 UBS Private Equity Secondary Market Review UBS Private Funds Group June—2011 UBS Private Funds Group Secondary Market Review The UBS Private Funds Group’s Secondary Advisory Practice was launched in 2004 with the mandate to provide the highest quality sell- side advice to owners of private equity portfolios. In the current installment of this series, UBS provides a comprehensive review of secondary market activity in 2010 and the first quarter of 2011 and highlights key issues and trends that will impact the secondary market in 2011. Our perspective is unique within the secondary market, based not only on our experience as a leading placement agent and secondary advisor, but also as a seller in the structuring and execution of UBS’s own $1.3 billion secondary transaction in 2003.1 To date, UBS has advised on and executed over $24 billion of secondary transactions and has established itself as a market leading advisor.2

Review of the Secondary Market—2010 Market Environment Secondary volume rebounded to record levels in 2010, totaling approximately $22 billion which represented a 132% increase as compared to 2009 levels ($9.5 billion).3 The combination of improved capital market conditions and strong levels of available capital resulted in a dramatic improvement in the pricing environment during the first quarter of 2010, while increased regulatory pressure crystallized financial institutions’ intention to sell risk assets. Following a somewhat slow start to the beginning of 2010, the year began to pick up momentum following the announcement of Bank of America’s $1.9 billion transaction and RBS’ €400 million transaction. These transactions were particularly noteworthy given their size, which seemed to signal that both sellers and buyers were comfortable making large “splash trades”, a feature clearly missing from the market in 2009. The large “splash trade” theme continued through 2010 and has carried forward into 2011, as there have already been eight transactions greater than $500 million brought to market in the first half of 2011.3 However, dry powder declined in 2010 for the first time since 2006, a feat that may be repeated in 2011 with expectations for at least another $20 billion in transaction volume. While there is sufficient dry powder among secondary buyers and capital markets conditions are buttressing pricing levels, technical supply and demand factors could impact pricing / competition later in 2011, particularly with so many large secondary buyers fundraising. Pricing Trends4 After ending 2009 at an average discount of (31.6%) for assets and an average discount of (36.8%) for all assets, pricing improved meaningfully during the first quarter of 2010 to an average discount of (12.1%) for buyout assets and an average discount of (12.5%) for all assets. Thereafter, pricing seemed to stabilize to modestly improve throughout 2010 ending the year at an average discount of (11.7%) for buyout assets and an average discount of (15.5%) for all assets. Thus far in 2011, pricing has been relatively unchanged from fourth quarter 2010 levels, except for buyout pricing which increased to a (3.0%) discount.

QUARTERLY PRICING FOR PRIVATE EQUITY ASSETS

0.0% (3.0%) (8.2%) (7.5%) (10.3%) (10.0%) (12.1%) (13.4%) (9.8%) (11.7%) (13.1%) (12.5%) (18.0%) (17.2%) (15.5%) (20.0%) (18.1%) (25.0%) (21.1%) (26.5%) To find out more about UBS’s (31.6%) (30.0%) dedicated private equity secondary (34.0%) (30.9%) market advisory services, please contact: (33.9%) % (Discount) to NAV to (Discount) % (36.8%) (40.0%) (36.9%) (38.8%) Nigel Dawn

(50.0%) Managing Director, Global Co-Head Q4 '09 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 UBS Private Funds Group +1-212-821-5333 All PE Buyout Venture Energy nigel.dawn@.com

