[wanabidii] Obama, in Colorado, warns women Romney would roll back their rights

Folks,   Did Romney use his political and financial connections to shift debts to tax-payers burden while taking all the profits and hiding them in offshore tax shelters.......???   If Romney becomes the President, how will he manage his network of Corporate business interests including his Private Equity without compromising public interest and manipulating and exploiting taxpayer ?   Does Mitt Romney believe in a secure Government Administration management as oppose to Governing through the commerce of International Corporate? Should the Government be a majority People's Government or the Corporate Special Interest of a few to benefit or both???   If Commerce is unregulated, who bears the burden of debt with unreasonable explosive costs ??? How can selfishness and greed from the Corporate Business Community be managed under legislative fair policy to provide discipline and order in a balance way shared by all??   Is the avoidance of taxes by the rich and wealthy the solution to rising debts? The Corporate lack of responsibilities and not playing by the rule, were the reason why the Euro-zone is in trouble with Economic Crisis exploded the banks and caused economic meltdown?   Can the Corporate Business Community exist by itself without the general public Partnership to whom they expect to sell their products/commodities/and services?   To run for Presidency without specifics of a Plan, something is not just adding up. This is only possible with Mitt Romney.   Mitt Romeny's records shows that the way he managed Equity Firms is cloudy and not clear…...How will he then provide Transparency with accountability when he has refused to give his 10 year tax-return to clear smokes-screen??? It may not be illegal, but his refusal is creating more anxiety that he has something to hide otherwise, he would have cleared himself..   It must be known that, the war is between the unscrupulous wealthy against the middle class poor.   All people of America should be proud and be grateful in having a President as intelligent as President Obama, because America will remain a Super Power for a very long time, as it is on the road to recovery, rooted on a firm foundation that no individual or group of people will bring it down easily. Although President Obama has not delivered all that he promised; he is on the right path, and he truely believes in America with its people.   President Obama is more passionate and committed than any president in recent history ever did.   The sacrifice President Obama took to put America on the path to recovery was not easy; as forces that hated him fought him through and through, but the President pressed on and we witnessed his testimony which no one can doubt or deny.   In his quest to lift the economy, President Obama has not relaxed or backed down in exerting pressure on Congress to pass items on Obama's "to-do" list including those of job, but it is clear Republicans aren't likely to act anytime soon. We shall wait and see..........   Wake up people wake up....The big fight is nothing but to take away peoples voices and rights so to make the middle class victims of poverty slaves of the Millennium. This conspiracy must be rejected and is not acceptable. People must stand up and together we can shape our destiny united under peace and joined in love; for this is the purpose of God's creations.   Scroll to the end and you will be amazed how much information is out there so you can choose wisely.......   Cheers everybody.......   Judy Miriga Diaspora Spokesperson Executive Director Confederation Council Foundation for Africa Inc., USA http://socioeconomicforum50.blogspot.com         Obama, in Colorado, warns women Romney would roll back their rights By Olivier Knox, Yahoo! News White House Correspondent By Olivier Knox, Yahoo! News | The Ticket – 4 hrs ago Sandra Fluke gets a hug from U.S. President Barack Obama after introducing him in Denver. ( Marc Piscotty/Getty … Campaigning in the battleground state of Colorado, President Barack Obama warned women voters vital to his reelection effort that Mitt Romney would roll back their rights and had embraced "policies more suited to the 1950s than the 21st century." Obama got a vocal assist from Sandra Fluke, who as a Georgetown law student advocated health insurance coverage of birth control—only to be branded a "slut" by conservative talk show icon Rush Limbaugh. Fluke said she was "heartened" that "so many Americans…reached out to me and supported me, no matter what anyone's politics were." And she highlighted Obama's strong public support — before ripping into Romney. "Mr. Romney could only say that those weren't the words he would have chosen," she said, drawing boos from the crowd. "Well, Mr. Romney, you're not going to be the candidate we choose. Because if Mr. Romney can't stand up to extreme voices in his own party, then we know he'll never stand up for us." Fluke introduced Obama, who wasted no time in hammering home what he described as the high stakes of the 2012 campaign. "The direction you choose when you walk into that voting booth three months from now will have a direct impact—not just on your lives but on the lives of your children and the lives of your grandchildren," he told a cheering crowd of supporters in Denver. "That's true for everybody, but it's especially true for the women in this country." National polls have found a persistent gender gap: Obama does far better than Romney among women (notably single women), while Romney typically does better with men. In Colorado, which both campaigns are targeting, Obama edges Romney 51 percent to 43 percent among women, according to a new Quinnipiac/NYT/CBS poll. Romney is up 56-39, that survey found. Obama highlighted his efforts to battle workplace sex discrimination, his appointment of two women to the Supreme Court, and the benefits women—and families—stand to get from Obamacare. And the president trained heavy fire on Romney for vowing to "kill it dead"—noting that would roll back politically popular measures like a ban on insurance companies refusing coverage because of preexisting conditions and allowing parents to keep kids up to 26 years old on their insurance. And "when it comes to a woman's right to make her own health care choices they want to take us back to the policies more suited to the 1950s than the 21st century," Obama said of Romney and Republicans, an unmistakable reference to access to abortion. The president also emphasized that a Republican president "could tip the balance of the [supreme] court in a way that turns back the clock for women and families for decades to come." "The choice between going backward and moving forward has never been so clear," he said. Ahead of Obama's remarks, Romney campaign spokeswoman Amanda Henneberg told Yahoo News that "President Obama's four years in office haven't been kind to women." "Hundreds of thousands of women have lost their jobs, poverty among women is highest in nearly two decades, and half of recent graduates can't find a good job," Henneberg said. "Middle-class families have struggled in the Obama economy, and Mitt Romney has a plan to strengthen the middle class and get our country back on the right track."       Bill Clinton denounces Romney welfare criticism August 8, 2012 6:33 AM President Clinton in London, May 22, 2012. (Credit: Getty Images for Clinton Foundation Fundraiser) (CBS News) After Mitt Romney criticized President Obama for "taking the work requirement out of welfare", former President Clinton - who signed the 1996 Welfare Reform Act - came to Mr. Obama's defense. "After the law was enacted, every state was required to design a plan to move people into the workforce, along with more funds to help pay for training, childcare and transportation. As a result, millions of people moved from welfare to work," Mr. Clinton said in a written statement sent late Tuesday. Clinton explained that Romney's criticisms of Mr. Obama, where Romney suggested in a TV ad and on the stump that the president removed the work requirement from the welfare law, were "disappointing." Romney has honed in on a memo issued last month by the Department of Health and Human Services (HHS) that will allow states to apply for waivers from certain parts of the Temporary Assistance for Needy Families (TANF) program. The move, sought by several states, is meant to allow states more flexibility in meeting the work requirement. "The Secretary is interested in approaches that seek to improve employment outcomes," the memo says. Romney accuses Obama of "taking the work requirement out of welfare" "The recently announced waiver policy was originally requested by the Republican governors of Utah and Nevada to achieve more flexibility in designing programs more likely to work in this challenging environment," Mr. Clinton added. The Administration has taken important steps to ensure that the work requirement is retained and that waivers will be granted only if a state can demonstrate that more people will be moved into work under its new approach." "The Romney ad is especially disappointing because, as governor of Massachusetts, he requested changes in the welfare reform laws that could have eliminated time limits altogether," the former president said. The Obama campaign maintains that the new HHS policy does not remove the work requirement. It called Romney's statements untrue and hypocritical and noted that some Republican-led states had sought the new waiver policy. For his part, Romney's campaign isn't backing down and released a new web video Wednesday hitting Mr. Obama for not supporting the 1996 welfare bill. It features a quote of then-Illinois state senator Obama saying "I was not a huge fan of the federal plan that was signed in 1996" along with clips of other Democratic senators, including Joe Biden and John Kerry, announcing their support of the bill. "President Obama was a vocal opponent of the innovative, bipartisan welfare reforms that President Clinton and a Republican Congress passed in 1996," Romney spokesman Ryan Williams said in a written statement. "His administration has now undermined the central premise of those reforms by gutting the welfare-to-work requirement." CBS News/National Journal reporter Sarah Huisenga contributed to this report.       