion in2008 (2007 CHF 966 mill ion). Even though these commitmentscould be drawn down at any point in t ime, the Group expectsoutstanding commitments to be drawn over a six year period(standard investment period of a private equity fund).

I t is the aim of the Group to maintain equil ibrium betweendrawdowns and distr ibutions. The Group applies a cash f lowmodel to est imate future cash f lows and cash balances . As of 31 December 2008, cash in banks tota led TCHF 14 930(2007: 26) and loans payable tota led TCHF 101 948 (2007:TCHF 107 954) and preferred shares amounted to TCHF 163 714(2007: 0).

Management monitors cash f lows on a weekly basis by up-dating i ts cash f low repor t and repor ts at least on a quar terlybasis to the board of directors. As agreed in the supplemen-tary agreement with the banking consor tium, management pro-vides addit ionally on a bi-weekly basis an overview comprisingal l banking relat ionships. Shor t fa l ls in cash f lows have beencovered by a credit faci l i ty , as wel l as by the issuance of pre-ferred shares by the Subsidiary. As both of these resources areexhausted, the Company has generated l iquidi ty by se l l ingfund interests in the secondary market . Current ly , the Com-pany is exploring the possibi l i ty of a substantive ref inancing.

In accordance with IAS 1 these consolidated financial state-ments have been prepared on a going concern basis. Althoughthe Company is in breach of cer ta in covenants on i ts seniordebt f inancing (USD 86 mil l ion outstanding), and the lenderscould require accelerated repayment of the entire amount, theCompany is in ongoing and act ive negotiat ions with the bank -ing consor t ium and has engaged advisors and been in discus-

48


Credit riskThe Group has credi t e xposure only to establ ished, credi t -wor thy third par t ies , so that no col lateral izat ion is required.Receivables are monitored continuously.

Management monitors credit r isk on a regular basis . The Group holds cash with AIG Private Bank, HSBC Bank

of Bermuda and Zurcher Kantonalbank. The Group monitorsthe standing of these inst i tut ions on a regular basis .

The Group holds loans in two investments (see Note 1),namely F l int Group and MVLF. Management of the Group

monitors these loans on a regular basis by ensuring interest ispaid and by reviewing monthly and quar terly repor t ing. Bothloans are current on interest payments.

The Group attempts to minimize investment r isk througheffect ive due di l igence in advance of investments, conserva-t ive underwr i t ing, rev iews of investment par tners , and con-tractual provisions that l imit the Group’s downside r isk. (seealso other price r isk). On a quar terly basis , the Group reviewsal l investments for potential impairment losses.

> 3 months/no 2008At 31.12.08 in TCHF < 1 month 1–3 months stated maturity Total carrying amount

Cash and cash equivalents 14 930 – – 14 930Derivat ive instruments – – – –Other current assets 345 – – 345Loans – – – –Total financial assets (excl. investments) 15 275 – – 15 275

The Company maintains cash and cash equivalents with prime banks and other reputable f inancial inst i tut ions.

s ions wi th a number of investors , wi th the ul t imate goal of securing long-term financing that would al low the Company tomeet al l of i ts commitments, including the funding of remain -ing capital commitments to private equity funds and the ser-vicing or repayment of exist ing debt. Although there can be noassurance of completing a successful refinancing, the Companyis confident that i t wi l l conclude a transact ion and thereforeconsiders the going concern basis to be appropriate. Shouldthe Company be unsuccessful in completing a ref inancing, theCompany might face accelerat ion of i t s senior debt , whichmight force the Company to sel l a substantial por t ion of theCompany’s investment por tfol io in the secondary market at adiscount to NAV.

In case the Company fai ls to honor a capital drawdown re-ceived from a por t fol io fund, the Company exposes i tsel f tothe fol lowing r isks:– The fund manager retaining the paid in capital to date– Lit igat ion – fund managers are required to take legal

act ion against l imited par tners not honoring capital cal ls .

Currently, the Company is not aware of a precedent casethat would provide detai led insight into the consequences ofmissing capital cal ls .

> 3 months/noAt 31.12.08 (in TCHF) < 1 month 1–3 months stated maturity

Payables and accrued charges 1 165 – 8 314Loans payable 21 346 5 890 74 711Preferred shares – – 163 714Total Liabilities 22 511 5 890 246 739Unfunded commitments – – 744 074

> 3 months/noAt 31.12.07 (in TCHF) < 1 month 1–3 months stated maturity

Payables and accrued charges 30 923 – –Loans payable 107 954 – –Total Liabilities 138 877 – –Unfunded commitments – – 966 417

49


Fair value estimationThe fair value of f inancial instruments quoted in act ive mar-kets is based on quoted market pr ices at the balance sheetdate. The quoted market pr ice used for f inancial assets heldby the Group is the current bid price.

The fair value of f inancial instruments that are not quotedin an act ive market is determined by using information pro -vided to the Company by the fund managers. These valuationsare reviewed by the Company and adjusted wherever neces-sar y (e l iminat ion of any discounts appl ied on l i s ted invest -ments ; consis tent va luat ion of a por t fo l io company wi th invar ious funds etc .) . The fund managers themselves use a var iety of methods and make assumpt ions based on marketcondit ions current at each balance sheet date. Valuat ion tech-niques include mult iple analysis , discounted cash f low analy-sis , reference to transaction prices, reference to the valuationsof other investors and reference to comparable companies .Due to inherent uncer tainty of valuat ions, however, est imatedfair values may dif fer s ignif icantly from the values that wouldhave been used had a readi ly avai lable market for the securi-t ies existed and the dif ferences could be material .

In cases where the carrying amount is a reasonable appro-x imat ion of fa i r va lue (e .g . shor t - term receivables and pay-ables) no addit ional fair value is disclosed. Al l current assetsand current l iabi l i t ies are shor t-term. The carrying amount of f inancial l iabi l i t ies measured at amor t ized cost approximatesfa i r va lue as the interest ra tes are f loat ing on a shor t termbasis and there were no init ia l costs to amor t ize.

For 2008 the Company used repor ts received f rom thefunds to calculate fair value. Expressed in % of total number ofinvestments, 58% represent audited annual repor ts, 7% unau-dited quar ter ly repor ts as per December 31, 2008, 34% unau-di ted valuat ions as per December 31, 2008 and the balanceunaudited quar terly repor ts per June 30/September 30 2008.

Note 16: Contractual AgreementsOn December 22, 1999, the Group entered into three contrac-tual agreements with AIG that enti t le the Group to receive dis-t r ibut ions equal to pro rata share of a l l d is tr ibut ions from aspecif ied l ist of funds, while obligating the Group to make pay-ments equal to pro rata share of al l draw-downs of committedcapital to the same l ist of funds.

Distr ibutions from the underlying fund investments, whichare over the amount of i ts ini t ia l investment plus subsequentpayments are spl i t 90% to the company and 10% to AIG. Theprofi t sharing is intended to compensate AIG for the manage-

ment fees i t paid with respect to the underlying fund invest-ments prior to the contractual agreements, which are not takeninto considerat ion when calculat ing the fair value of the un-derlying fund investments.

As at Apri l 30, 2008, the contractual agreements were un-wound by the Group. Thereby, the Group rendered i ts econo-mic interest in specif ic private equity funds. In agreement withthe counterpar ty , the Group received four funds (Palamon European Equi ty Par tner , Doughty Hanson & Co. I I I , Apol lo Investment Fund IV and Blackstone Capital Par tners I I I) with afair value of CHF 15.4 mil l ion. For the remainder of the fundsthe Group received CHF 20.3 mil l ion from the counterpar ty ,corresponding to the NAV of these funds. The ContractualAgreements were establ ished in 1999 and provided the Groupaccess to a broadly diversi f ied private equity por tfol io. Due tothe matur i ty of the underly ing funds, the Contractual Agree-ments have lost weight in the Group’s por tfolio while requir ingsubstantial administrative resources. As a result, i t was de cidedto unwind the transact ion.