Source: UBS-advised transactions; based on the average of the high bids received

Pricing Trends (continued) 45 days for interim financial statements, 9.30 financial Pricing for energy funds is also particularly notable as statements tend to become stale. More specifically, GPs the average discount price for energy focused funds are able to provide guidance on year-end valuations in was better than buyout funds for the 2nd, 3rd and 4th advance of the completion of the audit process which quarters of 2010. Energy appears to have developed buyers are able to reflect in their pricing relative to the into a thematic investment for select secondary buyers. 9.30 NAVs. With many large buyout funds predicting In addition, many secondary buyers have been double-digit write-ups to 9.30, optical pricing particularly attracted to US energy funds due to the expectedly increased as buyers incorporated the new inherent barriers to entry created by tax leakage that information into their analysis. makes it harder for non-US buyers to acquire these Transaction Volume interests at market clearing levels. Secondary market volume was approximately The stable to modestly improving “optical” pricing $22.0 billion in 2010, representing a 132% increase levels evidenced during 2010, despite rising net asset from 2009 levels.3 In addition, transaction supply values (“NAV”), suggests that buyers’ expectations increased to $27.5 billion from $16.3 billion in 2009, regarding future performance were improving representing an increase of 69% (note that UBS’s throughout the year. As a result, sellers that waited transaction supply likely understates the actual until later in 2010 to execute transactions generally transaction supply as the data generally captures only received increased purchase price proceeds. However, intermediated transactions and publicly announced as the table demonstrates, determining the optimal non-intermediated transactions).3 The disparity between time to sell should not be exclusively predicated on the increase in transaction volume and transaction whether increased purchase price proceeds were supply suggests that transaction completion rates generated. For example, sellers that sold during the increased dramatically in 2010, which is not surprising second quarter of 2010 based on a December 31, 2009 given pricing levels. reference date and invested the purchase price proceeds in the S&P 500 would have been in an equal SECONDARY TRANSACTION VOLUME to better than position than the sellers in the third and 25.0 22.0 fourth quarters of 2010. Moreover, this analysis does 20.0 not make any adjustments for risk which would further 20.0 skew the analysis towards second quarter 2010 sellers. 15.0 15.0

9.5 10.0

TIMING OF SALE DECISIONS (US$ bn)

Reference Date 5.0 Sep-09 Dec-09 Mar-10 Jun-10 Marketing Period Q1 '10 Q2 '10 Q3 '10 Q4 '10 0.0 Closing Date Mar-10 Jun-10 Sep-10 Dec-10

1 2007 2008 2009 2010 Reference Date NAV 188.81 202.86 215.84 225.51 2 (% Discount)—Buyout Funds (12.1%) (18.1%) (13.4%) (11.7%) Base Purchase Price 165.88 166.20 187.01 199.04 1 Post-Reference Date Net Cash Flow 5.02 0.22 (4.97) (13.95) Source: Publicly available data and UBS estimates Cash Received at Closing 170.90 166.41 182.04 185.09 3 S&P 500 % Change from Closing Date to 06/30/10 (11.86%) 0.00% n/a n/a As mentioned previously, market conditions allowed for 3 S&P 500 % Change from Closing Date to 09/30/10 (2.41%) 10.72% 0.00% n/a 3 S&P 500 % Change from Closing Date to 12/31/10 7.54% 22.02% 10.20% 0.00% a greater number of large transactions (greater than 4 Cash Position at 06/30/10 150.63 166.41 n/a n/a 4 Cash Position at 09/30/10 166.78 184.25 182.04 n/a $500 million in transaction value). In aggregate, there 4 Cash Position at 12/31/10 183.79 203.05 200.62 185.09 were at least eleven transactions in 2010 that were Notes: 1 Based on a hypothetical portfolio consisting of equal weighted commitments to large buyout funds greater than $500 million as compared to only three in 2 Based on the average of high bids received during the applicable Marketing Period 3 3 Based on FactSet 2009. Although financial institutions and US public 4 Cash Position asssumes Cash Received at Closing is subsequently invested in the S&P 500 state plans / public agencies were the sellers for eight While the quarterly pricing data has generally been and three of the largest transactions in 2010, relatively stable, the first quarter of 2010 and 2011 data respectively, their rationale for selling was quite reveal that the market experienced material changes in different. For financial institutions, it was regulatory “optical” pricing levels, particularly for buyout funds. reform and for state agencies / public agencies, it was While there are many factors contributing to the portfolio management. change in optical pricing levels, a chief contributor is the “year-end phenomenon.” This phenomenon, which is most likely to occur during the first two to three months of every year prior to the release of year-end audited financial statements, is amplified during periods of changing macroeconomic conditions. With year-end audited financial statements sometimes taking up to 120 days to be finalized instead of the customary 30 to