Welfare fight heats up, Gingrich joins the fray August 8, 2012 1:36 PM By Sarah Huisenga Topics Campaign 2012 Mitt Romney campaigns at Central Campus High School in Des Moines, Iowa, on Wednesday, Aug. 8. (Credit: AP Photo/Charles Dharapak) (CBS News) DES MOINES, Iowa - Republican presidential candidate Mitt Romney and former House Speaker Newt Gingrich joined forces Wednesday in a double-barreled attack on President Obama for what they called his attempt to remove work requirements from welfare - charges found to be baseless by welfare policy experts and new organizations. Romney said that as an Illinois state senator, Obama opposed the legislation hammered out by Democratic President Bill Clinton and the Republican Congress in 1996 to impose stringent new work and study requirements on welfare recipients. As president, Obama has taken executive action to gut the law in an attempt to create "a nation of government dependency," Romney said in a campaign appearance in a high school auditorium here. "Now he's president ... with a very careful executive action, he removed the requirement of work from welfare," Romney said. His campaign is also airing an attack ad on the subject, which asserts, "You wouldn't have to work and wouldn't have to train for a job. They just send you your welfare check." (Romney: Obama's always opposed work in welfare.) Gingrich, who ran unsuccessfully for the Republican nomination in 2012, lodged similar charges in a conference call with reporters on Wednesday. The administration's recent move to allow states to apply for waivers from certain parts of the Temporary Assistance for Needy Families program is "outrageous," Gingrich said, and part of a conspiracy by Obama and liberals to increase government dependence. "On the hard left, there is unending desire to create a dependent America," Gingrich said. "... It's not just Obama's a radical, but the people he appoints are even more radical." He singled out Kathleen Sebelius, the Health and Human Services secretary, who generated the administration's policy. "She is waging war on the Catholic Church," Gingrich said. "She's adopted radical positions on a range of issues. Why would any everyday American believe that she is going to enforce -- that if she makes it optional, that she is going to enforce a work requirement? The fact is, when we wrote the bill, Section 407 was not (made) waive-able precisely because we distrusted people like the secretary of HHS." The website Politifact, which investigates political claims, found Romney's charges to be untrue. A memo from George Sheldon, the acting assistant secretary at HHS, said the department wanted to give states more flexibility in meeting work requirements in order to "to allow states to test alternative and innovative strategies, policies, and procedures that are designed to improve employment outcomes for needy families," the website reported. Obama campaign spokesman Lis Smith issued a response saying that Romney's continued attacks, which he launched on Tuesday, are "both untrue and hypocritical." "Former President Clinton, the author of welfare reform, called Romney's comments 'not true', especially in light of Romney's previous support for a policy that would have eliminated time limits for welfare recipients, which would have ended welfare reform as we know it," she wrote. "If we take Mitt Romney at his word today, that past behavior is the best predictor of future behavior, it becomes clear that he lacks the core strength and principles the nation needs in a president." Obama did not support the welfare reform bill when it was passed in 1996, saying he feared "disastrous results." But in 2008, while running for president, Obama said he'd changed his position about the landmark bill and had become "absolutely convinced" that the work-centered approach must be "the centerpiece of any social policy." Matthew Shelley contributed to this story.           Romney's Bain Capital invested in companies that moved jobs overseas By Tom Hamburger, Published: June 21The Washington Post Mitt Romney's financial company, Bain Capital, invested in a series of firms that specialized in relocating jobs done by American workers to new facilities in low-wage countries like China and India. During the nearly 15 years that Romney was actively involved in running Bain, a private equity firm that he founded, it owned companies that were pioneers in the practice of shipping work from the United States to overseas call centers and factories making computer components, according to filings with the Securities and Exchange Commission.       Romney's Cayman Islands holdings complicate tax return debate By David S. Hilzenrath, Published: January 24, 2012The Washington Post Republican presidential candidate Mitt Romney's newly released tax return shows sprawling international financial interests, from Bain Capital entities based in Luxembourg to a Goldman Sachs fund in Dublin. It discusses a foreign currency transaction and details foreign tax credits. But one of Romney's biggest foreign investments is sheltered from U.S. taxation, partly because it is based in the Cayman Islands. David Corn Washington Bureau Chief David Corn is Mother Jones' Washington bureau chief. For more of his stories, click here. He's also on Twitter and Facebook. RSS | Twitter Corn on MSNBC: Romney's Super PAC Ski Trip Romney struggles to appeal to Latino voters, and also goes on a legally dubious Super PAC ski trip. Corn on Hardball: Team Obama Attacks Romney on Bain How Bain's Lobbying Saved Mitt Millions Private equity titans like Bain Capital used K Street to preserve the GOP front-runner's favorite—and most lucrative—tax loophole. Romney Hits Obama on Solyndra, But Bain Got Government Subsidies, Too Bain Capital owes much of its success to tax breaks and subsidies. Mitt Romney 10 Theories About What Mitt Romney's Really Hiding in Those Tax Returns Bill USA (1,325 posts http://www.democraticunderground.com/101637731 - Everyone knows it's something that would damage an already weak candidate, but nobody knows exactly what it is. My guess is in one or more of the last ten years he probably payed no taxes (i.e. virtually nothing, like perhaps a few thousand dollars on millions of dollars in income) http://www.alternet.org/election-2012/10-theories-about-what-mitt-romneys-really-hiding-those-tax-returns? The Most Likely Explanation Given Romney's refusal to release his returns, this kind of speculation is entirely predictable. But the most likely reason Romney doesn't want to release his returns is that they'll cast a bright light on the aggressive tax avoidance strategies the super-rich use every day – strategies David Cay Johnston outlined so well in his excellent book, Perfectly Legal . The Romney campaign keeps assuring us that he paid all taxes required by law, and that very well might be the problem. A Vanity Fair investigation into the trickle of tax documents that Romney has disclosed – under intense pressure – found that they "provided a lavish smorgasbord for Romney's critics. Particularly jarring were the Romneys' many offshore accounts." To give but one example, there is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as "a Bermuda corporation wholly owned by W. Mitt Romney." It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife's newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts's governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney's personal lawyer. Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an "excepted investment fund" that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney's wealth is even greater than previous estimates. While the Romneys' spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in "jurisdictions where there is virtually no tax and virtually no compliance," as one Miami-based offshore lawyer put it. While James Wolcott thinks that it's "hardly a secret anymore" that "our tax code — and, indeed, our entire economic system — has been gamed to benefit the folks in Romney's economic stratum," most people probably don't have a firm grasp on precisely how the vaunted "job creators" avoid paying their fair share, and the release of Romney's returns would offer a teachable moment. As real estate billionaire Leona Helmsley once said, "Only the little people pay taxes." That's not the message Mitt Romney wants to convey during a campaign that has a lot to do with tax cuts for the wealthiest.       Mitt Romney's offshore accounts draw more fire THIS STORY APPEARED IN July 09, 2012|Callum Borchers President Obama's reelection campaign continued to blast Mitt Romney on Sunday for offshore financial holdings and renewed its call for the presumptive Republican presidential nominee to release additional tax returns. The pressure followed a week of news reports about a Bermuda company Romney owned and transferred to a trust in the name of his wife, Ann, on the day before he became Massachusetts' governor in 2003. The existence of the company, Sankaty High Yield Asset Investors Ltd., and other foreign assets — including investments in the Cayman Islands and a Swiss bank account maintained until 2010 — was not known to the public until Romney released his 2010 tax return and an estimate for 2011 in January. Obama campaign adviser Robert Gibbs suggested Sunday that Romney might have broken the law; at a minimum, Democrats say, Romney is guilty of secrecy and of betting against the country he aspires to govern. "You either get a Swiss bank account to conceal what you are doing or you believe the Swiss franc is stronger than the American dollar," Illinois Senator Dick Durbin said on CBS's "Face the Nation." "The one thing he could do . . . to clear up whether or not he's done anything illegal, whether he's shielding his income from taxes in Bermuda or Switzerland, is to do what every other presidential candidate has done and that is to release a series of years of their tax returns," Gibbs added on CNN's "State of the Union." Gibbs's claim that "every other presidential candidate" has released "a series of years of their tax returns" is not quite accurate. In 2008, GOP nominee John McCain released only two years of returns. And the Obama campaign's demand that Romney release 23 years of tax returns — the number he shared with McCain while being vetted as a potential running mate — is unprecedented. According to a list compiled by PolitiFact, no presidential candidate since 1976 has released more than 12 years of tax returns. The Romney campaign on Sunday called attacks on Romney's offshore assets "unseemly and disgusting." "Mitt Romney had a successful career in the private sector, pays every dime of taxes he owes, has given generously to charitable organizations, and served numerous causes greater than himself," Romney spokeswoman Andrea Saul said in a statement. The significance of Romney's foreign assets is unclear. Though it has used Romney's offshore holdings to paint him as an out-of-touch rich man hoarding his wealth abroad, the Obama campaign and its surrogates have struggled to articulate why the investments are relevant to the election. Martin O'Malley, the Democratic governor of Maryland, made an attempt on ABC's "This Week": by vengenceofgod100 August 8, 2012 12:36 AM EDT Romney has a huge problem with his taxes because he has to reveal at least ten (10) years, if not his father's pledge that a presidential candidate should release at least twelve (12) years. I suggest Romney has no choice for several reasons. One, his father told him he should do so. Remember what Moses said Mitt, "Honor your father and mother"and if he doesn't do it, it shows he's trying to hide something. Two, this Tax Problem is not going away soon. You might say that the mess the government is in fiscally is because of Secret Tax Policy's lawmakers make for the rich. Three, his political stance not to increase revenue by the Ryan Republicans plan makes the Romney position untenable, because their position to keep Tax Breaks for the rich and ultra-rich increases the debt of the U.S. of A. by at least another trillion dollars. Four, their is no question that even if he refuses to open his taxes up to public review it still leaves all these unanswered questions, and just further exacerbates Romney s refusal to be an honest candidate and because of this duplicity of not revealing his taxes should disqualify him from being taken seriously as a President for the United States. Americans deserve better. by fastdraw2 August 7, 2012 9:23 AM EDT There has got to be something really horredously damaging in Romney's tax returns for him to this far and risk the election without releasing them.         