i1;j;..--: . . I-I-I-I I--IIn,-I - . ,t H., ..- LITylIII..I I .lI_ .-33Zhmaj., 4 . I ILLUI - .r,v v_ ir, I -lnu"; j_ I- Ieini.1. ?E'f.Q"ffQT_ff _r.1.., . ..I.. QIII. hr-I._ - I . Iphi--.-- glLi.- I IQII If-lr;. II - . - .I --IQILII .IIVial- I I 1 - - jiIha-. -. I I - (Ig..1 'lfilj;] -5, kr;jfLI-IIiipi?=iEUR - I-gl I I I IIytif . z.I-- lil.-! -- -- ITqw; -as-Imz- .-1.uIEUR'EjiI-T-I I --I- - I --.- . 21* II-?twI?i-I.It; urI..- IbUniYV.-II, I I in - I Illnipti-I..--..I,?I-rw; 'Slg ., -1-..- -. -I-I AVII SZ. sis'rr;:-I-.. .-1.f-LgIiImagsi ..-. VLLI !Q11te..ik.] y. p? . I -. .I.l -- 7 Il JW i --7- .-.. -.., gf} . A grnh_F`l_i su.; MiebbahSy`; `iiL--. -4 - ?;J.Zlf U-.: Tw--I sj.- I . I - . ?yq-n!IIq_{cup(1-- . wtELLH6?cF`Iii I II yy ?olI?--z C., . I I --Tlr__`ynQ-__jI skin {fill `Ir -2- Z?lu; L_;q;W.-- -377 - Bain Capital Fund IX, L.P. Notes to Financial Statements December 31, 2009 1. 'l`he Partnership Background Bain Capital Pund IX, (the "Partnership") is a Cayman Islands exempted limited partnership organized pursuant to the Amended and Restated Agreement of Limited Partnership, as last amended on December 31, 2009 (the "P:-rrtnership Agreement"}. The brrsirress activity is to invest the funds ofthe Partnership with the principal objective of achieving appreciation of capital invested. Services are perfonned for the Partnership by its management company, Bain Capital Partners, LLC {the "lvlanager") for a fee (Note 6). The general partner ofthe Partnership is Bain Capital Partners L.P. (the "General Partner"). The Partnership shall continue until December 31, 2016, unless sooner dissolved or extended to a date no later than December 31, 2020, as specified in the Partnership Agreement. The Partnership has $8,000,000,000 ot`partners' capital commitments ol` which $5,274,21},296 or 78.42% ofthe Institutional Limited Partners` and General Partner`s cormnitted capital was contributed, and $998999,955 or 78.41% ofthe Other Limited Partners` committed capital was contributed at December 31, 2009. Additionally, the following portions ofthe Institutional Limited Partners', General Partners and Other Limited Partners` committed capital were contributed to the Partrrerslrip's Alternative Investment Vehicles (Note 3) at December 31, 2009: Percentage of Commitment commitment Contributed to facilitate contributed: contributed investment in: 5 29,608,005 0.37% Sun'l`elep1rone 540,06-5,817 6.75% OSI Restaurant Partners, [nc. 5.60% Sankaty Special Situations l, LP. 409,001988 5.11% Clear Channel Comrnunications 80,238,132 1.00% Clear Channel Debt 5 1,506,786,749 18.83% Total uncalled capital as ol`Decen'rbcr 31, 2009 was $184565,000 for institutional Limited Partners andthe General Partner, and $35,035,000 for Other Lirnited Partners. Partners are not able to withdraw from the Partnership. Income and Expense Allocation The Partnership Agreement provides for the allocation of operating income and operating expenses based upon the partners' contributed capital accounts. In order to recognize the advance contributions of certain partners, adjustments to allocations may be made at the sole discretion of the General Partner. Gains and losses are allocated in accordance with Partnership Agreement. Prior to nraking airy other allocations, gains and losses shall generally first be allocated to the General Partner until the General Partner has received a net amount equal to its Total Priority Profit Share (Note 6). Allocations ofrcmaining gains and losses are generally as necessary to ensure that, after the Partnership has achieved its Preferred Return as defined in the Partnership Agreement, 70% of cumulative realized capital gains and losses through the date of allocation are allocated to all partners on a pro rata basis, based on the partners' contributed capital accounts, and 30% are allocated to the General Partner ("Carried Interest"). Unrealized gains and losses are allocated in the same manner described above as if realized at December 31, 2009. 9 Bain Capital Fund IX, L.P. Notes to Financial Statements December 31, 2009 Distributions Distributions are made at the discretion of the General Partner. Cash distributions representing a return of capital are made in proportion to contributed capital. Generally, cash distributions representing profit are made in the same proportion as such profit is allocated to the capital accounts. As specified in the Partnership Agreement, distributions of publicly traded securities are valued at the last trade price or, if unavailable, at the last bid price on the most recent day on which such securities traded prior to the date as of which their value is to be detemiined. 