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2007/8/9/10 TRANSACTION VOLUME BREAKDOWN— LGT, which together raised approximately 50% of the FUNDS AND DIRECTS dedicated capital.5 Additionally, 2010 saw increased focus on separate accounts as several large sovereign 25.0 wealth funds, seeking to capitalize on the benefits of Directs the asset class and current market opportunity, sought 20.0 17% Directs to partner with leading secondary buyers. As a result, 15.0 33% Directs Directs there are very few remaining sovereign wealth funds 27% 15% operating autonomously (i.e., independent of an (US$ bn) (US$ 10.0 LP LP 83% LP advisor) that can be characterized as non-traditional 67% 5.0 73% LP buyers. 85% 0.0 2011 promises to be a more active year for fundraising 2007 2008 2009 2010 with twelve large secondary buyers expected to be in the market seeking commitments in excess of $25.0 Source: Publicly available data and UBS estimates billion.5 AXA, Coller, Credit Suisse, DB Private Equity, LP transaction volume in 2010 represented 83% of HarbourVest, and Permal are all total secondary transaction volume, continuing a trend currently fundraising for their successor funds, while established in 2009 in which direct transactions made Lexington is currently finishing fundraising for its latest up a significantly smaller percentage of overall fund. In addition, it is expected that LGT, Paul Capital secondary volume.3 Further segmentation reveals that and Pomona will formally begin fundraising later in mega buyout and large buyout funds represented 39% 2011, while AlpInvest, which was acquired by The and 31% of LP transaction volume, respectively.3 This Carlyle Group and AlpInvest management, is currently seems logical given that 2010 transaction volume was planning for its inaugural fundraise and may begin driven by financial institutions rationalizing their pay-to- marketing in late 2011. Although the overall play portfolios and state plans / public agencies fundraising market is expected to improve in 2011, it is implementing portfolio management strategies by noteworthy that a recent Preqin Ltd. survey detailed reducing exposure to mega and large buyout funds that 8% and 3% of responding LPs viewed secondaries from 2005 – 2008 vintages. In addition, there is a deep as an area of the market presenting best opportunities 6 and fairly efficient market for mega buyout and large and where they sought to invest in 2011, respectively. buyout funds, so it seems natural that sellers would This represented a significant decline from a similar seek transactions with lower execution risk and a faster Preqin Ltd. survey taken in February 2010, for which the execution timeline following a year in which it was LP response for the same categories was 20% and 7 challenging to execute a secondary transaction. 17%, respectively. Such a dramatic decline in the perceived level of attractiveness for secondaries will only 2010 FUND TYPE BY INVESTMENT STRATEGY—LP serve to amplify the level of competition and may TRANSACTIONS potentially result in a more challenging fundraising environment for secondary funds. Energy Venture Other 3% <1% 5% 2011 FUNDRAISING CHART BY PROGRESS

AlpInvest 1,000 Mid-Market Mega Buyout AXA Private Equity 3,000

Buyout (<$1 bn) (>$5 bn) Coller Capital 5,000 39% 22% Credit Suisse 2,500

DB Private Equity 500

HarbourVest Partners 3,500

Lexington Partners 900

LGT 2,000

Partners Group1 3,900 Large Buyout Paul Capital 2,000 ($1 bn - $5 bn) Permal 150 31% Pomona 1,300

0 1,000 2,000 3,000 4,000 5,000 6,000 ($ mm)

Source: Publicly available data and UBS estimates Preparing / Pre-Marketing - $6.3 bn Marketing - $18.6 bn Closing - $0.9 bn

Note: Fundraising 1 Target size of EUR 3.0 billion converted at the rate of 1.0 EUR = 1.3 USD

Secondary fundraising in 2010 totaled approximately Source: Private Equity Intelligence, Thomson Financial VentureXpert and UBS $12.5 billion, roughly equal to 2009 fundraising levels, estimates which was consistent with the performance of the 5 overall private equity market. In addition, 2010 represented somewhat of an off-year for secondary fundraising, as most of the large dedicated groups were out of the market, except for Lexington, Pantheon and