Republicans push Romney to get it over with, release tax returns THIS STORY APPEARED IN July 19, 2012|Callum Borchers A growing roster of Republicans is calling on Mitt Romney to release additional tax returns on the premise that the presumptive GOP presidential nominee could score political points with transparency-hungry voters and weather a few stormy news cycles about the volume and location of his wealth. But Romney appears certain that the tempest would not subside so quickly. "In the political environment that exists today, the opposition research of the Obama campaign is looking for anything they can use to distract from the failure of the president to reignite our economy," Romney told the National Review on Tuesday. "And I'm simply not enthusiastic about giving them hundreds or thousands of more pages to pick through, distort, and lie about." Romney's fear is not unfounded. His offshore assets — a company in Bermuda, investments in the Cayman Islands, a recently closed Swiss bank account — continue to feature prominently in Obama campaign attacks months after their existence was made public when Romney released his 2010 tax returns in January. A Vanity Fair article about the Bermuda company, Sankaty High Yield Asset Investors Ltd., dominated political discourse this month. As Romney adviser Vin Weber told the Washington Post on Tuesday, "the Democrats aren't calling for all this information so that they can move on to other issues." Yet pressure on Romney continues to mount within his own party — and even within his own campaign, according to a report by the Post. Many in the GOP believe Romney is doing more damage to his image by stonewalling than he would do by opening the book on several more years of taxes. The list of prominent Republicans advising Romney to give up earlier tax returns includes Representative Ron Paul and Governor Rick Perry, both of Texas; Haley Barbour, a former Republican National Committee chairman; and Senators Charles Grassley of Iowa and Johnny Isakson of Georgia. "Politically, I think that would help him," Paul told Politico on Tuesday. "In the scheme of things politically, you know, it looks like releasing tax returns is what the people want." Conservative journalists such as Post columnist George Will and Weekly Standard editor William Kristol are also urging further disclosure. "He should release the tax returns tomorrow. It's crazy," Kristol said on "Fox News Sunday." "You've got to release six, eight, 10 years of back tax returns. Take the hit for a day or two." So far, Romney has shown no sign of heeding their advice. He has pledged to release his 2011 tax returns when they are finished, after providing an estimate in January, but said he will end his disclosures then. STEPHEN BRAUN Related Links Romney plans a summer jaunt to meet with Israeli leaders Latest issue in Romney vs. Obama: Which one is more 'out of touch'? Mitt Romney: Supreme Court ruling on health law wrong In an Oct. 10, 2006 file photo Mitt Romney speaks at the Leadership Summit on Race in Detroit. For nearly 15 years, Republican presidential candidate Mitt Romney's financial portfolio has included an offshore company that remained invisible to voters. / AP Photo/Paul Sancya/fileSTEPHEN BRAUN Associated Press WASHINGTON — For nearly 15 years, Republican presidential candidate Mitt Romney's financial portfolio has included an offshore company that remained invisible to voters as his political star rose. Based in Bermuda, Sankaty High Yield Asset Investors Ltd. was not listed on any of Romney's state or federal financial reports. The company is among several Romney holdings that have not been fully disclosed, including one that recently posted a $1.9 million earning — suggesting he could be wealthier than the nearly $250 million estimated by his campaign. The omissions were permitted by state and federal authorities overseeing Romney's ethics filings, and he has never been cited for failing to disclose information about his money. But Romney's limited disclosures deprive the public of an accurate depiction of his wealth and a clear understanding of how his assets are handled and taxed, according to experts in private equity, tax and campaign finance law. Sankaty was transferred to a trust owned by Romney's wife, Ann, one day before he was sworn in as Massachusetts governor in 2003, according to Bermuda records obtained by The Associated Press. The Romneys' ownership of the offshore firm did not appear on any state or federal financial reports during Romney's two presidential campaigns. Only the Romneys' 2010 tax records, released under political pressure earlier this year, confirmed their continuing control of the company. The mystery surrounding Sankaty reinforces Romney's history of keeping a tight rein on his public dealings, already documented by his use of private email and computer purges as Massachusetts governor and his refusal to disclose his top fundraisers. The Bermuda company had almost no assets, according to Romney's 2010 tax returns. But such partnership stakes could still provide significant income for years to come, said tax experts, who added that the lack of disclosure makes it impossible to know for certain. "We don't know the big picture," said Victor Fleischer, a University of Colorado law professor and private equity expert who urged corporate tax code reforms during congressional testimony last year. "Most of these disclosure rules are designed for people who have passive ownership of stocks and bonds. But in this case, he continues to own management interests that fluctuate greatly in value long after his time with the company and even the end of his separation agreement. And the public has no clear idea where the money is coming from or when it will end." Named for a historic Massachusetts coastal lighthouse, Sankaty was part of a cluster of similarly named hedge funds run by Bain Capital, the private equity firm Romney founded and led until 1999. The offshore company was used in Bain's $1 billion takeover of Domino's Pizza and other multimillion-dollar investment deals more than a decade ago. Romney's campaign declined to answer detailed questions from AP about Sankaty. Romney aides have said in the past that some disclosures were not required because those assets were valued by his financial advisers at less than $1,000 — below the minimum threshold under federal rules set by the U.S. Office of Government Ethics. A financial snapshot of Sankaty in Romney's 2010 tax returns showed the holding with almost no value at the time— with $10,000 in both assets and liabilities. "Everything on the filings is reported as required," campaign spokeswoman Andrea Saul said in a brief statement. "If OGE has an issue with any filings, they would let us know." The agency declined to comment. While Sankaty no longer plays an active role in Bain's current deals, private equity experts said such holdings could provide significant income to Romney under his 10-year separation agreement from Bain, which expired in 2009. Investment funds typically churn "carried interest," profit shares due to the managers of the funds that often range as much as 20 percent of a fund's annual profit — known as "the carry." Even after investment funds are exhausted, profit shares and other late earnings from those stakes can continue to stream, arriving as lucrative "tails," tax experts say. In some circumstances, the analysts added, offshore companies like Sankaty could also offer limited tax deferral advantages. The implications of Romney's Bain profit-sharing became clear last month when his trust reported that one rarely disclosed asset had posted a $1.9 million payout. The income was described as a "true-up" payment, catch-up income that made up for unpaid earnings owed to Romney as part of his Bain separation agreement. Such sizable earnings are possible "depending on the terms of the agreement," said tax law expert Michael Kosnitzky, an attorney at the New York firm of Boies, Schiller & Flexner. The Romney campaign acknowledged recently that it could not rule out more large future payments. The use of offshore companies such as Sankaty is allowed under U.S. tax laws. They are typically set up as shell corporations by private equity and hedge funds to route investments from large foreign and institutional investors, such as large pension plans, into corporate takeovers. The money is used to provide equity and buy up debt. In turn, the investors gain U.S. tax advantages by passing their funds through the offshore "blocker" corporations, avoiding a high 35 percent tax on earnings that the Internal Revenue Service describes as "unrelated business income." Set up in Bermuda in 1997, Sankaty served as Romney's partnership stake in Bain's Sankaty group, which invests in bonds, bank loans and corporate debt instruments. That first wave of Sankaty funds managed more than $100 million in investments in the late 1990s and early 2000s, according to a corporate analyst familiar with the funds. The analyst insisted on anonymity because the analyst was not authorized to discuss the funds publicly. Since late 2003, Romney has left his financial decisions to what his campaign describes as a "blind trust" overseen by lawyer R. Bradford Malt, a longtime Boston legal associate. The trust was set up under Massachusetts