Note 17: Details of AIG Private Equity Portfolio L.P. I

Fair Value (in TCHF) 2008 2007AIG Fund PortfolioAIG Highstar Capital , L.P. 146 174AIG Horizon Par tners Fund, L.P. 723 1 216AIG PEP I Other Assets and Liabi l i t ies 213 1 759 Subtotal 1 082 3 149

Fair Value (in TCHF) 2008 2007Third Party Fund PortfolioInternational Funds Carlyle Europe Venture Par tners, L.P. 143 28GMT Communicat ions Par tners I I , L .P. 1 955 1 921TH Lee.Putnam Internet Par tners, L.P. 938 1 393Subtotal 3 036 3 343

Fair Value (in TCHF) 2008 2007Third Party Fund PortfolioUS Funds Advanced Technology Ventures VI , L.P. 527 637Arrow Path Venture Capital , L.P. 323 406Baker Communicat ions Fund I I , L.P. 2 048 2 744Berkshire Fund V, L.P. 1 469 2 422Blackstone Mezzanine Par tners, L.P. 498 698Boston Mil lennia Par tners I I , L .P. 1 618 1 457

50


Fair Value (in TCHF) 2008 2007Third Party Fund PortfolioUS FundsCarlyle Par tners I I I , L .P. 1 042 869Focus Ventures I I , L .P. 300 437Hear t land Industr ial Par tners LP 711 1 445JK&B Capital I I I , L .P. 954 1 257KRG Capital Fund I , L.P. 2 10Meritage Private Equity Fund, L.P. 649 445Nor th Cast le Capital Par tners I I , L .P. 141 624Questor Par tners Fund I I , L.P. 2 040 1 379RCBA Strategic Par tners, L.P. 45 824Si lver Lake Par tners, L.P. 394 733Technology Crossover Ventures IV, L.P. 1 388 1 753Thayer Equity Investors Fund IV, L.P. 910 1 077Thomas Weisal Capital Par tners, L.P. 566 1 189T WP CEO Founders’ Circle (QP), L.P. 14 30Mesirow Capital Fund 122 193Subtotal 15 761 20 629

Fair Value (in TCHF) 2008 2007Direct Investments PortfolioTheravance 302 505Universal Studio Escape – 3 019Avalon Pharmaceuticals , Inc. 6 72High Response Holdings, Inc. – 121AZ Automotive Corp. 620 935Iomai Corporat ion – 16Springs Industr ies, Inc. 260 570Fresh Direct 259 301Amercian Media – 253AMF Bowling 577 760NovaRay – 38Alt ir is Inc. 62 66Subtotal 2 086 6 656Total 21 965 33 777

Note 18: Share-Based Compensation PlanStock Option PlanThe Company issued the fol lowing incentive stock options inMay 2005. There were no opt ions outs tanding at year-end2008.

The options were granted free of charge. Each option en-t i t les the holder to buy one share of the Company at the exer-cise price. A third of the options are each exercisable after avest ing period of one, two and three years. In case of a termi-nat ion of the working contract during the vest ing period, theunvested options are cancel led. In June 2008 the stock optionplan expired.

Movements in the number of share opt ions outs tandingand their related exercise prices are as fol lows:

2008 2007Average exercise Average exercise

price per share Options price per share Options

At January 1 125.00 15 833 125.00 18 666Granted – –For feited 125.00 – 125.00 –Exercised 125.00 15 833 125.00 (2 833)At December 31 125.00 – 125.00 15 833

All options matured in June 2008, thus no options (2007: 9 000) were exercisable. Options exercised in 2008 were trans-acted as fol lows:

– 500 options at a market price of CHF 163.00– 1 500 options at a market price of CHF 162.50– 4 000 options at a market price of CHF 160.00– 4 000 options at a market price of CHF 158.00– 166 options at a market price of CHF 151.50– 4 000 options at a market price of CHF 151.40– 1 667 options at a market price of CHF 151.00.

The related weighted average share price at exercise wasCHF 156.62 per share.

In the current year, CHF 113 413 (2007: 26 472) was chargedas an e xpense re lat ing to the opt ions resul t ing in a corre-sponding increase to shareholders ’ equi ty by the sameamount.

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Share Appreciation Rights (SARs)Outstanding SARs as at 31 December 2008 are as fol lows:

Number Year of Subscription Strikeof SARs grant Vesting date Expiry ratio price

7 000 2006 15.2.2007 28.2.2009 1:1 CHF 1607 000 2006 15.2.2008 28.2.2009 1:1 CHF 1607 000 2006 15.2.2009 28.2.2009 1:1 CHF 160

8 000 2007 1.3.2008 14.3.2010 1:1 CHF 1608 000 2007 1.3.2009 14.3.2010 1:1 CHF 1608 000 2007 1.3.2010 14.3.2010 1:1 CHF 160

3 984 2008 1.3.2009 14.3.2011 1:1 CHF 1603 983 2008 1.3.2010 14.3.2011 1:1 CHF 1603 983 2008 1.3.2011 14.3.2011 1:1 CHF 160

The SARs were granted free of charge. Each SAR ent i t lesthe holder to receive in cash the dif ference between the str ikeprice and the market price of one share of the Company at theexercise price. A third of the SARs are each exercisable after avest ing period of one, two and three years. In case of a termi-nat ion of the working contract during the vest ing period, theSARs are cancel led.

Movements in the number of stock appreciat ion r ights andtheir related exercise prices are as fol lows:

2008 2007Average exercise Average exercise

price per share SARs price per share SARs

At January 1 160.00 45 000 145.40 27 334Granted 160.00 11 950 160 24 000Exercised – – 97 (6 334)At December 31 160.00 56 950 160.00 45 000

Of the 56 950 SARs (2007: 45 000) , 45 000 SARs (2007: 7 000) were e xerc isable . No SARs were e xerc ised in 2008(2007: 6 833).

In the current year , CHF –529 734 (2007: 433 341) wascharged as an expense relat ing to SARs. The carrying amountat the end of the per iod amounted to CHF 31 348 (2007: 561 118) and the intr insic value at the end of the period of l ia-bi l i t ies for which the counterpar t ’s r ight to cash or other as-sets had vested by the end of the period (for example vestedshare appreciat ion r ights) equals CHF 0 (2007: CHF 70 000).

The fol lowing table l ists the inputs in the models used forthe plan for the years ended 31 December 2008 and 31 Dec-ember 2007:

2008 SARs

Dividend yield (%) 0%Expected volat i l i ty (%) – depending on term 32.47–42.68Risk-free interest rate (%) 0.7247%Expected l i fe of option/SARs (years) 3 yearsWeighted average share price –Model used Black Sholes

(Excel)

2005 Stock Option Plan 2007 SARs

Dividend yield (%) 0% 0%Expected volat i l i ty (%) – depending on term 11.68 7.38–8.90Risk-free interest rate (%) 1.51% 0.9116%Expected l i fe of option/ SARs (years) 3 years 3 yearsWeighed average share price 166.95 --Model used Black Sholes Black Sholes

(E xcel) (E xcel)

Note 19: Commitments, Contingencies and Other Off-balance-sheet TransactionsIn addit ion to those commitments disclosed in the InvestmentSchedule and the Derivative Instruments mentioned in Note 4,the Company has ni l off-balance-sheet transactions open as ofDecember 31, 2008 (2007: ni l off-balance-sheet transact ions).The operations of the Company may be affected by legislat ive,f i sca l and regulator y developments for which provis ions are made where deemed necessary. P lease refer to Note 15 (l iquidity r isk) for addit ional information on commitments.

Note 20: Segment ReportingThe Group operates in the sole business segment of pr ivateequity investments. The geographical analysis of total assetsis determined by speci fy ing in which region the investmentwas made:

in TCHF 2008 2007Nor th America 336 497 373 389Europe 252 281 404 390Rest of the World 47 301 73 583Total 636 079 851 362

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The geographical analysis of total income is determined byspecifying from which region the investment profi ts are gen-erated:

in TCHF 2008 2007Nor th America 2 830 24 322Europe 17 001 103 916Rest of the World (7) 1 423Total 19 824 129 661

*Total Income is determined net of capital losses.

Note 21: Subsequent EventsBetween January 1, 2009 and Apri l 11, 2009, the fol lowing ag-gregate investment related cash f lows have been recorded (bythe par tnerships under the commitments e x is t ing as of December 31, 2008 and direct investments):

Capital Calls (in 1 000) Amount

USD 13 832EUR 11 046JPY 41 798DKK 2 488

Distributions (in 1 000) Amount

USD 2 083EUR 375

In 2009 the Company entered into def ini t ive agreementsto sel l a number of por tfol io funds in the secondary market.They are as fol lows:

• Cognetas I I : the Company received proceeds of EUR 3.47mi l l ion and was re leased of capi ta l commitments of ap-proximately EUR 8 mil l ion. The impact on NAV of this salewas approximately CHF 1.31 per share.