2. Significant Accounting Policies [isc of Estimates Tite preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires the General Partner to make estimates and assumptioris that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Events or transactions occurring after year end through the date that the financial statements were issued, March l8, 2010, have been evaluated in the preparation of the financial staternents. Cash and Cash Equivalents The Partnership considers all highly liquid debt instruments purchased with an original mattrrity of three months or less to be cash equivalents. The Partnership has established guidelines relative to diversification and maturities that it believes maintain safety and liquidity. The guidelines are periodically reviewed and modified to take advantage oftrends in yields and interest rates. Included in cash and cash equivalents at December 3 1, 2009 are overnight of`t`shore time deposits with comrnercial banks in the amount of $46,716,179 bearing interest at 0.03%, which matured on January 4, 2010. Investment Valuation ln accordance with the authoritative guidance on fair value measurements and disclosures under generally accepted accounting principles, the Partnership discloses the fair valtre ofits investrnents in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets t`or identical assets or liabilities (level measurements) and the lowest priority to unobservable inputs (level 3 measurements). The guidance establishes three levels ofthe fair value hierarchy as follows: Level - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Partnership has the ability to access at the rneasurcrnent date; Level 2 - Inputs other than quoted prices that are observable for the asset either directly or indirectly, including inputs in markets that are not considered to be active; l.cvel 3 - lnputs that are unobservable. Inputs are used in applying the valuation techniques discussed below and broadly refer to the assumptions that the General Partner uses to make valuation decisions, including asstunptions about risk. Inputs may include recent transactions, earnings forecasts, market multiples, future cash flows, and other factors. An investment`s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. The categorization of an investment within the hierarchy is based upon the pricing transparency ofthe investment and does not necessarily correspond to the General Partners perceived risk of that investment. 10 Bain Capital Fund IX, L.P. Notes to Financial Statements December 31, 2009 Generally, the majority of our private equity investments are valued utilizing unobservable inputs, and are therefore classified within level 3. The General Partner`s determination of fair value is based upon the best information available for a given circumstance and may incorporate assumptions that are managcmenfs best estimates after consideration ofa variety ofinternal and external factors. in establishing the fair value of an investment the General Partner will tirst consider recent transactions in the same or similar securities including the initial purchase transaction of the security being valued or any recent financing round. Otherwise, the General Partner generally employs two valuation methodologies when determining the fair value ofa private equity investment. The first methodology is a market multiples approach that considers a speciti ed linancial measure (such as EBITDA) and recent public market and private transactions and other available measures for valuing comparable companies "lvlarket Approach"). The second methodology determines a valuation by discounting 1`uture cash flows "lncome Approacli"). The ultimate fair value recorded for a particular investment will generally be within the range suggested by the two methodologies utilizing the judgment ofthe General Partner. The General Partner tnay also adopt the valuation of an underlying partnership imerest provided by the partnership unless the Genera] Partner determines in the good faith exercise of its discretion that any such valuation is unreasonable or inappropriate under the circumstances. Because ofthe inherent uncertainty of valuation, this estimated fair value may differ significantly from the value that would have been used had a ready market for the security existed, and the difference could be material. investments whose values are based on quoted market prices in active markets, and are therefore classified within level l, generally include