law, but it's not a federally qualified blind trust — which Romney plans to use if he wins the presidency. Romney does not oversee his investments under his current trust, but its general composition is made public and Malt invests according to Romney's political positions. Romney's 2010 tax returns show him and his wife as sole owners of Sankaty. A 2011 Bermuda legal document lists Malt as Sankaty's president. Michael F. Goss, currently Bain Capital's chief operating officer, is listed as vice president, and Quorum Corporate Ltd., a Bermuda law firm, as secretary. Malt deferred questions about Sankaty to the Romney campaign; Bain Capital and Quorum declined to comment. The candidate's 2010 tax returns listed at least 20 investment holdings besides Sankaty that had not been previously disclosed on federal reports. At least seven were foreign investments. Bain Capital Inc., the holding that posted the $1.9 million earning, was listed on Romney's state ethics reports in 2001 and 2002, when he ran for governor, but was missing from any annual ethics report until Romney's trust included it last month on his 2012 financial statement. Sankaty is the only offshore holding in the Romneys' portfolio under their full control. On his 2010 taxes, Romney's blind trust filed an IRS form identifying Sankaty as a "controlled foreign corporation." That filing is required for any U.S. taxpayer who owns more than 50 percent of a foreign company. Romney's 2010 tax returns indicate that he and his wife control all 12,000 shares. Several U.S. Securities and Exchange documents from the late 1990s and 2000s depicted Romney as Sankaty's owner at the time, but when he ran for Massachusetts governor in 2001 and 2002, Romney did not list the company on annual disclosure forms required by the Massachusetts State Ethics Commission. The ethics commission would not comment on the omissions. Boston College law professor R. Michael Cassidy, who was a member of the commission at the time, said that if Romney "owned this business before he signed his ethics disclosure, then he was obliged to report it." The state's disclosure rules also allow a $1,000 minimum threshold. A six-year statute of limitations covering Romney's ethics reports has since expired. Bermuda legal documents show that on Jan. 1, 2003, the day before Romney was sworn in as governor, his wife's trust acquired 12,000 shares of Sankaty. The transfer was not made public. The month before, Romney had placed his assets in the state-approved trust overseen by Malt. The move legally allowed the trust to describe Romney's holdings in 2003 only as "various investments and securities" — without providing details. The trust filed similar disclosures between 2004 and 2007, the last year of Romney's term. Romney's use of Sankaty as his partnership stake in Bain deals is documented in several U.S. Securities and Exchange Commission reports between 1998 and 2000. The company controlled 50,000 shares of Global-Tech Appliances Inc., a Chinese appliance firm that Bain briefly invested in. Sankaty was also used to manage 385,000 shares in the 1999 takeover of Domino's, as well as the $75 million investment into the Stericycle waste disposal firm and a $150 million investment in the US LEC telecommunication firm. Romney was named as sole owner and president of Sankaty in several of those documents. Though no longer active at Bain by then because he had left to head Salt Lake City's Olympic Games bid, Romney remained a participant because of his partnership stake. Even though Sankaty is no longer used for Bain investments, several tax analysts said its legal offshore status still could be used by Romney to defer some taxes on some of the "carried interest" income related to the Bain deals. Romney has said he gets no tax break. He told an audience at a Maine town hall appearance in February that "I have not saved one dollar by having an investment somewhere outside this country." But the lack of disclosure over the years, private equity experts said, makes it impossible to tell. "Without knowing more about an offshore's history and how it was used," Fleischer said, "you're left in the dark." Romney, Shell Companies & Offshore Accounts: A Primer By Erin McPike - July 16, 2012 It's no secret that Mitt Romney is wealthy. But recent reports about where he has invested his fortune have sparked a debate about the appropriateness of a presidential candidate engaging in tax deferral practices. This conversation is a welcome one for the Obama campaign, which has repeatedly portrayed Romney as being out of touch with average Americans. Steering the political discourse to offshore banking accounts is yet another way to bolster that critique. The Obama team is also using Romney's investments to underscore a broader point about tax policy. The presumptive GOP nominee could explain that he sought lower taxes outside the country to drive his own campaign message about slashing the tax rate, but he has thus far eschewed that tactic -- an understandable response given his reticence to discuss his personal finances. To explore the larger issues here further, we first need to explain what Romney did with his vast investments. Recent articles in Vanity Fair and the Associated Press have charted the flow of some of his dollars into shell companies and offshore investments. Most Americans don't have the kind of resources Romney does -- either in scope or in type -- and thus even the terminology involved might be puzzling. But as investment banker James Rickards explained to RCP, "This is 98 percent tax-driven." Calling it ironic that Romney famously said, "Corporations are people," Rickards noted that "there's a difference between Mitt Romney the person and his corporations." He pointed out that "corporations have a separate existence. If you have an overseas investment . . . in Bermuda, that entity is not a U.S. taxpayer. The money it makes is not U.S. income, so it's not taxable in the United States." Indeed, according to Vanity Fair and the AP, Romney initiated a "company" in Bermuda called Sankaty High Yield Asset Investors Ltd., in which he could park money he made from overseas investments in order to shield it from the high U.S. tax rate. If a person makes money abroad, "you would not put that money in a high-tax jurisdiction" such as the United States, Rickards explained. Instead, someone with foreign investments could launch what is known as a shell company to delay, and possibly minimize, paying taxes. This practice is "quite common," he said, among the wealthy members of the financial sector who are involved with hedge funds, private equity firms, the insurance industry and other Wall Street entities. But it is, of course, not common among Americans whose income derives from domestic sources, because that income cannot legally be moved into shells. For, say, teachers, firefighters, secretaries, office managers, marketing consultants, journalists, and all kinds of other American workers, income is usually limited to funds derived within the United States. That money cannot be used to launch a "company" in Bermuda because it didn't come from a foreign source. If someone tried, they would violate U.S. laws. Enter into this discussion President Obama's chief strategist, David Axelrod. On CNN's "State of the Union" Sunday morning, he criticized Romney's personal finances: Tens of millions of dollars in the Cayman Islands. So when we reform the tax code . . . how does that inform his judgment? . . . What I am suggesting is that he's taken advantage of every single conceivable tax shelter and loophole that we can see. And now, is he the guy who is going to clean up our tax code and make it advantageous to average taxpayers in the country, or is he going to look at it through the lens of his own experience? Surrogates for Obama's re-election effort have also pounced on this topic, saying that Romney is "betting against the U.S. dollar" by keeping much of his money socked away abroad. Maryland Gov. Martin O'Malley, for instance, has asserted repeatedly that Romney is not especially patriotic given that he's structured his finances by doing just that. But veteran Republican strategist Mary Matalin quipped last week on CNN: "I think you would be pretty stupid to not hedge against an American dollar in this Obama economy." This is not a point that has been echoed by the Romney camp. The candidate has simply said that he followed the letter of the law when filing his taxes. And that response is generally accepted, though it hasn't stopped Republicans and Democrats alike from calling for more than the single tax return (plus an estimate for 2011) that he has made public. Earlier this year, Romney issued his 2010 tax documents, which led to the discovery of some of his foreign holdings, which sparked the stories from Vanity Fair and AP and triggered the recent uproar. Despite all that noise, Rickards noted that for a small subset of the population who make money abroad, Romney's practices are unremarkable. He explained that some small countries (Bermuda, the Cayman Islands, Cyprus and Malta) "have created entire industries out of providing these services." Those nations have created "wealthy, prosperous economies, but by not taxing," he said. Instead, account holders pay registration fees. And with so many investors paying those fees, these countries have created an alternative economic model. Thus, he said, "the business of a tax deferral is big business." (U.S. taxes need not be paid until, or unless, the funds are transferred into a U.S. account. If the money remains in the overseas account until the owner dies and an heir moves the bequeathed funds to the United States, estate taxes would apply.) Indeed, for Americans with foreign investments, it takes several thousand dollars -- chump change to Romney -- to set up a shell company. "You can do it in a day," Rickards said. "They'll provide directors. It's quite easy to do." A wealthy American can defer taxes for years by keeping it outside of the United States in a shell company that reinvests those dollars tax-free and earns even more money. "That is powerful in itself," said Rickards, who asserted that such untaxed growth "is a huge economic problem that's way bigger than Mitt Romney." Major corporations such as General Electric "leave trillions of dollars offshore for exactly the same reason . . . because they don't want to pay U.S. taxes," he said. And therein lies a talking point for the Obama administration: The president's economic team has spent the past several years trying to enact a number of proposals for policing tax evasion abroad by individuals and closing loopholes to recover cash from major corporations that park dollars abroad. But for Obama, there's a bit of an optics problem