• Emerging European Convergence Fund I I : the Company re-ceived proceeds of EUR 5.39 mil l ion and was released ofcapital commitments of roughly EUR 10 mill ion. The impacton NAV of this sale was approximately CHF 2.04 per share.As the sa les pr ice for above two t ransact ions was nego -t iated relat ively c lose to year-end 2008 the Company re-garded sa les proceeds as the best est imate of year-endvaluat ion.

• Berkshire VI I : the Company received proceeds of USD 5.40mi l l ion and was re leased of capi ta l commitments of ap-proximately USD 23 mill ion. The impact on NAV of this salewas approximately CHF 1.47 per share.

• Doughty Hanson I I I : the Company received proceeds ofUSD 2.3 mil l ion and was released of capital commitmentsof roughly USD 0.5 mil l ion. The impact on NAV of this salewas approximately CHF .62 per share.

• The Company sold eight private equity fund l imited par t-nership interests to a s ingle buyer. Three of the fund in -terests are sold completely (Carlyle IV, EQT I I I , EQT IV) andfive funds were sold par t ial ly (sold 50% of Lion I I , 50% ofEQT V, 50% of Plat inum I I , 40% of Diamond Cast le IV and20% of KRG IV) . Aggregate sa les proceeds amounted toUSD 17.9 mi l l ion. As a resul t of the sa le , the Company’soutstanding commitments to private equity funds wil l de-crease by approximately USD 33 million. The impact on NAVof this transaction was approximately CHF 7.5 per share.

These funds were valued using year-end 2008 repor ts asthe date of the sale took place significantly after year-end 2008.

Since the balance sheet date of December 31, 2008, therehave been no fur ther material events that could impair the in-tegr i ty of the informat ion presented in the f inancia l s ta te-ments.

The consol idated f inancia l s tatements are author ized forissue on Apri l 30, 2009 by the Board of Directors. The annualgeneral meeting cal led for June 2, 2009 wil l vote on the f inalacceptance of the consol idated statements.

53


REPORT OF THE GROUP AUDITORS

As statutory auditor, we have audited the consol idated f inan-cial statements of AIG Private Equity AG, which comprise theconsol idated balance sheet , income statement , s tatement ofcash f lows, statement of changes in shareholders’ equity andnotes (pages 20 to 52), for the year ended 31 December 2008.

Board of Directors’ ResponsibilityThe Board of Directors is responsible for the preparat ion andfair presentat ion of the consol idated f inancia l s tatements inaccordance wi th the Internat ional F inancia l Repor t ing Stan-dards (IFRS) and the accounting provisions of the Addit ionalRules for the List ing of Investment Companies of the SIX SwissE xchange as wel l as the requirements of Swiss law. This re-sponsibi l i ty includes designing, implementing and maintainingan internal control system relevant to the preparat ion and fairpresentat ion of consol idated f inancial statements that are freefrom material misstatement, whether due to fraud or error. TheBoard of Directors is fur ther responsible for select ing and ap -plying appropriate accounting pol ic ies and making accountingest imates that are reasonable in the circumstances.

Auditor’s ResponsibilityOur responsibi l i ty is to express an opinion on these consol i -dated f inancial statements based on our audit . We conductedour audi t in accordance wi th Swiss law and Swiss Audi t ingStandards as wel l as the International Standards on Audit ing.Those standards require that we plan and per form the audit toobtain reasonable assurance whether the consol idated f inan-cial statements are free from material misstatement.

An audit involves per forming procedures to obtain auditevidence about the amounts and disclosures in the consol ida-ted f inancial statements. The procedures selected depend onthe auditor’s judgment, including the assessment of the r isksof mater ia l misstatement of the consol idated f inancia l s tate-ments, whether due to fraud or error. In making those r isk as-sessments, the auditor considers the internal control systemrelevant to the entity’s preparation and fair presentation of theconsolidated f inancial statements in order to design audit pro-cedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effect iveness ofthe ent i ty ’s internal control system. An audi t a lso inc ludes evaluating the appropriateness of the accounting policies usedand the reasonableness of accounting est imates made, as wel l

as evaluat ing the overa l l presentat ion of the consol idated f inancia l s tatements . We bel ieve that the audi t ev idence wehave obtained is suff ic ient and appropriate to provide a basisfor our audit opinion.

OpinionIn our opinion, the consol idated f inancial statements for theyear ended 31 December 2008 give a true and fair view of thefinancial posit ion, the results of operat ions and the cash f lowsin accordance with the International Financial Repor t ing Stan-dards (IFRS) and comply with the accounting provisions of theAddit ional Rules for the Lis t ing of Investment Companies ofthe SIX Swiss E xchange as wel l as with Swiss law.

Without qual i fy ing our opinion, we draw attention to Note15 of the consol idated f inancia l s ta tements which indicates that the Company has defaulted on the covenants of the syn-dicated credit faci l i ty and that nego t iat ions for ref inancing ofthe Group are in progress. These condit ions, along with other matters as set for th in Note 15, indicate the e x is tence of a mater ia l uncer ta inty which may cast s igni f icant doubt aboutthe Group’s abi l i ty to continue as a going concern.

Without qual i fy ing our opinion, and in accordance with ar-t ic le 20 of the Addit ional Rules for the List ing of InvestmentCompanies of the S IX Swiss E xchange, we draw at tent ion toNote 1 of the consolidated financial statements. As indicated inNote 1, the consolidated financial statements include unquotedinvestments stated at their fair value of CHF 620.8 mil l ion. Be-cause of the inherent uncer tainty associated with the valuationof such investments and the absence of a l iquid market, thesefair values may dif fer from their real isable values, and the dif-ference could be material . The fair values of these investmentshave been determined by the Board of Directors and havebeen disc losed in Note 1. We have reviewed the proceduresapplied by the Board of Directors in valuing such investmentsand have viewed the underlying documentat ion. While in thecircumstances the procedures appear to be reasonable and thedocumentat ion appropriate, the determinat ion of fa i r valuesinvolves subject ive judgment which cannot be independentlyveri f ied.

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Report on other legal requirementsWe confirm that we meet the legal requirements on l icensingaccording to the Audi tor Overs ight Act (AOA) and indepen-dence (ar t ic le 728 CO and ar t ic le 11 AOA) and that there areno circumstances incompatible with our independence.

In accordance with ar t icle 728a paragraph 1 item 3 CO andSwiss Audit ing Standard 890, we confirm that an internal con-trol system exists which has been designed for the preparationof consol idated f inancial statements according to the instruc-t ions of the Board of Directors.

We recommend that the consol idated f inancial statementssubmitted to you be approved.

PricewaterhouseCoopers Ltd

Thomas Romer Cornel ia HerzogAudit exper t Audit exper tAuditor in charge

Zürich, Apri l 30, 2009

1. GROUP STRUCTURE AND SHAREHOLDERS

AIG Private Equity Ltd. (the Company) is a holding companyaccording to Swiss law and domici led in Zug. I ts 100% sub s i-diary holds the vast majori ty of investments on i ts behalf .

Both Fund Investments and Direct Investments are invest-ments in pr ivate equi ty which forms the only investment category of the Company. For presentat ion purposes , the investments are divided in the fol lowing three por tfol ios:

– AIG Funds– Third Par ty Funds– Direct Investments

For further information please also refer to the principles of con-solidation section within the consolidated financial statements.See also note 1 of statutory accounts (par t ic ipat ions).

Significant ShareholdersThere are several shareholders with a par t ic ipat ion exceedingthe 3% threshold of the Company’s share capital . The numberof shares and voting r ights of the major shareholders are dis -c losed in note 8 of the consol idated f inancial statements.

ADVISORY AGREEMENTMANAGEMENT

AGREEMENT

SERVICE AGREEMENT I

SERVICE AGREEMENT I I

SHAREHOLDERS

100 %

100 %

INVESTMENTS INVESTMENTS INVESTMENTS

AIG PR IVATE EQUIT Y LTD.ZUG

(COMPANY)

AIG PR IVATE BANK LTD.ZURICH(BANK)

AIG GLOBAL INVESTMENT CORP.

( INVESTMENT ADVISOR)

AIG PR IVATE EQUIT Y MGMT LTD. BERMUDA

(MANAGER)

AIG PR IVATE EQUIT Y (BERMUDA) LTD.

(SUBS IDIARY)

AMERICAN INTERNATIONALCOMPANY LTD.