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As part of its periodic review, UBS has also Fortunately for sellers interested in benefiting from this analyzed several other developments in the type of transaction approach, UBS is able to leverage its secondary market. market leading position as a secondary advisor with its proprietary data. The successful implementation and execution of “drive-by” secondaries exemplifies UBS’s keen understanding of the secondary market, and The “Drive-By” Secondary demonstrates UBS’s ability to innovate for the benefit of the seller. The “drive-by” secondary, a concept created by UBS, is Real Estate Secondaries a unique and novel transaction approach that is designed to capitalize on the depth and efficiency of Historically about 6% of total private equity secondary the secondary market, particularly for mega buyout and volume and often an ignored segment of the secondary large buyout funds which we generally refer to as “flow market, real estate has undergone a perceptible change funds.” At its most basic level, the “drive-by” secondary in the past 18 months as secondary buyers position is defined as a sale transaction consisting of “flow themselves to capitalize on what is believed to be an funds” (i.e., Apollo, Blackstone, Carlyle, TPG, etc.) in under-represented and undercapitalized segment of the which no information is shared with buyers—other than market.8 Further intensifying this development is the a seller’s commitment amounts—and the due diligence perception that secondary opportunities will abound period is accelerated—limited to one to three weeks. due to the amount of primary capital raised by real The “drive-by” secondary is not appropriate for all estate funds at the peak of the last fundraising cycle sellers, nor is it appropriate for certain kinds of assets. and the level of distress in the commercial real estate However, when used effectively through a market. While the expected level of transaction supply comprehensive and tailored transaction approach, the has yet to be fully realized, UBS believes that the real “drive-by” secondary can provide tremendous benefits estate secondary market will experience a to potential sellers. In addition to reduced liability from developmental growth phase once limiting transitory sharing of confidential information and reduced GP factors—uncertainty about NAV / valuation levels and interaction / lower transfer expenses, the drive-by distressed pricing—wane. While pricing has started to secondary allows sellers to almost immediately capitalize recover and certain assets are pricing closer to NAV, on a current market and pricing environment. In many opportunity and value-added funds remain previous years, it could take sellers anywhere from six to challenged. ten weeks (sometimes longer) to get to market and TOTAL RETURNS FOR NCREIF TOWNSEND FUND INDEX receive bids, by which time the market could have changed dramatically from when the initial sale decision 15.0% was made. However, the level of competition in the 10.0% 5.0% secondary market, given the depth and breadth of the 0.0% dedicated buyer community, has pushed buyers to seek -5.0% ways to differentiate themselves and be more -10.0% competitive. Evolving from this competitive spirit, buyers -15.0% have started maintaining perpetual models / pricing, -20.0% even investment committee approved bids, on many -25.0% -30.0% “flow funds”, which enables them to react seamlessly Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10 to opportunities where speed can be the differentiating Opportunistic Value-Added factor between winning and losing. While the benefits of the “drive-by” secondary can be Source: Publicly available NCREIF Townsend Fund Returns alluring, it also magnifies the importance of sound For many years, the real estate secondary market was transaction execution. This type of transaction strategy characterized by sporadic transaction supply and was places an increased premium on the strategic elements dominated by three buyers—Credit Suisse, Landmark of transaction timing (when to launch a transaction) Partners and Liquid Realty. However, in 2006, Liquid and knowledge of the buyer universe. Specifically with Realty completed a £435 million secondary transaction, respect to knowledge of the buyer universe, it is critical acquiring a portfolio of Jersey Property Unit Trusts. to understand which buyers are existing investors in Believed to be one of the largest, if not the largest, real which funds and / or have information to conduct due estate secondary transactions consummated, this diligence. Equipped with this knowledge, an brought significant attention to the real estate segment experienced advisor can identify and eliminate of the market. Thereafter, various investment groups information voids, which will augment a more even began drawing parallels between the development and playing field among all buyers and foster a higher level growth of the traditional secondary market and the of competition and transaction flexibility. potential development of the real estate market. The