there. For one thing, GE's CEO Jeff Immelt is on the president's business council and sat in Michelle Obama's box during a State of the Union address. Might that seem hypocritical given the administration's position on taxes, and the Obama campaign's attacks on Romney? Answered White House spokeswoman Amy Brundage: "The Jobs Council is an outside advisory board comprised of a number of individuals with diverse opinions and backgrounds, and just because a company is on the Council doesn't mean that we endorse its specific business decisions. The Council is only intended to provide outside advice and recommendations on ways to create jobs here at home and improve our global competitive edge." On a broader level, though, when Obama ran for president four years ago, he supported incentives for companies to repatriate their dollars back to U.S. soil in order to spark more job creation within the United States. Within four months of taking office, he rolled out tax reform proposals targeting approximately $700 billion that corporations had kept overseas, and he's proposed a minimum tax on corporations with such foreign subsidiaries. The proposals went nowhere, but Obama has said he intends to tackle tax reform in a second term. In February, the administration issued its framework for business tax reform. Some policies have already been put into action, including a clampdown on individuals that one administration official estimates will generate roughly $10 billion in revenue over the next decade. In 2010, the administration pushed the Foreign Account Tax Compliance Act through Congress to combat tax evasion, and it has reached agreements with seven countries to force their financial institutions to report individual earnings abroad. Tax evasion, of course, doesn't apply to Romney, who has abided by the law. But the greater discussion on offshoring and tax reform does. Reform simply won't happen during the election season, though the administration might get some mileage out of the larger discussion. What may move the dial in terms of the presidential race, however, is the Obama campaign's pressure on Romney to produce more tax returns. Indeed, the situation could be a tough one for Romney either way. Until he releases more returns, the focus on his refusal to do so will likely remain a hot topic. But if he does release them, there is the potential for exposing more foreign investments. Rickards, the investment banker, noted, "You have to do a separate schedule for each offshore company" when filing tax returns, suggesting that past years could be "an opposition researcher's fantasy." Several more years of returns would amount to tens of thousands of pages, he said, adding, "You would need a truck to move Mitt Romney's tax returns around." For his part, Romney has called for much lower tax rates on Americans, an area in which his policy proposals have been quite detailed. But he hasn't spoken much about those lately. Rather, his focus has been on lashing back at the Obama campaign for what he's called character attacks against him. This entire fiasco is helping to open the eyes of the American people. Mitt and his billionare friends are not paying his fair share to help this economy grow. Why should he be allowed to cheat the tax system while YOU, the middle class, get arested for evading your taxes? If this is bad enough he wants YOU, the middle class to pay even more so the rich can get even more tax breaks while huge companies are still allowed to send jobs overseas. Why do Republicans hate America so much!? nakira2ca 2 days ago If the tables were turned and it was Obama that was hiding his returns the Republican party would be all over him like stink on a pig. Even if Harry made this shit up I am glad it is getting the attention it is. It's nice to see the Republicans getting a taste of their own medicine for a change. Remember Mitt's first ad where he deliberately misquoted Obama quoting McCain then admitted later that he was aware of the deception spouting his 'sauce for the goose' line? Right back at you Mitt!! nakira2ca 2 days ago Mitt Romney's attack on "green jobs" has risks August 7, 2012 10:04 PM Republican presidential candidate, former Massachusetts Gov. Mitt Romney campaigns at Acme Industries in Elk Grove Village, Ill.,Tuesday, Aug. 7, 2012. (AP Photo) Election 2012 Health care ruling's effect on Obama, Romney campaigns How will Supreme Court healthcare decision impact 2012? Obama: Romney wants 50s-era women's health care Welfare fight heats up, Gingrich joins the fray Gibbs on anti-Romney ad: I don't know "specifics" Complete Coverage » (AP) DENVER - Mitt Romney's presidential campaign has been savaging what it calls President Barack Obama's "unhealthy" obsession with "green jobs." The Republican challenger criticizes the government program that propped up solar manufacturer Solyndra, and he mocks Obama's vision of a boom in employment, citing a European study to argue that new solar or wind-energy positions would destroy jobs elsewhere. But when a campaign spokesman said last week that Congress should let a tax break for wind energy producers expire at the end of the year, some Republicans were concerned the candidate had gone too far. Republican Rep. Tom Latham, R-Iowa, noting that nearly 7,000 Iowans work in the wind industry, assailed the Romney campaign for "a lack of full understanding of how important the wind energy tax credit is for Iowa and our nation." Iowa's senior senator, Chuck Grassley, told reporters he didn't believe Romney really opposed the extension, and he joined five other GOP lawmakers in voting for it in the Senate Finance Committee. The Obama campaign quickly organized conference calls for reporters and circulated fact sheets showing the deep support the credit has in such swing-voting states as Iowa, Colorado and Nevada. Obama will appear in Denver and western Colorado Wednesday to promote his economic plan, and the wind tax credit may well come up. The backlash on the wind tax issue shows the risks Romney takes in targeting a fast-growing and popular industry that Obama has embraced. However, Romney's aides argue the campaign is just making a principled economic argument against excessive government interference in the marketplace — one that the conservative movement, which Romney has struggled to win over, has praised. Indeed, Patrick Hedger, a researcher at FreedomWorks, a small-government group that is a prominent backer of the tea party movement, called Romney's position "a happy surprise." He added that Republicans who feared a political cost from Romney's position were stuck in an outdated way of thinking. "We've got to get out of this cycle of buying votes with money we don't have," Hedger said. Koch brothers hit back after Zach Galifianakis calls them "creepy" Full coverage of Romney's VP choice Romney: "I'll put work back in welfare" But critics contend that Romney, who counts members of the fossil fuels industry as major financial supporters and relies on the head of an oil company as his energy adviser, has backed himself into a corner. "I think it's really a knee-jerk reaction to what this president has done," said Jeff Gohringer, a spokesman for the League of Conservation Voters. "He (Romney) is actually going to states and advocating cutting thousands of their jobs." Surveys show the industry's popularity. A Gallup poll in March found Americans nearly twice as likely to favor wind and solar energy as coal or oil. The American Wind Energy Association released a poll last month showing that more than half of Iowa's voters say they would not back a presidential candidate who did not support expanding wind power. A January poll by Colorado College found that a majority of voters in six Western states believe that expanding renewable energy will create more jobs. In Colorado, GOP Rep. Doug Lamborn says he was pleased the Romney campaign took a stand against the tax credit. "It shows he's standing on principle and not pandering to win votes," Lamborn said. But Lamborn is the only one of the state's seven congressional representatives to oppose the extension. Obama made green jobs a focus of his 2008 campaign, and he included tens of billions of dollars in incentives to promote energy efficiency and the renewable industry in federal stimulus efforts. After Solyndra's bankruptcy last year, Republicans lined up to criticize the administration program that guaranteed the firm's loans, and Romney has broadened the attack to the administration's support for the entire industry, even in states where it is popular. During a May stop in Colorado, where the poll from Colorado College found two-thirds of residents believe renewable energy will create jobs, Romney mocked Obama for spending billions to create "green jobs." He asked the crowd: "Have you seen those jobs anywhere?" Mitt Romney: The Bane of Romney's Existence http://www.youtube.com/watch?v=No0jNi5Vv3U&feature=relmfu Published on May 17, 2012 by DemRapidResponse DNC Video "The Bane of Romney's Existence" What Romney's business experience at Bain really means for jobs in the economy: wealth creation, not job creation. Mitt Romney "Harry Reid to 'Put Up or Shut Up' on Tax Return Accusation" http://www.youtube.com/watch?v=E2H_jUe7Df4 Published on Aug 4, 2012 by MrObamanos Mitt Romney has a message for Harry Reid: "put up or shut up." The Senate Majority Leader twice this week has repeated a wildly speculative rumor, that Mitt Romney did not pay any taxes for 10 years. "The word's out that he hasn't paid any taxes for ten years," Sen. Reid, D-Nev., said of Romney on the Senate floor Thursday. "Let him prove that he has paid taxes, because he hasn't." Reid was repeating what he had originally said in an interview with the Huffington Post earlier in the week, in which he recalled that a month ago someone who invested with Bain Capital called his office to say that Romney "didn't pay any taxes for 10 years." Romney is the former CEO of Bain Capital, but left the company in 1999. Reid freely admitted he couldn't substantiate the charge and he didn't really even know if it was true. But he repeated it anyway. "He didn't pay taxes for 10 years! Now, do I know that that's true? Well, I'm not certain," said Reid to the Huffington Post based on information provided, he says, by an informant. "But obviously he can't release those tax returns. How would it look?" Today Romney fired back at Reid working the rumor mill and called on the Majority Leader to reveal his informant. "I have paid taxes every year and a lot of taxes, a lot of taxes," Romney said today in Las Vegas. "Harry is simply wrong, and that's why I'm so anxious for him to give us the names of the people who have put this forward. I wouldn't be at all surprised to hear the names are people from