(SERVICE COMPANY)

AIG FUNDSPORTFOLIO

THIRD PART Y FUNDSPORTFOLIO

DIRECT INVESTMENTSPORTFOLIO

BOARD OF DIRECTORS

INVESTMENTCOMMIT TEE

APEN FAITH MEDIA HOLDINGS LLC

100 %

DIRECT INVEST-MENTS

THIRD PART Y FUNDS

BOARD OF DIRECTORS INVESTMENT COMMITTEE MANAGEMENT BOARD AUDITORSEduardo Leemann, Chairman Dr. Thomas Lips, Chairman Andrew Fletcher PricewaterhouseCoopers Ltd.Dr. Ernst Mäder Steven Costabi le (Fund Investments) Conradin Schneider Birchstrasse 160Dr. Roger Schmid FT Chong (Direct Investments) CH-8050 ZürichRober t Thompson Win NeugerDr. Christ ian Wenger

Organisational Structure

57

AIG PR IVATE EQUIT Y GROUP – CORPORATE GOVERNANCE

CORPORATE GOVERNANCE AT AIG PR IVATE EQUIT Y LTD.

February 1, 2009. AIG Private Bank Ltd. sold AIG Private Equity Management Ltd. to AIG Investments (Swit zerland) Ltd. , a sub -s idiary of AIG, Inc. At the same t ime the Service Agreement I I was transferred from AIG Private Bank Ltd. to AIG Investments (Swit zerland) Ltd.

58


2. CAPITAL STRUCTURE

CapitalAs of December 31, 2008 the issued share capital of the Com-pany was CHF 412 500 000, div ided into 4 125 000 ful ly paid regis tered shares wi th a nominal amount of CHF 100 each. As per the same date 3 929 185 shares were outstanding andthe Company held 195 815 shares as treasury shares. The mar-ket capi ta l izat ion of the Company per year-end amounts toCHF 149.1 mil l ion.

The shares are l isted on the SIX Swiss E xchange.

Changes of capitalOn June 13, 2000 the Company increased its share capital fromCHF 184 000 000 to CHF 317 500 000 by issuing 1 335 000 ful lypaid-in shares with a nominal value of CHF 100.00 at a price ofCHF 150.00 per share.

On June 28, 2006 the Company increased i ts share capitalfrom CHF 317 500 000 to CHF 412 500 000 by issuing 950 000shares of which 736 013 were paid- in shares with a nominalvalue of CHF 100.00 at a price of CHF 158.50 The balance of213 987 shares were subscribed by the Company.

Shares and participation certificatesThere are no preferent ia l r ights or s imilar r ights . Each share is ent i t led to one vote and has fu l l d iv idend r ights . Vot ingr ights may be e xerc ised only af ter a shareholder has been registered in the Company’s share register. No shares and/orshare cer t i f icates wi l l be issued to shareholders . Two GlobalShare Cer t i f icates (“Globalurkunde auf Dauer”) are deposited with S IX S IS Ltd. under Swiss Secur i ty number 915.331, I S INCHF0009153310. Transfers of shares are ef fected through abook-entry system maintained by SIX S IS Ltd.

There are neither par t ic ipat ion cer t i f icates nor profi t shar -ing cer t i f icates.

Authorized and conditional capitalThe board of directors is enti t led to an increase in authorizedcapi ta l up to a maximum amount of CHF 206 250 000 by issuing no more than 2 062 500 shares wi th a nominal of CHF 100.–. The durat ion of the author izat ion per iod expiresMay 30, 2009.

The board of d i rectors is ent i t led to an increase in con -dit ional capital up to a maximum amount of CHF 206 250 000by issuing no more than 2 062 500 shares with a nominal ofCHF 100.–.

Shares for which subscript ion r ights were granted but notexecuted are at the board of director’s disposal .

The pre-emptive rights of the shareholders can be ex cludedin case of acquisit ions of other companies or additional l ist ingsto foreign stock exchanges. I f doing so, the board of directorsis not allowed to fix the issuing price under the Net Asset Valueof the shares of the Company.

See also Ar t ic le 4 b of the ar t ic les of associat ion (avai l ableat www.aigprivateequity.com).

Limitations of transferability and nominee registrationsThe Company’s shares are f reely t ransferable , wi thout any limitations, provided that the buyers declare they are the bene-f ic ia l owners of the shares and comply wi th the disc losure requirements of the Federal Act on Stock E xchanges and Secu -r i t ies Trading of March 24, 1995.

Nominees who act as f iduciar ies of shareholders are en -tered without fur ther inquiry in the Company’s share registeras shareholders with voting r ights up to a maximum of 3% ofthe outstanding capital avai lable at the t ime.

See also Ar t ic le 4 of the ar t ic les of associat ion.

Convertible Bonds and WarrantsThere are no conver t ib le bonds and warrants issued by theCompany or by i ts subsidiar ies on shares of the Company out-standing.

59


3. BOARD OF DIRECTORS

ResponsibilitiesThe board of directors consists of one or more members. Theboard of directors is ult imately responsible for the policies andmanagement of the corporat ion. The board establ ishes thestrategic, accounting, organizat ional and f inancing pol ic ies tobe followed by the corporation. The board fur ther appoints theexecut ive of f icers and the author ized s ignator ies of the cor -porat ion, supervises the management of the corporat ion andmonitors the investment decis ions. Moreover, the board is en-trusted with preparing shareholders’ meetings and carrying outshareholders resolutions. The board may, pursuant to i ts regu -lations, delegate the conduct of day-to-day business oper ationsto management under i ts control . The board approves al l com-pensation upon proposal of the chairman.

Meeting scheduleThe board usual ly meets four t imes per year in person (mini-mum twice) . The regular meet ings are typical ly held in Feb -ruary , May, August and November. Addi t ional meet ings arecal led on shor t notice i f and when required. In the year underrev iew, e ight board meet ings took place. Each of the boardmeetings has a special focus which is basical ly connected tothe Company’s repor t ing rhy thm. Such focuses are the f inan-c ia l s ta tements , inter im resul ts , the medium-term plan, in-vestments , fore ign e xchange e xposure, the annual genera lmeeting and corporate governance. The members of the man -agement committee are invited to attend the board meetingsand have at tended a l l e ight board meet ings . The board re -solves by major i ty vote wi th the presence of a major i ty ofmembers. The average durat ion of a board meeting is ninetyminutes.

Principles of the election procedureThe members of the Board wil l be elected by the annual gen -era l meet ing according to Ar t ic le 11 of the ar t ic les of asso -ciat ion. The term of off ice for al l members is three years withthe possibi l i ty of repeated re-elect ion.

Members of the board of directors

Eduardo Leemann, born 1956, Swiss c i t izen, Chairman, non-executive member, term of off ice expires in 2009.

Mr. Leemann joined AIG Investments in 1997 as Chief E xe-cut ive Off icer of AIG Pr ivate Bank in Zur ich ser v ing la ter asChairman of the Board for AIG Pr ivate Bank. He recent ly returned to the Executive Board of AIG Private Bank and is nowappointed Chief E xecut ive Off icer of AIG Pr ivate Bank Ltd . ,

Senior Managing Director and Head of AIG Global Weal th Management. He previously worked at Goldman, Sachs & CoBank as Member of the Management Committee and Head ofPrivate Banking. Prior to that , Mr. Leemann was Deputy to theHead of Pr ivate Banking wor ldwide at Bank Jul ius Baer wi th direct responsibil i t ies for the Western Hemisphere, Switzerlandas wel l as the overa l l market ing ef for t in Pr ivate Banking. Previously, he was responsible for building the private bankingbusiness of Bank Julius Baer in their New York branch. EduardoLeemann is a graduate of the Swiss School of Economics andBusiness Administration (SEBA) and of the Advanced ExecutiveProgram of the J .L. Kel logg Graduate School of Managementat the Nor thwestern Universi ty in Chicago, USA.

Mr. Leemann became Chairman of the Company’s board ofdirectors in September 1999.

Mr. Leemann also serves on the Board of Directors of AIGInternational Real Estate GmbH & Co. KgaA, a l isted real estatecompany in Frankfur t , Germany. Mr. Leemann also serves as amember of the board of directors of S IX Group.

Dr. Ernst Mäder, born 1954, Swiss cit izen, non-executive mem-ber, term of off ice expires in 2009.

Current ly CFO and C IO of the Swiss Nat ional Acc ident Insurance Fund, Dr. Mäder has had an ex tensive career withleading Swiss banks. He served Credit Suisse Private Bankingas Head of Investment Research and Credit Suisse First Bostonas Head of the Fixed Income & Derivat ives Research Depar t-ment Swit zer land/Europe. Ear l ier in his career , he spent tenyears at UBS Zurich working with the Economic Depar tment,Investment Research and the Asset Management . Dr. Mäderholds an Economics degree from the Universi ty of Zurich withpost-graduate studies in “the use of VAR-models in forecastinginterest rates and analysing data.”