active listed equities. The General Partner does not adjust the quoted price for such instruments, even in situations where the Partnership holds a large position and a sale could reasonably impact the quoted price. Effective January l, 2009, the Partnership adopted the authoritative guidance under GAAP on determining fair value when the volume and level of activity for the asset or liability have si gniti cantly decreased and identifying transactions that are not orderly. Accordingly, if the Partnership determines that either the volume andfor level of activity for an asset or liability has signi ticantly decreased (from nomial conditions tor that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. Valuation techniques such as an income approach might be appropriate to supplement or replace a market approach in those circumstances. The guidance also provides a list of factors to determine whether there has been a significant decrease in relation to normal market activity. Regardless, however, of the valuation technique and inputs used, the objective for the fair value measurement in those circumstances is unchanged from what it would be if markets were operating at normal activity levels and} or transactions were orderly; that is, to determine the current exit price. ll .-.-- -- - rI7jIv-?.-LTg7y.?7 77 Vp--7--I ray. an ir . ..-I: .5 . szYQY7 7777.hir,}. I l- . ..-.~-gn ?o I I 2 I, I-aHT.5;-gl 7 FIT4*5377 7.ai`: IA I I I -?JI, 777 77I777 ..VVIV Vg; I Ie.-.52 I I .. syyr-.- V: 7 I 7--.-7 . -.--7. 'Fpg-- - - 7-- rg - ig-- -..- .- -. -- ..- V, 7-Rig.; :3 7: ., Muzi..1I-VI-7. I .. .. . .-.., . . - - - .. - -. . . IIBain Capital Fund IX, L.P. Notes to Financial Statements December 31, 2009 Investment Transactions, Income and Expenses Investment transactions are accounted for on the closing date. Realized gains and losses on investment transactions are determined using the specific identification method. Interest income and expenses are recorded on the accrual basis. Dividend income is recorded on the ex-dividend date, net of applicable withholding tax. The General Partner analyzes dividends received from portfolio companies to determine whether they have been accretive to the investment based on an analysis of enterprise value and information provided by investment banks, third party valuations or other parties. The financial statements reflect the character of such dividends as required under generally accepted accounting principles. ln some cases, the Partnership invests in portfolio companies directly and in some cases invests in portfolio companies indirectly through one or more holding companies or other entities in which other parties affiliated with the Partnership andfor the Manager may also be investors. In cases where the Partnership invests indirectly through such an entity, the Schedule of Investments reflects the proportionate share of the underlying investment. The financial statements include the accounts ot`the Partnership and its wholly owned subsidiary, Bain Capital Fund IX, LLC. All intercornpruiy balances and transactions have been eliminated in consolidation. Foreign Currency Translation The accounting records ofthe Partnership are maintained in U.S. dollars. The value ofcash and foreign securities is recorded in the books and records ofthe Partnership after translation to U.S. dollars based on the exchange rates on that day. income and expenses arc translated at prevailing exchange rates when accrued or incurred. The Partnership docs not isolate that portion of realized or unrealized gains or losses resulting from changes in the foreign exchange rate on investments from fluctuations arising from changes in the market prices ofthe securities. Such gains and losses are included with the net realized and unrealized gainfloss on investments. Income Taxes The Partnership is a qualified intermediary and intends to conduct its operations so that it will not be engaged in a United States trade or business and, therefore, will not be subject to United States federal income or withholding tax on its income from United States SOLIYCGS. The Partnership may be subject to taxes in certain foreign jurisdictions. Under the current laws ofthe Cayman Islands, there are no income, estate, transfer, sales or other Cayman Islands taxes payable by the Partnership. Accordingly, no income tax provision is required in these financial statements. The Partnership adopted the authoritative guidance on accounting for and disclosure of uncertainty in tax positions (Financial Accounting Standards Board - Accounting Standards Codification 740) on January l, 2009, which required the General Partner to detennine whether a tax position of the Partnership is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits ofthe position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. The General Partner has determined that there was no effect on the financial statements from the Partnerships adoption of this authoritative guidance. The Partnership files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. ln the nonnal course ofbusiness, the Partnership is subject to examination by federal, state, local and foreign jurisdictions, where applicable. I3 -.1r~"et? :4 ??.