the White House or the Obama campaign or who knows where they're coming from." Or better yet put simply, "Harry Reid really has to put up or shut up," Romney said. Democrats have criticized Romney for not releasing more than two years of his tax returns. But there has never been anything to suggest that Romney's tax bill was zero. It is possible, however unlikely, that someone like Romney who pays most of his taxes in the form of capital gains could legally pay no taxes in the year after a big loss. The presumptive GOP candidate has said he always paid all of the taxes he was required by law to pay. But he has said releasing more tax returns would likely not quiet critics. Romney has so far released his 2010 returns and an estimate for 2011. Those two years are all Romney says he will release, arguing that no matter how many years he releases critics will always want more. Harry Reid: Mitt Romney Paid No Taxes For a Decade! http://www.youtube.com/watch?v=3h3xrBGToXo&feature=related Published on Aug 1, 2012 by politicalarticles Road Rage: Mitt 'Bhorat' Romney's International Insult Tour: http://www.politicalarticles.net/blog/2012/08/01/road-rage-mitt-bhorat-romney... "Romney Paid No Taxes for Ten Years" Harry Reid http://www.youtube.com/watch?v=qGy5ERHlZoI&feature=related Published on Jul 31, 2012 by MrObamanos For weeks, Democratic and Republican leaders alike have been clamoring for Mitt Romney to release at least a decade of personal tax returns. Democrats want him to release them because they think the returns will show Romney has used every loophole imaginable to shelter his wealth. Republicans want him to release the returns because the longer Romney waits, the more it looks like he's hiding something. For a week or so, the issue went away, overshadowed by Romney's trip abroad and accompanying gaffes. He criticized the Brits for being ill-prepared for the Olympics, and put down Palestinian culture. A Romney aide even managed to get recorded telling a reporter to kiss his ass. The issue of Romney's taxes, it seemed, had be disappeared from the public discussion. That was until Senate Majority Leader Harry Reid (D-NV) gave an interview with Huffington Post published today that all but guarantees Romney will release said returns. In it, Reid alleged that an investor in Bain Capital, where Romney was CEO from 1991 to 2002, told him that Romney did not pay any taxes for ten years: "Saying he had 'no problem with somebody being really, really wealthy,' Reid sat up in his chair a bit before stirring the pot further. A month or so ago, he said, a person who had invested with Bain Capital called his office. "'Harry, he didn't pay any taxes for 10 years,' Reid recounted the person as saying. "'He didn't pay taxes for 10 years! Now, do I know that that's true? Well, I'm not certain,' said Reid. 'But obviously he can't release those tax returns. How would it look? "'You guys have said his wealth is $250 million,' Reid went on. 'Not a chance in the world. It's a lot more than that. I mean, you do pretty well if you don't pay taxes for 10 years when you're making millions and millions of dollars.'" Harry Reid might be telling the truth about this unnamed Bain investor, or he might not. Either way, it's a diabolically savvy political move that puts the onus on Romney to act. By revealing this alleged hearsay, Reid is positing the worst case scenario about Romney's taxes during the ten-year span in question—namely that he didn't pay any. While the veracity of this scuttlebutt seems unlikely, it will essentially force Romney to release the returns to show that he at least paid some taxes, even if the amount is so low he'll be publicly ridiculed for it. Meanwhile, Reid has plausible deniability since he supposedly heard the rumor from a Bain investor, of which there have no doubt been hundreds or perhaps thousands in the company's history. If Romney's returns show he paid taxes, Reid could simply say that it was just something he had heard. Indeed, he even covered himself by saying, "I'm not certain." Whether Romney paid no taxes for so long is unclear at the moment. But what is clear is that thanks to Harry Reid, we'll all know quite soon. Reid puts GOP in a bind over Romney's taxes By Dana Bash, CNN Senior Congressional Correspondent updated 1:40 PM EDT, Tue August 7, 2012 STORY HIGHLIGHTS Senate Majority Leader Reid says Mitt Romney went 10 years without paying taxes Republicans push back against Reid's unsubstantiated claims, calling him a liar GOP sources say they know they're playing into Reid's hands by responding but feel they must Reid often pulls no punches when going after an opponent, especially one he dislikes Washington (CNN) -- Republican sources say they're in a Catch-22 situation on how to reply to Senate Majority Leader Harry Reid's claims that GOP presidential candidate Mitt Romney went 10 years without paying taxes. They understand that they're taking Reid's bait and that responding to his unsubstantiated claims against Romney keeps alive the issue of Romney's refusing to release his tax returns. Still, these GOP sources say they feel that if they do not respond to such a serious charge from such a high-ranking Democrat, it will look like a tacit admission Reid is right. Republicans stepped up attempts to undermine Reid's unsubstantiated allegations Monday, saying Reid and other Democrats' accusations are being orchestrated by President Barack Obama's campaign -- specifically his senior campaign adviser, David Axelrod. To that end, Republican National Committee spokesman Sean Spicer noted that Axelrod visited Senate Democrats for their weekly lunch last Tuesday. Later that afternoon, a Huffington Post story was published with Reid's allegations about the presumptive GOP nominee not paying any taxes. Opinion: Why won't Romney release more tax returns? "You've got to wonder if the so-called source is Axelrod himself," Spicer said. "Hours after meeting with Axelrod, Reid comes out and makes baseless accusations?" Axelrod flatly denied that allegation, calling it "completely false" and saying he "never had any such discussion." Gibbs: Romney must be open on taxes "Instead of pointing fingers in every direction, they can put the whole matter to rest by simply observing the standard George Romney and a generation of candidates have set by releasing the returns," Axelrod said. In a separate article posted Monday, the Huffington Post reported that it interviewed Reid days before Axelrod's visit, making any influence from the top Obama official's Capitol Hill visit impossible. By trying to tie Reid's remarks to the Obama campaign, Republicans are trying to hit Democrats where it could hurt most: the president's credibility. That comes after the GOP response to Reid got increasingly hostile and personal over the weekend. "I'm not going to respond to a dirty liar who hasn't filed a single page of tax returns himself (and) complains about people with money but lives in the Ritz-Carlton here down the street," Republican National Committee Chairman Reince Priebus said on ABC News. "And the fact that we're going to spend any time talking about it is ridiculous." Sen. Lindsey Graham of South Carolina also used the "L" word to describe Reid's statements, which were repeated on the Senate floor later in the week, saying the majority leader is "making things up." "What he did on the floor of the Senate is so out of bounds. I think he's lying about his statement, of knowing something about Romney," Graham said Sunday on CNN's "State of the Union." Big GOP convention roles revealed As for Reid, he tried to turn the focus right back to where he wants it. "This whole issue is not about me," Reid said in his home state of Nevada on Monday. "Mitt Romney's the first presidential candidate since his dad ran not to release his income tax returns. He's released one income tax return, and that points toward the Bahamas, Switzerland and a few other foreign countries. This whole controversy will end very quickly if he releases his income tax returns, like everybody else has done." Romney has released his tax return from 2010 and an estimate from 2011. He has vowed to release his full 2011 return once it's completed, but he will not release past years', as previous presidential candidates have done. Meanwhile, Reid chief of staff David Krone insisted Monday, again, that he knows who Reid's source is -- and that the source is credible. "I know who this person is, and if I thought this person was not credible, I would say something to Sen. Reid. I would try to shut it down. This person is credible," Krone said. "This person has asked Reid to protect the confidentiality of this person, but it's real," he continued. "This person told him this. This person said it to Sen. Reid." Multiple Democratic sources insist that Reid made the allegations against Romney on his own but also admit the Obama campaign is not telling him to back off. Sources close to Reid say he knew full well he would be challenged by Republicans and the media for accusing Romney of not paying taxes for 10 years but not offering any proof. But these sources say Reid didn't care -- in fact, he was eager to do it. Growing up impoverished in a trailer with no running water in Searchlight, Nevada, Reid literally fought his way out as a boxer. As a politician, he has never been afraid to punch below the belt, especially when he dislikes someone personally, and by all accounts Reid has a strong personal disregard for Romney. Obama debuts 'Romney Hood' Through the years he has called President George W. Bush a loser and a liar, named then-Federal Reserve Chairman Alan Greenspan a political hack and gone after Sen. John McCain during the 2008 presidential race as someone too temperamental to be president. But Republicans say this time, Reid took it too far, not only because he won't back up his accusation beyond citing a confidential source but because he chose to attack Romney on the issue from the Senate floor. Romney himself pushed back against Reid's accusations twice last week, insisting that he has paid a lot of money in taxes -- and telling the majority leader to either "put up or shut up." President Obama has criticized Mitt Romeny about his work at Bain Capital This is IN THE NEWS in VOA Special English. Links Download PDF: Mitt Romney and Bain Capital President Obama has criticized Mitt Romney about his work at Bain Capital Multimedia Play or download MP3 of this story August 08, 2012 21:56 UTC Obama Questions Romney's Links to Bain 05/25/2012 Private companies are rarely a major issue in American presidential election campaigns. But some observers say that could change this year because of Bain Capital. Bain Capital is an investment company with offices in Boston, Massachusetts. Mitt Romney, the