Mr. Mäder jo ined the Company’s board of d i rectors in December 2000.

Dr. Roger Schmid, born 1959, Swiss c i t izen, non-execut ivemember, term of off ice expires in 2009.

Mr. Schmid jo ined Ernst Goehner Foundat ion in 1996 as Managing Director and became a member of the board oftrustees in 2005. Pr ior to joining Ernst Goehner Foundat ion,Mr. Schmid worked for f ive years with Bank Leu Ltd. as coun-selor-at- law and became a Member of the Senior Managementin 1995. Mr. Schmid received a degree in law from Zurich Uni-versi ty. His professional education includes training programsand work in South Afr ica, England and the United States.

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Mr. Schmid jo ined the Company’s board of d i rectors inSeptember 1999.

Mr. Schmid also serves as a non-executive member on theboard of directors of Panalpina Welttranspor t (Holding) Ltd.

Robert Thompson, born 1954, US ci t izen, non-executive mem-ber, term of off ice expires in 2010.

Mr. Thompson is the Head of AIG Investments worldwideAl ternat ive Investments bus iness , hav ing jo ined AIG Invest -ments in 2005. Mr. Thompson was a co-founder and managingmember of Ferrer Freeman Thompson & Co. , LLC, (“FFT”), aprivate equity f irm. Prior to FFT, he was Managing Director andEqui ty Group Leader at GE Capi ta l . Mr. Thompson founded, organized, and developed GE Capital ’s Private Equity act ivi t iesthroughout the United States, Europe, Asia and Lat in America.Mr. Thompson has over 18 years of experience in al l segmentsof the pr ivate equi ty bus iness inc luding fund investments ,mezzanine investments, direct investments, joint ventures andleveraged buyouts . He current ly serves on Investment Com-mittees for AIG Investments’ al ternative investments act ivi t ies.Mr. Thompson received an AB in Economics f rom Harvard College and an MBA from Stanford Universi ty.

Mr. Thompson joined the Company’s board of directors inMay 2007.

Dr. Christian C. Wenger, born 1964, Swiss c i t izen, non-exe -cut ive member, term of off ice expires in 2009.

Mr. Wenger is a lawyer and a par tner at the wel l -known law firm of Wenger & Vieli in Zurich. He joined the firm in 1996and became par tner in 1999. Mr. Wenger is specia l ized in commercial and business law, with a focus on Private Equity,Venture Capital and M&A. Mr. Wenger is member of the man -agement board of SEC A (Swiss Associat ion for Private Equityand Corporate Finance) as wel l as president of CTI Invest , aninvestors’ organizat ion associated with KTI , the Swiss federalgovernment’s agency to promote innovation. In the scope ofhis professional act iv i t ies, Mr. Wenger is member of the boardof severa l Swiss as wel l as internat ional companies . He re -ce ived a degree in law f rom Zur ich Univers i ty (Dr. iur) andcompleted his s tudies wi th an LL.M at Duke Univers i ty LawSchool, Nor th Carol ina.

Mr. Wenger jo ined the Company’s board of d i rectors inMay 2006.

Mr. Wenger a lso ser ves as a non-execut ive member of the board of directors of Looser Holding Ltd. and AIG PrivateBank Ltd.

Internal Organisation and definition of areas of responsibilityThe pr inc ipal responsib i l i t ies of the board of d i rectors en -compass:

– Establ ishment of strategic, organizat ional , repor t ing and f inancial pol ic ies

– Appointment of executive off icers– Definit ion of investment pol icy and supervis ion of i ts

implementat ion– Preparat ion and execution of annual shareholders

meetingThey are summarized in Ar t ic le 13 of the ar t ic les of asso-

ciat ion (avai lable at www.aigprivateequity.com).In view of the relat ively small board of directors and the

complexity of the tasks, the board did not const i tute any morecommittees.

The board of directors has delegated to the ManagementCommittee the coordinat ion of the day-to-day business oper -a t ions of the company. See a lso Ar t ic le 3 of the Internal Regulat ions of the Board of Directors (avai lable at www.aig-privateequity.com). The board of directors has not concludedany contracts with third par t ies to manage the business.

For the tasks and responsibi l i t ies of the board see internalregulat ions of the board of d i rectors (avai lable at www.aig -privateequity.com).

Information and control instruments vis-à-vis the management boardIn order to al low fulf i lment of i ts supervising duties, the boardof directors is provided with the fol lowing information:

– Discussions with the management during the board ofdirectors meetings, telephone conferences, etc.

– Quar terly, Semi-annual and Annual repor ts– Auditors repor t on the annual audit of the f inancial

statements

Members of the management committee par t ic ipate at everymeeting of the board i f directors. Addit ional ly , the membersof the management committee engage on a frequent basis withthe chairman of the board and other members of the board ofdirectors.

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4. INVESTMENT COMMITTEE

Dr.Thomas Lips, Chairman of the Investment CommitteeDr. Lips is Chief Investment Off icer for AIG Global InvestmentCorp. (Swit zerland) Ltd. and is responsible for direct ing Euro-pean Equit ies act iv i t ies. Pr ior to joining the AIG Companies in1998, he was at Goldman, Sachs & Co. Bank as Chief Invest-ment Off icer responsible for bui lding the private and inst i tu-t ional asset management bus iness in Swi t zer land. Pr ior toGoldman, Sachs & Co., Dr. Lips was head of Investment Coun-sel ing and Research for Union Bank of Swit zer land. Dr. L ipsstudied at the Universit ies of Fribourg, Basel and Zurich, wherehe received his Doctorate Degree in Economics . He is the found ing member of the board of the Swiss Training Center forInvestment Managers , and a member of the edi t ing body ofthe Swiss Associat ion for Investment Research. He is also theChairman of the Swiss Associat ion of F inancia l Analysts and Investment Managers. Dr. Lips is a member of the AIG GlobalInvestment Pol icy Committee.

Steven Costabile (fund investments)Mr. Costabile joined AIG Global Investment Group in 2000 andis the Managing Director of the Pr ivate Equity Funds Group.Mr. Costabi le has played a s igni f icant ro le in the successfu lgrowth of three product l ines, P inestreet LLC, PineStar (sec -ondaries) and the PEP (primary) program. Mr. Costabi le ser-ves on the Developed Markets Fund Investment Committee,APEN Investment Committee and Asian Pr ivate Equity FundsInvestment Commit tee. His current responsib i l i t ies inc ludeoverseeing a l l pr ivate equi ty funds investments in the de -ve loped markets , as wel l as sourc ing, due di l igence, moni -tor ing product development , and market ing. From 1997 to2000, Mr. Costabi le was a Vice President at Credit Suisse FirstBoston (CSFB) in the Pr ivate Funds Group, wi th a focus on investments on behalf of CSFB and third par ty investors. Pr iorto that , he was the Senior Investment Off icer of A l ternat ive Investments for the Commonwealth of Massachusetts and theAssistant Director of Venture Capital for the Commonwealth ofPennsylvania. In both posit ions, Mr. Costabi le focused on pri-vate equity fund investments. He received both a BSBA and anMBA from Duquesne University. He is also a CFA char ter holderand holds a Series 7 l icense.

FT Chong (direct investments)Mr. Chong joined AIG Investments in 1998 and currently leadsthe Direct Investments Team which focuses on private equityand mezzanine invest ing in developed markets such as theUnited States and Europe. Mr. Chong has worked in buyoutsand leveraged f inancing since 1981. Mr. Chong is currently adirector of a number of companies inc luding Fresh Direct .Prior to joining AIG Investments, Mr. Chong was Executive VicePres ident for Bus iness Development for the GT Group, anAsian conglomerate, from 1994 to 1998. In the early 1990’s hewas a founder and CFO of DynadxTechnologies, Inc. , a star t-upcompany that developed and marketed a new out-of -home adver t is ing technology. From 1981 to 1989 he was head of theUSD 3 bi l l ion US leveraged f inance group at Swiss Bank Corp.and par t ic ipated in or led the f inancing for more than twodozen high prof i le leveraged buyouts . He received an MBAfrom Columbia Universi ty and also has a degree in ChemicalEngineering from the Universi ty of Malaya.