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attraction of the real estate market was further benefits of a demonstrable secondary track record, galvanized with the onset of the financial crisis and its knowledge of the real estate secondary buyer subsequent impact on commercial real estate values. community and proven real estate expertise. The UBS More specifically, buyers anticipated that the more than Private Funds Group has been able to leverage the $400 billion in real estate capital raised for opportunity attributes of its market leading secondary advisory and value-added funds since 2004 would create a business, its position as a real estate placement agent significant market opportunity for both traditional LP and the Investment Bank’s leading Real Estate and transactions and direct / fund restructuring Lodging and Leisure advisory practice to provide sellers transactions.9 with the highest quality sell-side advice for real estate As a result, the dedicated secondary buyer community assets. has grown exponentially to encompass at least twelve Review of the Hedge Fund Secondary Market dedicated real estate secondary managers controlling approximately $2.8 billion of dry powder.10 The hedge fund secondary space has been a historically Concurrently, the non-traditional or non-dedicated small niche market, but certain trends in the sector market has also grown significantly to encompass a suggest that it represents a meaningful opportunity in wide variety of buyer types, including asset managers, absolute dollar terms due to the number of new endowments and foundations, , public entrants on the buy side and demand for holistic pension funds and sovereign wealth funds. While the solutions on the sell side. While there is no definitive real estate secondary market is still underdeveloped data to accurately size the market, there is speculation relative to the traditional private equity secondary that a large number of hedge fund managers still hold market, the level of growth and development witnessed illiquid investments, which has led to a wave of demand over the past 18 months is undeniable. and the emergence of new creative monetization solutions. SECONDARY MARKET FOR PRIVATE EQUITY VERSUS REAL ESTATE The market upheaval of 2008 and 2009 resulted in a record number of redemptions from investors seeking Private Equity Real Estate to either generate liquidity or manage risk. However, at that point many hedge funds had suspended Cumulative Primary Capital Raised Since 2001 $2.7 trillion $457.8 billion redemptions, either due to the sheer volume of Transaction Volume Since 2001 $106.4 billion $5.8 billion requests or because the underlying assets were illiquid. As a result, an active secondary market formed to Transaction Volume as a % of Capital Raised 3.9% 1.3% enable the transfer of positions in traditional hedge Number of Dedicated Secondary Buyers >70 12 funds that raised gates on redemptions (“Locked-up

Dry Powder $35.5 billion $2.8 billion Positions”) and interests in hedge fund vehicles that held mainly illiquid investments (“Side Pocket Dry Powder as a % of 2010 Theoretical Supply ~150% ~115% Interests”). Given the prevailing market dynamics that

existed during this period, most sellers were motivated Source: Private Equity Intelligence, Thomson Financial VentureXpert, UBS estimates by uncertainty or distress, which enabled secondary and proprietary UBS survey buyers to acquire assets at significant discounts to While the overall technical process of executing a real reported market values. estate secondary sale of an LP interest is similar to that Market dynamics shifted quickly in 2010, with a of a traditional private equity secondary, there are meaningful recovery of investor confidence, which led profound differences in the underlying assets. Whereas to an increase in for the traditional private equity valuation tends to be more global hedge fund industry of 20%, from $1.6 billion in revenue or cash flow based, real estate tends to be 2009 to $1.9 billion by the end of 2010.11 As a result, more hard-asset based. As a result, there is very little there were few remaining forced sellers and those that overlap in the buyer community for traditional private were interested in liquidity were increasingly price equity secondaries and real estate secondaries. Not only sensitive as capital market conditions improved and are most traditional private equity secondary buyers market fears subsided. We believe these factors led to a uncomfortable evaluating real estate funds, many are modest decline in 2010 hedge fund secondary activity prohibited from doing so through their respective from 2009 levels. agreements. From a seller’s While the volume of Locked-up Positions sold in the perspective, the less efficient nature of the real estate secondary market has decreased, many hedge fund secondary market relative to the traditional private investors still have exposure to Side Pocket Interests. equity market renders the service and advice provided Hedge fund managers have been cautious in selling by an experienced secondary advisor even more down their illiquid portfolios because they have been valuable. That said, providing tangible value to sellers is hesitant to realize a loss on the investments and in contingent on advisors being able to harness the many cases they still believe in the long-term value of