likely Republican Party candidate for president, helped start the company. Profits from Bain Capital have made Mr. Romney very wealthy. Recently, President Obama has begun asking questions about Mister Romney's involvement with the company. The two men are set to face each other in the November elections. Bain Capital is a private equity company. It uses money from wealthy individuals and financial organizations to buy other businesses. It then works to increase their profitability before selling them, often at a huge profit. Bain is one of America's leading venture capital companies. Its partners reportedly manage sixty-five businesses said to be worth about sixty billion dollars. Mitt Romney helped to organize the company in nineteen eighty-four. Mister Romney led Bain until he left in nineteen ninety-nine. He says the businesses Bain bought and directed during his years with the company created about one hundred thousand jobs. Mister Romney has said that his time at Bain was more important to him than his years as governor of Massachusetts. He says both jobs gave him the experience and skills necessary to help the American economy. The former governor spoke at a recent campaign event. He said Mister Obama has failed in his efforts to strengthen the economy. ROMNEY: "He has spent more and borrowed more. The time has come for a president, a leader, who will lead. I will lead us out of this debt and spending inferno." He also said that, if elected, he will change the way Washington operates. ROMNEY: "We need a president who understands the power of free enterprise because he's lived it. And I have, and I will, and I'll make sure that is part of our future." Mister Obama and his campaign have sharply different ideas about Mister Romney's time at Bain Capital. They have advertisements that describe how some of Bain's investments failed. The ads say the company's decisions cost thousands of workers their jobs, while Bain earned big profits on its investments. OBAMA: "I will say today, I think there are folks who do good work in that area and there are times where they identify the capacity for the economy to create new jobs or new industries. But understand that their priority is to maximize profits and that's not always going to be good for communities or businesses or workers." Mister Obama has dismissed Mister Romney's claim that his years at Bain make him the right person to fix the economy. Several studies show that the economy will be the top issue in the election campaign. That means the president will have to spend a lot of time defending his record. Democratic Party activists know many voters are unhappy about the economy. The president's supporters will note some improvements in the economy as evidence that the country is moving in the right direction. And that's IN THE NEWS, in VOA Special English. For transcripts, MP3s and now PDFs of our programs for e-readers, go to voaspecialenglish.com. I'm Steve Ember. Assets Offshore Hint At Larger Romney Wealth WASHINGTON (OFFICIAL WIRE) July 4, 2012 Leave a Comment By STEPHEN BRAUN WASHINGTON (AP) — For nearly 15 years, Republican presidential candidate Mitt Romney's financial portfolio has included an offshore company that remained invisible to voters as his political star rose. Based in Bermuda, Sankaty High Yield Asset Investors Ltd. was not listed on any of Romney's state or federal financial reports. The company is among several Romney holdings that have not been fully disclosed, including one that recently posted a $1.9 million earning — suggesting he could be wealthier than the nearly $250 million estimated by his campaign. The omissions were permitted by state and federal authorities overseeing Romney's ethics filings, and he has never been cited for failing to disclose information about his money. But Romney's limited disclosures deprive the public of an accurate depiction of his wealth and a clear understanding of how his assets are handled and taxed, according to experts in private equity, tax and campaign finance law. Sankaty was transferred to a trust owned by Romney's wife, Ann, one day before he was sworn in as Massachusetts governor in 2003, according to Bermuda records obtained by The Associated Press. The Romneys' ownership of the offshore firm did not appear on any state or federal financial reports during Romney's two presidential campaigns. Only the Romneys' 2010 tax records, released under political pressure earlier this year, confirmed their continuing control of the company. The mystery surrounding Sankaty reinforces Romney's history of keeping a tight rein on his public dealings, already documented by his use of private email and computer purges as Massachusetts governor and his refusal to disclose his top fundraisers. The Bermuda company had almost no assets, according to Romney's 2010 tax returns. But such partnership stakes could still provide significant income for years to come, said tax experts, who added that the lack of disclosure makes it impossible to know for certain. "We don't know the big picture," said Victor Fleischer, a University of Colorado law professor and private equity expert who urged corporate tax code reforms during congressional testimony last year. "Most of these disclosure rules are designed for people who have passive ownership of stocks and bonds. But in this case, he continues to own management interests that fluctuate greatly in value long after his time with the company and even the end of his separation agreement. And the public has no clear idea where the money is coming from or when it will end." Named for a historic Massachusetts coastal lighthouse, Sankaty was part of a cluster of similarly named hedge funds run by Bain Capital, the private equity firm Romney founded and led until 1999. The offshore company was used in Bain's $1 billion takeover of Domino's Pizza and other multimillion-dollar investment deals more than a decade ago. Romney's campaign declined to answer detailed questions from AP about Sankaty. Romney aides have said in the past that some disclosures were not required because those assets were valued by his financial advisers at less than $1,000 — below the minimum threshold under federal rules set by the U.S. Office of Government Ethics. A financial snapshot of Sankaty in Romney's 2010 tax returns showed the holding with almost no value at the time— with $10,000 in both assets and liabilities. "Everything on the filings is reported as required," campaign spokeswoman Andrea Saul said in a brief statement. "If OGE has an issue with any filings, they would let us know." The agency declined to comment. While Sankaty no longer plays an active role in Bain's current deals, private equity experts said such holdings could provide significant income to Romney under his 10-year separation agreement from Bain, which expired in 2009. Investment funds typically churn "carried interest," profit shares due to the managers of the funds that often range as much as 20 percent of a fund's annual profit — known as "the carry." Even after investment funds are exhausted, profit shares and other late earnings from those stakes can continue to stream, arriving as lucrative "tails," tax experts say. In some circumstances, the analysts added, offshore companies like Sankaty could also offer limited tax deferral advantages. The implications of Romney's Bain profit-sharing became clear last month when his trust reported that one rarely disclosed asset had posted a $1.9 million payout. The income was described as a "true-up" payment, catch-up income that made up for unpaid earnings owed to Romney as part of his Bain separation agreement. Such sizable earnings are possible "depending on the terms of the agreement," said tax law expert Michael Kosnitzky, an attorney at the New York firm of Boies, Schiller & Flexner. The Romney campaign acknowledged recently that it could not rule out more large future payments. The use of offshore companies such as Sankaty is allowed under U.S. tax laws. They are typically set up as shell corporations by private equity and hedge funds to route investments from large foreign and institutional investors, such as large pension plans, into corporate takeovers. The money is used to provide equity and buy up debt. In turn, the investors gain U.S. tax advantages by passing their funds through the offshore "blocker" corporations, avoiding a high 35 percent tax on earnings that the Internal Revenue Service describes as "unrelated business income." Set up in Bermuda in 1997, Sankaty served as Romney's partnership stake in Bain's Sankaty group, which invests in bonds, bank loans and corporate debt instruments. That first wave of Sankaty funds managed more than $100 million in investments in the late 1990s and early 2000s, according to a corporate analyst familiar with the funds. The analyst insisted on anonymity because the analyst was not authorized to discuss the funds publicly. Since late 2003, Romney has left his financial decisions to what his campaign describes as a "blind trust" overseen by lawyer R. Bradford Malt, a longtime Boston legal associate. The trust was set up under Massachusetts law, but it's not a federally qualified blind trust — which Romney plans to use if he wins the presidency. Romney does not oversee his investments under his current trust, but its general composition is made public and Malt invests according to Romney's political positions. Romney's 2010 tax returns show him and his wife as sole owners of Sankaty. A 2011 Bermuda legal document lists Malt as Sankaty's president. Michael F. Goss, currently Bain Capital's chief operating officer, is listed as vice president, and Quorum Corporate Ltd., a Bermuda law firm, as secretary. Malt deferred questions about Sankaty to the Romney campaign; Bain Capital and Quorum declined to comment. The candidate's 2010 tax returns listed at least 20 investment holdings besides Sankaty that had not been previously disclosed on federal reports. At least seven were foreign investments. Bain Capital Inc., the holding that posted the $1.9 million earning, was listed on Romney's state ethics reports in 2001 and 2002, when he ran for governor, but was missing from any annual ethics report until Romney's trust included it last month on his 2012 financial statement. Sankaty is the only offshore holding in the Romneys' portfolio under their full control. On his 2010 taxes, Romney's blind trust filed an IRS form identifying Sankaty as a "controlled foreign corporation." That filing is required for any U.S. taxpayer who owns more than 50 percent of a foreign company. Romney's 2010 tax returns indicate that he and his wife control all 12,000 shares. Several U.S. Securities and Exchange documents from the late 1990s and 2000s depicted Romney as Sankaty's owner at the