Win J. NeugerMr. Neuger is Chairman and CEO of AIG Investments and is responsible for directing strategies on a worldwide basis. Heis a lso an E xecut ive Vice President and unt i l 2009 served asChief Investment Off icer of AIG. He also served as a memberof the board of d i rectors of the Company f rom 2006–2007. Mr. Neuger joined AIG Investments in 1995, with investment management e xper ience s ince 1973. Before jo in ing AIG Investments , he was wi th Bankers Trust Company, where heserved both as Managing Director , F ixed Income and, sub -sequently, Managing Director, Global Equit ies. Pr ior to joiningBankers Trust , Mr. Neuger served as Chief Investment Off icerat Western Asset Management. He was also the Head of FixedIncome at Nor thwestern Nat ional Bank in Minnesota . Mr. Neuger received an AB from Dar tmouth College and an MBAfrom Dar tmouth’s Amos Tuck Graduate School of Business. Heis a CFA char terholder and is a member of the New York Society of Securi ty Analysts (NYSSA), CFA Inst i tute (formerlyAIMR), and the Counci l on Foreign Relat ions.

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5. MANAGEMENT BOARD

Members of the Management Board

Andrew Fletcher, born 1964, US ci t izen.Mr. Fletcher joined the Company in 2001. Mr. Fletcher is alsoa member of the management board of AIG Global InvestmentCorp. (Swi t zer land) Ltd . , responsib le for a l ternat ive invest -ments and structured products, and a managing director of AIGInternational Real Estate GmbH & Co. KGaA, a l isted real estatecompany in Frankfur t , and i ts subsidiar ies. Pr ior to 2001, Mr.Fletcher worked for four years as Assistant General Counsel inAIG’s corporate law depar tment in New York and for s ix yearsin pr ivate pract ice. He is a graduate of Harvard Col lege andHarvard Law School.

Mr. Fletcher is also a member of the management board ofAIG International Real Estate GmbH & Co. KGaA, a l isted realestate company in Frankfur t , Germany. He is also a member ofthe management board of AIG Private Bank Ltd. , Zurich.

Conradin Schneider, born 1962, Swiss ci t izen.Mr. Schneider joined the AIG Companies in 1999. He was in-volved in establ ishing and l ist ing the Company, a Swiss l istedprivate equity investment company, on the SIX Swiss Exchange.With the Company Mr. Schneider is responsible for screeningprivate equity funds and direct investment oppor tunit ies andfor operat ions. Pr ior to jo in ing AIG, Mr. Schneider was wi thAvent ic Ltd. , the pr ivate equity vehic le of UBS for smal l andmedium sized companies in Swit zer land. Pr ior to his assign-ment wi th UBS-Avent ic , he worked 8 years as a corporate banker wi th UBS wi th a focus on Swiss mul t inat ionals . Mr.Schneider received his graduate degree from the Universi ty ofSt . Gal l , Swit zerland, special iz ing in banking and economics.

Mr. Schneider is also a member of the board of directors ofMV Leverage Finance Limited and AIG MezzVest I I , and a mem-ber of the management board of AIG International Real EstateGmbH & Co. KGaA, a l isted real estate company in Frankfur t ,Germany. He is also a member of the management board ofAIG Private Bank Ltd. , Zurich.

Investment Process DiagramManagement &

Investment Advisor

InvestmentCommittee

Board of Directors

Subsidiary

Sourcing EvaluationInvestment

Memorandum

Negotiation

of Terms

Investment

ApprovalMonitoring Exit

Recommendations

The Investment Commit tee is appointed by the board of directors of the Subsidiary and is responsible for assessing theinvestment oppor tunit ies presented by the Manager and theInvestment Advisor and subsequent ly making investment recommendations to the board of directors of the Subsidiaryfor approval by the latter. See also note 14 to the consolidatedfinancial statements.

I t also has to be noted that three members of the Invest-ment Committee (W. Neuger, S. Costabi le and FT Chong) ofthe Subsid iar y are senior e xecut ives and members of the Investment Committee of AIG.

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6. COMPENSATIONS, SHAREHOLDINGS AND LOANS

Content and method of determining the compensationsThe compensat ion of the Board of Directors l ies in the re-sponsib i l i ty of the genera l meet ing. The Board of Directors approves compensation (including the share option plan) for

the management board upon proposal of the Chairman. Theshare based compensat ion plan is des igned to ensure that the Company maintains a competit ive bonus program in orderto recruit , retain and motivate management in the overal l in-terest of shareholders.

SubscriptionNumber of options Year of grant Vesting date Expiry Date ratio Strike Price

7 000 2006 15.2.2007 28.2.2009 1:1 CHF 1607 000 2006 15.2.2008 28.2.2009 1:1 CHF 1607 000 2006 15.2.2009 28.2.2009 1:1 CHF 160

Number of SARs

8 000 2007 01.3.2008 14.3.2010 1:1 CHF 1608 000 2007 01.3.2009 14.3.2010 1:1 CHF 1608 000 2007 01.3.2010 14.3.2010 1:1 CHF 160

3 984 2008 15.3.2009 28.3.2011 1:1 CHF 1603 983 2008 15.3.2010 28.3.2011 1:1 CHF 1603 983 2008 15.3.2011 28.3.2011 1:1 CHF 160

Share-based compensation plansThe members of Management of the Company have the optionto exerc ise an aggregate of 56 950 stock appreciat ion r ights

(SARs) of the Company over a per iod of three years . As of 31 December 2008, they held the fol lowing stock appreciat ionrights:

As of 31 December 2008, the members of Management of theCompany held no stock options.

No stock appreciat ion r ights but 15 833 options were exer-c ised in 2008. No other opt ions to purchase shares of theCompany have been issued by the Company.

Highest total compensation of Board of Directors memberSee above, total of compensations for both boards.

Base Variable Other Total Share-All figures in CHF Compensation Compensation*1 Compensation**1 20081 holdings2 SARs3

Board of DirectorsEduardo Leemann 60 000 2 000 8 193 70 193 200 –Erich Hor t (unti l May 2007) 12 500 500 1 469 14 469 – –Dr. Ernst Mäder 30 000 1 500 3 560 35 060 – –Dr. Roger Schmid 30 000 2 000 – 32 000 750 –Rober t Thompson – – – – – –Dr. Christ ian Wenger 30 000 2 000 - 32 000 – –Total Board of Directors 162 500 8 000 13 222 183 722 950 –

Management BoardAndrew Fletcher 250 120 – 31 898 282 018 6 668 –Conradin Schneider – – – – 3 000 –Total Management Board 250 120 – 31 898 282 018 3 000 –



64


7. SHAREHOLDER’S PARTICIPATION RIGHTS

Voting-rights restrictions and representationsEach registered share in the Company is enti t led to one vote.See also Ar ticle 7 section 1 in the ar ticles of association. Votingr ights may be e xerc ised only af ter a shareholder has been registered as shareholder with voting r ights in the Company’sshare register.

Rules on participating the general meeting if different from lawNo restr ict ions. See Ar t ic le 7 sect ion 2 in the ar t ic les of asso-ciat ion.

Statutory quoraThe s tatutor y quora comply wi th the appl icable legal regu-lat ions. See Ar t ic le 8 in the ar t ic les of associat ion.

Convocation of the general meeting of shareholdersand proposal for agenda items The convocat ion of the Shareholders’ Meeting complies withthe appl icable legal regulat ions . The convocat ion may a lso be requested by one or severa l shareholders represent ing together at least ten percent of the share capi ta l . See a lso Ar t ic les 5 and 6 in the ar t ic les of associat ion.

Registration in the share registerThere is no statutory rule on the deadline for registering share-holders in connect ion wi th the at tendance of the Annual General Meeting. In 2009, the qual i fy ing date is May 8, whilethe Annual General Meeting wil l be held on June 2.

8. CHANGES OF CONTROL AND DEFENCE MEASURES

Duty to make an offerThe Company refrains from the duty to make an offer (opting-out; see also Ar t ic le 23 in the ar t ic les of associat ion) pursuantto Ar t ic le 32 of the Federal Stock E xchange Act (SESTA).

9. AUDITORS

Date of assumption of the existing auditing mandatePriceWaterhouseCoopers (PWC) was re-elected for another 3years at the general meeting on May 28, 2008.

Responsible Par tner: Thomas Romer (since 2004)Responsible Director: Cornel ia Herzog (since 2008)

Total of auditing honorariums 2008CHF 150 640

Additional honorariumsTax-consult ing CHF 114 194

Supervisory and control instruments vis-à-vis the auditors, control instrumentsSince there is no Audit Committee, the Auditors’ repor t wil l bepresented to the whole Board of Directors as a par t of the annual repor t .