--gvIsn gapytUQNW -. .. All - - kr. {Iv- "77Itx?: . . ?IiIf,. A.-) .7: .5. I-jmiih Lira I-., Iglj., I . 2*7 -- agiZiviiae-yin?2*c I ..-, . . -.., g,N ug.--, - -- . uf{zi-_jj -- . Instig.5"riIpELI7.vlQQ?r`f 2 I VI--?vV? . . . Tale 7rr7. ._77 . . TI-zinj]- .- jr:?1f- x. .. 7777--.-li}: tvI-lm"` I I x$;h A A U-. - Iz .7ang.77. .. I- *?U--Qzjik in Ii .2..-. - - 15,1..--. .-.. wrVi` "`.77 V-.- .. V7-..VVI':Infllu pg.! L. Q7-7It-giinhnli..-. I-.- .. I 7-: . e75~rVVin.-, gag.--;hrV VVwil" - - ,o --.rT_ I--fz`gr7VV..-- .. 7* .- xwLn?-V-- .7. 7V.LV4 .71--.. 17l Vg-.`jfi VV . . -*grq- 7 - - V.2*-Vkjfg-;, .--7 .7 . VY. ?r?7IVY. 7, 5 7-- IJTgn? 2-.. -7 7? 7.75-.1 - I 7.. VV . VarRel-7?lV_ o,'7 7 I -7j*V -V7lV`lVr__ VsV.-- .. 7.., .7jug-; . I wr-7, VTTSV 45:.Vumi.-T. ;.VV--V UV AV V--"]VVMV 44-. I 444_vvici"Kkr_.--4V?;?;grg - . . fx; {fj`jyfn --Ar`ilT?IrBain Capital Fund IX, L.P. Notes to Financial Statements December 31, 2009 Debt investments are subj ect to credit and interest rate risk. "Credit risk" refers to the likelihood that an issuer will default in the payment of principal andfor interest on an instrument. Financial strength and solvency of an issuer are the primary factors influencing credit risk. In addition, subordination, lack or inadequacy ofcollateral or credit enhancement for a debt instrument may affect its credit risk. Credit risk may change over the life of an instrument and securities which are rated by rating agencies are often reviewed and may be subject to downgrade. "lnterest rate risk" refers to the risks associated with market changes in interest rates. Interest rate changes tnay affect the value of a debt instrument indirectly and directly. in general, rising interest rates will negatively impact the price ofa fixed rate debt instrument and falling interest rates will have a positive effect on price. Adjustable rate instruments also react to interest rate changes in a similar manner although generally to a lesser degree. Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules. As oflilecember 31, 2009, the HDS Debt Entities hold investments in HD Supply, Inc. fixed rate Senior Cash-Pay and Senior Subordinated PIK Notes that were purchased in the t`onn of assignments from third parties, the Michaels Debt Entity holds an investment in Subordinated Discount Notes that were purchased from third patties, and the Sensata Debt Entity holds an investment in Senior Subordinated Notes that were purchased from third parties. Based on activity in the bank loan and corporate debt markets, the debt entities are exposed to liquidity risk as well as risk ofthe borrowers. Leverage The HDS Debt Entities use leverage directly. The use of leverage will increase the volatility of the Debt Entities' values. While the use ofborrowed funds will increase returns if the HDS Debt Entities earn greater returns on the incremental investments purchased with borrowed funds than it pays for such funds, the use of leverage will decrease retunrs if the IIDS Debt Entities fail to eanr as much on such incremental investments as it pays for such funds. The effect of leverage may therefore result in a greater decrease in the values of the HDS Debt Entities than if it were not so leveraged. 6. Related Party Transactions The Partnership is a party to an investment and advisory agreement with the Manager. In consideration for a management fcc, the Manager provides administrative and operational services to the Partnership. The annual management Ice is the lesser of 2% ofthe aggregate subscribed capital multiplied by an inflation adjustment, as defined in the agreement, or 2.5% of aggregate subscribed capital and is subject to certain reductions as described in the agreement. The General Partner has reduced the management fee with respect to interests in the Partnership held by certain affiliates. The management fee is payable in advance on the first business day of each quarter. For