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the assets. This stance by hedge fund managers has had 2005/6/7/8/9/10 HEDGE FUND INDUSTRY ASSETS an impact on a number of investors, but in particular it UNDER MANAGEMENT has had a trickle-down effect for fund of hedge funds, which have been unable to fully return capital to their investors despite experiencing their own record number 2,500 1,917.4 of redemptions. 2,000 1,868.4 1,600.2 Side Pocket Interests are all that remain for some fund 1,464.5 1,407.1 1,500 of hedge funds that are in liquidation or are winding 1,105.4 down certain products. Selling assets in the secondary

(US$ bn) (US$ 1,000 market not only generates liquidity, but also helps relieve administrative burden and can improve investor 500 relations, for those that still manage other fund 0 products. 2005 2006 2007 2008 2009 2010 Many fund of hedge funds and other investors have sold single manager exposures in the secondary market Source: HFR Global Hedge Fund Industry Report, Year-End 2010 over the past 18–24 months. Going forward, we expect Despite there being a potentially meaningful supply of to see continued strategic sales of hedge fund illiquid hedge fund investments, the universe of buyers secondaries. However, the activity will primarily be in has historically been fairly small, particularly for Side Side Pocket Interests and sellers will seek more portfolio Pocket Interests. Recently however, we are beginning to sales that present a complete solution for their stub see a discernable increase in the number of market positions as opposed to the “piecemeal” approach. participants. Generally speaking, the most active hedge Hedge fund returns have improved markedly, with the fund secondary buyers can be placed in the following HFRI Fund Weighted Composite Index gaining 10.5% in categories. 2010.11 Now that portfolios are generally healthier, Traditional fund of hedge funds—Even prior to the investors may shift their attention to cleaning up assets economic disruption that commenced in the second that do not fit with their ongoing investment strategies. half of 2008, there was a modest amount of secondary Even if a sale results in a loss, in most cases it will be hedge fund market activity. Often times, these small relative to the size of an investor’s overall transactions would be brokered by the hedge fund portfolio. Furthermore, many hedge fund investors are manager and offered to its existing investor base. In not structured to hold illiquid assets and, in some cases, 2008 and 2009, some of the larger fund of hedge may be faced with the threat of holding private market funds began to more actively originate secondary assets for another 3–5 years if they do not sell opportunities in familiar hedge fund names. Most of prematurely. their focus has been on Locked-up Positions and only a There have been a limited number of estimates handful of these investors will acquire Side Pocket published by the market regarding the size of the Interests. hedge fund secondary opportunity. A survey conducted Dedicated secondary hedge funds—With the increasing by UK’s Financial Services Authority in September 2010, volume of secondary activity, dedicated pools of capital indicates that hedge fund side pockets represent about were formed by new investors or existing fund of hedge 11% of aggregate NAV for hedge funds with offices in fund investors. Most of this capital was specifically the . The survey reportedly represents formed to acquire illiquid positions. These funds about 20% of the global hedge fund industry, or typically have been set up with a fixed investment approximately $380 billion in assets under period, fund life and no redemption feature, providing management.12 This implies side pocket exposure of greater flexibility to invest in longer dated opportunities. roughly $42 billion for this subset of the market; simply Some of these funds have reached close to $1 billion in extrapolating this into estimates for the global market assets under management and have the ability to results in a figure that is closer to $200 billion. Based on complete large or complex portfolio transactions. conversations with market constituents and our own Dedicated secondary private equity funds—The market informal surveys, UBS’s estimate of the market for acquiring private equity assets in the secondary opportunity is closer to $75 billion, which would space has grown dramatically since 2004. As this represent about 4% of the global hedge fund assets market has become crowded, several players have spent under management as of the end of 2010. an increasing amount of time evaluating hedge fund opportunities. A handful of large secondary private equity players have completed transactions in the hedge fund space. Most of these funds are managing capital that well exceeds the billion dollar mark and their funds are already structured to hold assets with a longer