In addit ion to that , the responsible Auditor par t ic ipates inthe annual general meeting and is standing by for quest ionsand detai led audit information.

10. INFORMATION POLICY

The Company aims to offer the shareholders a high degree oftransparency. In this respect the Company publishes an annualrepor t , a semi-annual repor t and three quar ter ly repor ts . In addi t ion, the Company publ ishes the net asset va lue of theCompany on a monthly basis .

In between the quar ter ly repor t publ icat ions relevant in-formation ( including information subject to Ad-hoc publ ic i tyaccording to sect ion 72 of the SIX List ing Rules) is publishedin the form of press releases and avai lable at www.aigprivate-equity.com.

66

AIG PR IVATE EQUIT Y LTD. – F INANCIAL STATEMENTS 2008

BALANCE SHEET AS OF DECEMBER 31, 2008 AND DECEMBER 31, 2007

in TCHF

Note 2008 2007Assets

Current Assets

– Cash and cash equivalents 237 26

– Loans to subsidiary 2 185 25 150

– Derivat ive instruments 5 – 1 645

– Prepayments 141 219

– Own shares 3 7 431 27 847

9 994 54 887Long-term Assets

– Par t ic ipat ion 1 379 011 546 716

– Direct Investments 8 1 243 2 170

– Funds 8 3 762 3 041

384 016 551 927Total Assets 394 010 606 814

Liabilities and Shareholders’ EquityCurrent Liabi l i t ies

– Payables 213 265

– Accrued charges 660 1 135

– Bank loan 27 236 25 015

28 109 26 416Shareholders’ Equity

– Share capital 2, 6 412 500 412 500

– Reserve (non-disposable) 82 500 82 500

– Share capital premium 61 607 61 607

Total Share Capital Premium 144 107 144 107– Less: reserve set aside for own shares –24 573 –21 729

119 534 122 378– Reserve for own shares 30 691 27 847

– Reserve for stock option plan 4 – 182

– Retained earnings –196 824 17 491

Total Shareholders’ Equity 365 901 580 398 Total Liabilities and Shareholders’ Equity 394 010 606 814

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INCOME STATEMENT FOR THE PERIOD JANUARY 1 TO DECEMBER 31, 2008 AND JANUARY 1 TO DECEMBER 31, 2007in TCHF

Note 2008 2007Income

Dividend income from non-current assets 2 –

Gain on derivat ive instruments 5 – 2 642

Net real ized gains on investments – 1 566

Interest income from current assets 1 314 210

Gain on foreign currency exchange 3 009 10

Gain on sale of own shares – 346

Total Income 4 325 4 774

ExpensesService fees 301 301

Other operat ing expenses 2 093 1 499

Personnel expenses 99 830

Interest expense 2 292 –

Loss on par t ic ipat ion 186 173 –

Loss on foreign currency exchange 2 333 112

Loss on sale of own shares 3 26 –

Value adjustment on own shares 23 260 –

Value adjustment on investments 2 035 –

Tax expense 28 152

Total Expenses 218 640 2 886

Net profit for the year (214 315) 1 888

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AIG Private Equity Ltd. , Zug (“the Company”) is a Swiss stockcorporat ion establ ished under the relevant provis ions of theSwiss Code of Obligations and domici led in Zug. The Companywas establ ished by AIG Pr ivate Bank Ltd. on September 17,1999 for an indefinite period of t ime and was registered in thecommercia l register of the Canton of Zug on September 20,1999. The Company, together wi th AIG Pr ivate Equi ty (Ber-muda) Ltd . and APEN Fai th Media Holdings LLC (“ the Sub -s id iar ies”) , comprises the AIG PE Group (“the Group”) . TheCompany’s shares are l isted on the SIX Swiss E xchange sinceOctober 12, 1999.

The Company’s investment object ive is to achieve long-term capi ta l growth for shareholders by invest ing in pr ivateequity funds. The Company may also make direct investmentsin operat ing companies . A l though the Company may invest directly in fund investments or companies, it is anticipated thatinvestments wil l general ly be made through the Subsidiar ies.

The valuation of AIG Private Equity (Bermuda) Ltd. is basedon the going concern assumption of this enti ty. Although theCompany is in breach of cer tain covenants on i ts senior debtf inancing (USD 70 mil l ion outstanding), and the lenders couldrequire accelerated repayment of the entire amount, the Com-pany is in ongoing and act ive negot iat ions with the bank ingconsor t ium and has engaged advisors and been in discussionswith a number of investors, with the ult imate goal of securinglong-term f inancing that would al low the Company to meet al lof i ts commitments, including the funding of remain ing capitalcommitments to private equity funds and the servicing or re-payment of exist ing debt. Although there can be no assurancesof complet ing a successful ref inancing, the Company is con -f ident that i t wi l l conclude a t ransact ion and therefore con -siders the going concern basis to be appropriate. Should theCompany be unsuccessfu l in complet ing a ref inancing, theCompany might face accelerat ion of i t s senior debt , whichmight force the Company to sel l a substantial por t ion of theCompany’s investment por tfol io in the secondary market at adiscount to NAV.

2. Authorized and Conditional Share Capital As per December 31, 2008 the Company has CHF 206.25 mil-l ion (2007: CHF 206.25 mil l ion) authorized share capital out-s tanding. This author ized share capi ta l wi l l e xpire at end ofMay 2009.

As per December 31, 2008 the Company has CHF 206.25mil l ion (2007: CHF 206.25 mil l ion) condit ional share capitaloutstanding.

NOTES TO THE F INANCIAL STATEMENTS in TCHF

1. ParticipationLocation Capital held Nominal Value Paid Book value Book value

in % in TUSD in TUSD in TCHF in TCHF

31.12.08 31.12.07 AIG Private Equity (Bermuda) Ltd. Pembroke, Bermuda 100 702 663 495 870 369 428 537 680APEN Faith Media Holdings LLC. Delaware, USA 100 – 9 780 9 584 9 036Total 702 663 505 650 379 012 546 716

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3. Balances and transactions with own shares

Number Amount CHF

Balance as of January 1, 2008 175 973Disposal (sold at CHF 151.00)* –1 833 –276 783Disposal (sold at CHF 151.40)* –4 000 –605 600Disposal (sold at CHF 158.00)* –4 000 –632 000Disposal (sold at CHF 160.00)* –4 000 –640 000Disposal (sold at CHF 162.50)* –1 500 –243 750Disposal (sold at CHF 163.00)* –500 –81 500Purchase (purchased at CHF 150.00) 21 800 3 270 000Purchase (purchased at CHF 151.00) 9 300 1 404 300Purchase (purchased at CHF 151.50) 4 100 621 150Purchase (purchased at CHF 151.90) 125 18 988Purchase (purchased at CHF 120.00) 250 30 000Purchase (purchased at CHF 102.00) 50 5 100Purchase (purchased at CHF 100.00) 50 5 000Total 195 815 2 874 905Real ized loss on sale of own shares 2008 –25 698Book Value as of December 31, 2008 30 691 162

* This relates to equity sett lement of options exercised during the year.

6. Shareholders’ EquityThe following major shareholders held shares and voting rights of 3% and more as of December 31, 2007:

Number of Shares Participation in % Number of Shares Participation in %

2008 2008 2007 2007American International Underwriters Overseas Ltd. 413 500 10.02 413 500 10.02AIG Life (Ireland) Ltd. 1 018 881 24.70 1 160 127 28.12AIG Private Equity Ltd. 195 815 4.75 228 806 5.55AIG, Inc. 373 581 9.06 – –Ernst Göhner St i f tung 267 000 6.47 267 000 6.47SUVA, Schweiz. Unfal lversicherungsanstalt 127 500 3.09 127 500 3.09Axa Winter thur 167 000 4.05 167 000 4.05Mobil iar 152 500 3.70 – –

* On September 25, 2008 Schweizerische Mobil iar Versicherungsgesel lschaft informed the Company that i ts shareholding has increased above 3%.

4. Reserve for Own Shares

At the end of 2008 the Reserve for Own Shares amounts to CHF 30 691 162. The increase of CHF 2 849 207 has beenposted against Share Capital Premium – see also point 3 of thenotes.

5. Derivative Instruments Forward Exchange Transactions

2008As of December 31, 2008, the Company had no open foreignexchange contracts.