the year ended December 31, 2009, the Manager received $26,955,914 in corporate service fees from the portfolio companies. in accordance with the investment advisory agreement, the Manager retained all of these fees and no reductions were applied to management fees. During the year ended December 31, 2009, in accordance with the investment advisory agreement, management fees were reduced by $567,563 for 50% ofthe Partnership`s pro rata share of corporate service fees, net of expenses, received by the Manager in previous years. Pursuant to the investment and advisory agreement, the Manager may irrevocably waive the right to receive all or any portion ofthe payment ofthe management next due and payable and all or any portion of any payment ofthe management fee that will be due and payable during the following year, provided that any such waiver must be made in a written notice delivered to the Partnership prior to the date on which the waived portion ofthe payment would otherwise be due and payable, or prior to the beginning of the year, as the case 1`l`l3.y be. 5--, YA I .. gigA?'--.-. EUR-- .7 {sun ..hk.! ?2 . . i-oITTYJeni: I `rvInurr_r_ friMawrl"El? sigfrirjxi M11FZRvBain Capital Fund IX, L.P. Notes to Financial Statements December 31, 2009 At December 31, 2009, the General Partner had established multiple ATVs that hold an investment in Sanitary Special Situations 1, I is managed by Sarikaty Advisors, Inc., an aililiatc ofthe Manager. The table includes a reconciliation of the net increase in partners` capital resulting from operations allocated to the General Partner for year ended December 31, 2009 pursuant to the Partnership Agreement: Nei increase in Net Net realized Change in net partners' capital investment loss on un realized loss resulting from income investments on investments operations tlcneial l'i1rtr1er: ticncnil Partner. excluding (`mriecl Interest and Total Priority Protlt Share FB 9.052 U8.508) il 5 054.22l (`anictl - [38.883.884] 38,88},884 Prioritv Sliate - .-'tllocateti Fee Amount l.ll05.0=43 10.080.252 l*r1t1r1ty l'rol`it Shane - llrialiocauctlWai1.?crlFee .-itinotuit 120, 78.593 `l`nt;1E ticncral Partner 7. Authorized Commitments The Partiiersliip has committed a total to Bain Capital TP Holdings, LP., of vvliich $2,356,054 was unfunded as ofDece1nbcr 31, 2009. 8. Contingencies ln conjunction with the Partnerships investment activities, the Partnership is a party to agreements which contain certain representations and warranties. As such, the Partnership 111ay, t`rom time to time, be a party to suits and claims arising in the normal course ofbusincss. The General Partner believes that any losses resulting from the resolution of such claims would not have a material adverse effect on the Partnerships accompanying financial statements. The parent compa11y ofthe Manager has been named in civil litigation that may result in a loss to tl1e Partnership. While the General Partner believes that the claims are without merit, the ultimate outcome of these proceedings is not yet determinable. All entity controlled by the Partnership, Diamond ll Holdings, lnc. has been named in a civil litigation that may result in a loss to Partnership. Diamond agreed to lead an acquisition oI`3Com Corporation {"3Co1n") along with other entities associated with the Manager, one or more funds managed by the Manager and affiliates of Huawei Technologies. (ln March 20, 2008, Diamond 11oti tied 3Com that it was terminating the agreement pursuant to which it would have acquired 3Com. On July 31, 2008, 3Com Corporation sued Diamond asserting a right to a $06 million termination fee. lf 3Com is successful in asserting its claim the Partiiership would only be responsible for its allocable portion of termination fee. The ultimate outcome of the proceeding is not yet deterniinable. 9. Other Required Disclosure The Institutional Limited net Internal Rate of Retum ("net since the inception of the Partnersliip through December 31, 2009 and December 31, 2008 is and respectively. The net is net ol` management fees, Total Priority Profit Share, expenses, and Carried Interest. The calculation is based on the assumption that capital contributions and cash and stock distributions occurred o11 the last clay ofthe fiscal quarter. The fair value of the limited partners` capital accounts is assumed to be the terminal cash flow. The net IRR has been calculated for Institutional Limited Partners, which does not materially differ from Limited Partners. 20 hwrel., I turd lr; vv; VSJJIIV J., .-.. - . 2fvw{Irv- I4-I-I lvrm'? I I Innin