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investment horizon. Dedicated secondary private equity may at any time make purchases and/or sales in them as principal or agent. UBS may act or have acted as market-maker in the securities or other funds will typically only consider classic private equity financial instruments discussed in this material. Furthermore, UBS may have style investments held in side pockets. or have had a relationship with or may provide or has provided , capital markets and/or other financial services to the relevant Hedge funds—Other hedge funds have become companies. Neither UBS nor any of its affiliates, nor any of UBS' or any of its affiliates, directors, employees or agents accepts any liability for any loss or increasingly interested in evaluating Side Pocket damage arising out of the use of all or any part of this material. Additional Interests, typically credit or real estate related. Most information may be made available upon request. hedge funds are interested in active investment United Kingdom and the rest of Europe: Except as otherwise specified opportunities. However, passive stakes in other hedge herein, this material is communicated by UBS Limited, a subsidiary of UBS AG, to persons who are eligible counterparties or professional clients (as detailed funds will be acceptable as long as there is limited blind in the FSA Rules) and is only available to such persons. The information pool capital risk. contained herein does not apply to, and should not be relied upon by retail clients. UBS Limited is regulated by the FSA. France: Prepared by UBS Limited Foundations and family offices—There are a number of and distributed by UBS Limited and UBS Securities France S.A. UBS Securities France S.A. is regulated by the Autorité des Marchés Financiers foundations and family offices that are interested in (AMF). Where an analyst of UBS Securities France S.A. has contributed to this material, the material is also deemed to have been prepared by UBS secondary hedge fund interests. Analytical resources at Securities France S.A. Germany: Prepared by UBS Limited and distributed by these firms tend to be limited and therefore the scope UBS Limited and UBS Deutschland AG. UBS Deutschland AG is regulated by the Bundesanstalt fur Finanzdienstleistungsaufsicht (BaFin). Spain: Prepared of opportunities that they can evaluate is narrower. by UBS Limited and distributed by UBS Limited and UBS Securities España SV, Most of these investors are sophisticated and some can SA. UBS Securities España SV, SA is regulated by the Comisión Nacional del Mercado de Valores (CNMV). Turkey: Prepared by UBS Menkul Degerler AS put a sizeable amount of capital to work for the right on behalf of and distributed by UBS Limited. Russia: The materials relating to opportunity. equities and related research, are being prepared and distributed by “UBS Securities” CJSC. The securities referred to herein may be highly illiquid which As the hedge fund secondary market continues to gain may adversely impact the price and speed of execution of orders to trade in these securities. The materials relating to corporate finance, foreign momentum and media attention, we expect the exchange, fixed income products and other banking business are being number of buyers focusing on these opportunities will prepared and distributed by UBS Bank. The materials relating to custody business are being prepared and distributed by either UBS Bank or “UBS continue to increase. Given the high level of analytical Nominees” CJSC Switzerland: These materials are distributed in Switzerland expertise and complexity of the underlying assets, we by UBS AG to persons who are institutional investors only. Italy: Prepared by UBS Limited and distributed by UBS Limited and UBS Italia Sim S.p.A.. UBS expect more dedicated capital to enter the market as Italia Sim S.p.A. is regulated by the Bank of Italy and by the Commissione these types of investors will be best placed to capitalize Nazionale per le Società e la Borsa (CONSOB). Where an analyst of UBS Italia Sim S.p.A. has contributed to this material, the material is also deemed to on the opportunity. have been prepared by UBS Italia Sim S.p.A.. South Africa: UBS South Africa As the market continues to develop, an efficiently run (Pty) Limited (Registration No. 1995/011140/07) is a member of the JSE Limited, the South African Futures Exchange and the Bond Exchange of South sell-side process will be imperative to ensure that sellers Africa. UBS South Africa (Pty) Limited is an authorised Financial Services Provider. United States: These materials are distributed by UBS Securities receive a market clearing price. Understanding the LLC or UBS Financial Services Inc., subsidiaries of UBS AG, or solely to US universe of buyers, their motivations, cost of capital and institutional investors by UBS AG or a subsidiary or affiliate thereof that is not registered as a US broker-dealer (a "non-US affiliate"). Transactions resulting desired asset exposure are all important factors. from materials distributed by a non-US affiliate must be effected through UBS Additionally, the advisor’s role is to provide customized Securities LLC or UBS Financial Services Inc. Canada: These materials are being distributed in Canada by UBS Securities Canada Inc., a subsidiary of solutions to address, at