2007As of December 31, 2007 the Company had one open foreignexchange forward contract:

Contractual Exchange Positive Nominal Maturity exchange rate at replacementamount date rate year end value

USD 20 000 000 23.4.2008 1.1640 1.1329 CHF 622 000

70


7. Compensation, shareholdings and loansThe compensation of the Board of Directors l ies in the responsibi l i ty of the general meeting. The Board of Directors approvescompensation (including the share option plan) for the management board upon proposal of the Chairman.

2008 Base Variable Other Total Share-All amounts in CHF Compensation Compensation*1 Compensation**1 20081 holdings2 SARs3

Board of DirectorsEduardo Leemann 60 000 2 000 8 193 70 193 200 –Erich Hor t (unti l May 2007) 12 500 500 1 469 14 469 – –Dr. Ernst Mäder 30 000 1 500 3 560 35 060 – –Dr. Roger Schmid 30 000 2 000 – 32 000 750 –Rober t Thompson – – – – – –Dr. Christ ian Wenger 30 000 2 000 - 32 000 – –Total Board of Directors 162 500 8 000 13 222 183 722 950 –

ManagementAndrew Fletcher 250 120 – 31 898 282 018 6 668 –Conradin Schneider – – – – 3 000 –Total Management 250 120 – – 282 018 3 000 –



2007 Base Variable Other Total Share-All figures in CHF Compensation1 Compensation*1 Compensation**1 20071 holdings2 SARs3

Board of DirectorsEduardo Leemann 60 000 2 500 6 967 69 467 200 –Erich Hor t (unti l May 2007) 30 000 2 000 2 936 34 936 – –Dr. Ernst Mäder 30 000 2 500 2 909 35 409 – –Win Neuger – – – – – –Dr. Roger Schmid 30 000 1 500 – 31 500 750 –Rober t Thompson (as from May 2007) – – – – – –Dr. Christ ian Wenger 17 500 1 500 – 19 000 – –Total Board of Directors 167 500 10 000 12 812 190 312 950 –

ManagementAndrew Fletcher 242 319 – – 242 319 1 000 15 000Conradin Schneider – – – – 3 334 7 500Total Management 242 319 – – 242 319 4 334 22 500



71


Share-based compensation plansThe members of Management of the Company have the optionto exercise an aggregate of 56 950 stock appreciat ion r ights ofthe Company over a period of three years.

As of 31 December 2008, they held the fol lowing stock ap-preciat ion r ights and stock options:

8. InvestmentsThe Company holds one direct investment (Her tz) and threeprivate equity par tnerships (Carlyle Japan Par tners I I , L.P.; Uni-son Capital Par tners I I and Unison Standby Faci l i ty) . The bookvalues of these investments are as fol lows (in TCHF):

Her tz 2 170Carlyle Japan Par tners I I 2 153Unison Capital Par tners I I 2 213Unison Standby Faci l i ty 277

9. Risk Assessment The risk management system of AIG Private Equity Group com-pr ises f inancia l and operat ive r isks . By def in i t ion a r isk is apossible impact of a negative event that could harm the com-pany’s goals . Basical ly the r isk management system is a par tof the internal control system. On di f ferent level there are proact ive preventat ive and minimizing procedures in place totreat r isks as an integrate par t of management’s responsibi l i ty.Here by operat ive r isks are handled by def ined competencieswhere they occur.

10. Subsequent EventsSince the balance sheet date of December 31, 2008, there havebeen no material events that could impair the integri ty of theinformation presented in the f inancial statements.

SubscriptionNumber of options Year of grant Vesting date Expiry Date ratio Strike Price

7 000 2006 15.2.2007 28.2.2009 1:1 CHF 1607 000 2006 15.2.2008 28.2.2009 1:1 CHF 1607 000 2006 15.2.2009 28.2.2009 1:1 CHF 160

Number of SARs

8 000 2007 01.3.2008 14.3.2010 1:1 CHF 1608 000 2007 01.3.2009 14.3.2010 1:1 CHF 1608 000 2007 01.3.2010 14.3.2010 1:1 CHF 160

3 984 2008 15.3.2009 28.3.2011 1:1 CHF 1603 983 2008 15.3.2010 28.3.2011 1:1 CHF 1603 983 2008 15.3.2011 28.3.2011 1:1 CHF 160

72


REPORT OF THE STATUTORY AUDITORS

As s tatutor y audi tor , we have audi ted the accompanying f inancial statements of AIG Private Equity AG, which comprisethe balance sheet, income statement and notes (pages 66 to71), for the year ended December 31, 2008.

Board of Directors’ ResponsibilityThe Board of Directors is responsible for the preparat ion ofthe f inancial statements in accordance with the requirementsof Swiss law and the company’s ar t ic les of incorporat ion. Thisresponsibi l i ty includes designing, implementing and maintain -ing an internal control system relevant to the preparat ion off inancial statements that are free from material misstatement,whether due to f raud or error. The Board of Directors is fur ther responsib le for se lect ing and apply ing appropr ia te accounting pol ic ies and making accounting est imates that arereasonable in the circumstances.

Auditor’s ResponsibilityOur responsibi l i ty is to express an opinion on these f inancials ta tements based on our audi t . We conducted our audi t in accordance with Swiss law and Swiss Auditing Standards. Thosestandards require that we plan and per form the audi t to obtain reasonable assurance whether the f inancial statementsare free from material misstatement.

An audit involves per forming procedures to obtain auditevidence about the amounts and disclosures in the f inancialstatements. The procedures selected depend on the auditor’sjudgment , inc luding the assessment of the r isks of mater ia lmisstatement of the f inancial statements, whether due to fraudor error. In making those r isk assessments , the auditor con -siders the internal control system relevant to the enti ty ’s pre-parat ion of the f inancial statements in order to design auditprocedures that are appropriate in the circumstances, but notfor the purpose of expressing an opinion on the effect ivenessof the enti ty ’s internal control system. An audit also includesevaluating the appropriateness of the accounting policies usedand the reasonableness of accounting est imates made, as wel las evaluat ing the overal l presentat ion of the f inancia l s tate-ments. We bel ieve that the audit evidence we have obtained is suff ic ient and appropriate to provide a basis for our auditopinion.

OpinionIn our opinion, the f inancia l s ta tements for the year ended December 31, 2008 comply with Swiss law and the company’sar t ic les of incorporat ion.

Without qual i fy ing our opinion, we draw attention to Note1 of the f inancial statements which indicates that the valu ationof the wholly owned subsidiary AIG Private Equity (Bermuda)Ltd. , is repor ted on the assumption that the enti ty is able tocontinue as a going concern.

Report on other legal requirementsWe confirm that we meet the legal requirements on l icensingaccording to the Audi tor Overs ight Act (AOA) and indepen-dence (ar t ic le 728 CO and ar t ic le 11 AOA) and that there areno circumstances incompatible with our independence.

In accordance with ar t icle 728a paragraph 1 item 3 CO andSwiss Audit ing Standard 890, we confirm that an internal con-trol system exists which has been designed for the preparationof f inancia l s ta tements according to the inst ruct ions of theBoard of Directors.

We recommend that the f inancial statements submitted toyou be approved.

PricewaterhouseCoopers AG

Thomas Romer Cornel ia HerzogAudit exper t Audit exper tAuditor in charge

Zürich, Apri l 30, 2009

ADDRESSES AND CONTACTS

Registered OfficeAIG Private Equity Ltd.Grafenauweg 8CH-6300 ZugPhone +41 (41) 710 70 60Fax +41 (41) 710 70 64E-mail [email protected]

SubsidiariesAIG Private Equity (Bermuda) Ltd.29, Richmond RoadPembroke, HM 08Bermuda

APEN Faith Media Holdings, LLC2711 Centervi l le Road, Suite 400Wilming ton, New Cast le CountyDelaware 19808USA

Investor RelationsConradin SchneiderAIG Private Equity Ltd.Grafenauweg 8CH-6300 ZugPhone +41 (41) 710 70 60Fax +41 (41) 710 70 64E-mail [email protected]

If you would l ike to submit an investmentproposal please contact:

For US direct investments:E-mail [email protected]; Phone +1 646 857 8651

For US based private equity funds:E-mail Steven.Costabi [email protected] Phone +1 646 857 8693

For European direct investments:E-mail Rober t [email protected] Phone +44 203 217 1838

For European private equity funds:E-mail Axel [email protected] Phone +41 44 308 37 34

www.aigprivateequity.com

AIG Private Equity Ltd.Grafenauweg 8CH-6300 ZugSwitzerland

Phone +41 (41) 710 70 60Fax +41 (41) 710 70 64Email [email protected]

Documents

AIG Private Equity 2008 Annual Report