the very minimum, the seller’s UBS AG and a member of the principal Canadian stock exchanges & CIPF. price, timing, legal, structural considerations and other : The materials relating to equities and other securities business, and related research, are being distributed in Hong Kong by UBS Securities major objectives. Limited. The material relating to corporate finance, foreign exchange, fixed income products and other banking business, and related research, are Larger transactions, more buyers and greater being distributed in Hong Kong by UBS AG, Hong Kong Branch. Singapore: intermediation will be ongoing themes in the hedge Distributed by UBS Securities Pte. Ltd or UBS AG, Singapore Branch. Japan: The materials relating to equities, fixed income products, corporate finance fund secondary market. These trends should ultimately and other securities business, and related research, are distributed in Japan by improve the prices that sellers can generate and create UBS Securities Japan Ltd. The materials relating to foreign exchange and other banking business, and related research, are distributed in Japan by UBS opportunities for them to make strategic exits from AG, Branch. : These materials are distributed in Australia by non-core investments. UBS AG (Holder of Australian Financial Services Licence No. 231087) and UBS Securities Australia Ltd (Holder of Australian Financial services Licence No. 231098). This presentation has been prepared by UBS AG (Holder of This material has been prepared by UBS AG or an affiliate thereof ("UBS"). In Australian Financial Services Licence No. 231087) and/or its affiliates certain countries UBS AG is referred to as UBS SA. (together, "UBS") for distribution to persons who satisfy the definition of wholesale investor for the purposes of the Corporations Act 2001 (Cth) and This material is for distribution only under such circumstances as may be not intended for distribution to any retail clients and for the exclusive use of permitted by applicable law. It has no regard to the specific investment the party to whom UBS delivers this presentation. New Zealand: Distributed objectives, financial situation or particular needs of any specific recipient. It is by UBS New Zealand Ltd. An investment adviser and investment broker published solely for informational purposes and is not to be construed as a disclosure statement is available on request and free of charge by writing to solicitation or an offer to buy or sell any securities or related financial PO Box 45, Auckland, NZ. Israel: UBS AG and its affiliates incorporated instruments. No representation or warranty, either express or implied, is outside Israel are not licensed under the Investment Advice Law and are provided in relation to the accuracy, completeness or reliability of the therefore operating under the Sophisticated Investor exemption. Whilst UBS information contained herein except with respect to information concerning AG holds for its activities, it does not hold the same insurance that UBS AG its subsidiaries and affiliates, nor is it intended to be a complete would be required for an investment advisor or investment marketer under statement or summary of the securities markets or developments referred to the relevant Investment Advice Law Regulations. in this material. It should not be regarded by recipients as a substitute for the exercise of their own judgment. Any opinions expressed in this material are UBS specifically prohibits the redistribution or reproduction of this material in subject to change without notice and may differ or be contrary to opinions whole or in part without the prior written permission of UBS and UBS accepts expressed by other business areas or groups of UBS as a result of using no liability whatsoever for the actions of third parties in this respect. © UBS different assumptions and criteria. UBS is under no obligation to update or 2011. The key symbol and UBS are among the registered and unregistered keep current the information contained herein. UBS, its directors, officers trademarks of UBS. All rights reserved. and employees' or clients may have or have had interest or long or short positions in the securities or other financial instruments referred to herein and

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Notes: 1 Transaction size based on original commitments

2 Transaction size based on original commitments and includes one pending transaction

3 Source: Publicly available data and UBS estimates

4 Source: UBS-advised transactions; based on the average of the high bids received

5 Source: Private Equity Intelligence, Thomson Financial VentureXpert and UBS estimates

6 Source: Preqin Investor Outlook: Private Equity, December 2010

7 Source: Preqin Research Report: Private Equity Investor Survey, February 2010

8 Source: Private Equity Week, Columbia Strategy, Thomson Financial and UBS estimates; based on the average of real estate secondary volume from 2006-2010 as a percentage of total private equity secondary volume

9 Source: Preqin Ltd.

10 Source: UBS proprietary survey, December 2010

11 Source: HFR Global Hedge Fund Industry Report, Year-End 2010

12 Source: Financial Services Authority: A Report on the Findings of the Hedge Fund Survey and Hedge Fund as Counterparty Survey, February 2011

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