time, but when he ran for Massachusetts governor in 2001 and 2002, Romney did not list the company on annual disclosure forms required by the Massachusetts State Ethics Commission. The ethics commission would not comment on the omissions. Boston College law professor R. Michael Cassidy, who was a member of the commission at the time, said that if Romney "owned this business before he signed his ethics disclosure, then he was obliged to report it." The state's disclosure rules also allow a $1,000 minimum threshold. A six-year statute of limitations covering Romney's ethics reports has since expired. Bermuda legal documents show that on Jan. 1, 2003, the day before Romney was sworn in as governor, his wife's trust acquired 12,000 shares of Sankaty. The transfer was not made public. The month before, Romney had placed his assets in the state-approved trust overseen by Malt. The move legally allowed the trust to describe Romney's holdings in 2003 only as "various investments and securities" — without providing details. The trust filed similar disclosures between 2004 and 2007, the last year of Romney's term. Romney's use of Sankaty as his partnership stake in Bain deals is documented in several U.S. Securities and Exchange Commission reports between 1998 and 2000. The company controlled 50,000 shares of Global-Tech Appliances Inc., a Chinese appliance firm that Bain briefly invested in. Sankaty was also used to manage 385,000 shares in the 1999 takeover of Domino's, as well as the $75 million investment into the Stericycle waste disposal firm and a $150 million investment in the US LEC telecommunication firm. Romney was named as sole owner and president of Sankaty in several of those documents. Though no longer active at Bain by then because he had left to head Salt Lake City's Olympic Games bid, Romney remained a participant because of his partnership stake. Even though Sankaty is no longer used for Bain investments, several tax analysts said its legal offshore status still could be used by Romney to defer some taxes on some of the "carried interest" income related to the Bain deals. Romney has said he gets no tax break. He told an audience at a Maine town hall appearance in February that "I have not saved one dollar by having an investment somewhere outside this country." But the lack of disclosure over the years, private equity experts said, makes it impossible to tell. "Without knowing more about an offshore's history and how it was used," Fleischer said, "you're left in the dark." Is Romney's Sankaty High Yield Asset Investors Ltd. Based in Bermuda, used to pass non-taxed money that was gained from vultured US companies for foreign investment? by bobPostedJuly 11, 2012 Related Topics: Pension, Funds, Pension plans, Romney, Campaign, Deals, Blind, Declined, Offshore, Hedge funds, Jealous, Related, Foreign, Companies, Us, Questions, Interest Read More Jeb Bush to Speak at GOP Convention: Should GOP... Read all 34 opinions View Results and Demographics View Demographics Sankaty High Yield Asset Investors Ltd. Based in Bermuda, shows the true lack of ethics of Romney Romney's blind trust is not so blind The mystery surrounding Sankaty reinforces Romney's history of dishonesty Romney's campaign declined to answer detailed questions from AP about Sankaty because he has something to hide The use of offshore companies such as Sankaty are typically set up as shell corporations by private equity and hedge funds to route investments from large foreign and institutional investors, such as large pension plans, into corporate takeovers Sankaty is used by Romney to defer some taxes on some of the "carried interest" income related to the Bain deals. Oh don't be so jealous of Romney's Wealth Undecided (Please leave a comment) All of the above https://www.sankaty.com/ContentPage.aspx?page=53 Sankaty» Middle Market Group Sankaty Overview Sankaty Advisors, LLC is the fixed income affiliate of Bain Capital, LLC and currently manages $19.1 billion of assets in North America and Europe. The majority of Sankaty's capital is deployed by purchasing syndicated loans, high yield bonds, and various securities relating to private middle market transactions. Based on our flexible fund structure and locked-up capital, Sankaty has the ability to invest across across the entire breadth of the capital structure, including senior debt, second liens, mezzanine/subordinated debt, preferred stock, and common equity co-investments. About the Middle Market Group The Middle Market Group has 12 professionals dedicated to sourcing, conducting due diligence on, and managing private investments. The senior members of the group average over 10 years of experience in the middle market. Our team consists of several former consultants, who provide us the ability to diligence even the most complex situations and provide capital to those companies. We benefit from the additional 50 investment professionals of Sankaty who cover the entire leveraged finance and equity universe. This provides us with in-house expertise in every industry and enables us to respond quickly and thoughtfully to new opportunities. We are also able to provide insights into current industry trends. Sankaty's Middle Market Group has strong relationships with our existing investment partners due to our flexible capital, high certainty to close, and the value we bring both pre- and post-close. The resources and expertise that we bring to our partners provides them confidence that we can complete our diligence and reach robust investment decisions in an expeditions manner. Investment Criteria Sankaty's Middle Market Group is actively looking to invest in companies with greater than $5 million of EBITDA. We are targeting opportunities in which we can invest $15-100 million. Our funds may be used to finance a leveraged buyout, complete a recapitalization or restructuring, provide liquidity, or emerge from bankruptcy. We participate in both sponsored and non-sponsored transactions and are industry agnostic. We place considerable emphasis on finding leading companies with talented management teams. Our investments can range across the capital structure from senior secured loans all the way to common equity co-investments. We aim to provide a tailored solution to every unique opportunity and have considerable flexibility when structuring terms. Sample Investments Sankaty's Middle Market Group has invested in over $2 billion in nearly 100 transactions over its 12 year history. In addition to supporting existing portfolio companies, some investment examples from the past year include: Purchasing subordinated notes in the refinancing of an oil and gas E&P company in the Southwest. Providing subordinated debt and common equity to support the leveraged buyout of a national packaging company Injecting capital in the form of second lien debt to provide liquidity for a national retailer in advance of a holiday inventory build. Participating in the common equity of a telecommunications company that was taken private. Providing senior and subordinated debt to fund the roll-out of digital projectors in European theater chains. Mitt Romney Started Bain Capital With Money From Families Tied To Death Squads Posted: 08/08/2012 9:38 am Updated: 08/08/2012 1:05 pm Follow: Elections 2012, Mitt Romney, Elections 2012, Video, Arena Party, El Salvador, Mitt Romney Bain Capital, Roberto D'Aubuisson, Bain Capital, Death Squads, Mitt Romney 2012, Mitt Romney Bain Investors, Mitt Romney Death Squads, Mitt Romney El Salvador, Politics News In 1983, Bill Bain asked Mitt Romney to launch Bain Capital, a private equity offshoot of the successful consulting firm Bain & Company. After some initial reluctance, Romney agreed. The new job came with a stipulation: Romney couldn't raise money from any current clients, Bain said, because if the private equity venture failed, he didn't want it taking the consulting firm down with it. When Romney struggled to raise funds from other traditional sources, he and his partners started thinking outside the box. Bain executive Harry Strachan suggested that Romney meet with a group of Central American oligarchs who were looking for new investment vehicles as turmoil engulfed their region. Romney was worried that the oligarchs might be tied to "illegal drug money, right-wing death squads, or left-wing terrorism," Strachan later told a Boston Globe reporter, as quoted in the 2012 book "The Real Romney." But, pressed for capital, Romney pushed his concerns aside and flew to Miami in mid-1984 to meet with the Salvadorans at a local bank. It was a lucrative trip. The Central Americans provided roughly $9 million -- 40 percent -- of Bain Capital's initial outside funding, the Los Angeles Times reported recently. And they became valued clients. "Over the years, these Latin American friends have loyally rolled over investments in succeeding funds, actively participated in Bain Capital's May investor meetings, and are still today one of the largest investor groups in Bain Capital," Strachan wrote in his memoir in 2008. Strachan declined to be interviewed for this story. When Romney launched another venture that needed funding -- his first presidential campaign -- he returned to Miami. "I owe a great deal to Americans of Latin American descent," he said at a dinner in Miami in 2007. "When I was starting my business, I came to Miami to find partners that would believe in me and that would finance my enterprise. My partners were Ricardo Poma, Miguel Dueñas, Pancho Soler, Frank Kardonski, and Diego Ribadeneira." Romney could also have thanked investors from two other wealthy and powerful Central American clans -- the de Sola and Salaverria families, who the Los Angeles Times and Boston Globe have reported were founding investors in Bain Capital. While they were on the lookout for investments in the United States, members of some of these prominent families -- including the Salaverria, Poma, de Sola and Dueñas clans -- were also at the time financing, either directly or through political parties, death squads in El Salvador. The ruling classes were deploying the death squads to beat back left-wing guerrillas and reformers during El Salvador's civil war. The death squads committed atrocities on such a mass scale for so small a country that their killing spree sparked international condemnation. From 1979 to 1992, some 75,000 people were killed in the Salvadoran civil war, according to the United Nations. In 1982, two years before Romney began raising money from the oligarchs, El Salvador's independent Human Rights Commission reported that, of the 35,000 civilians killed, "most" died at the hands of death squads. A United Nations truth commission concluded in 1993 that 85 percent of the acts of violence were perpetrated by the right, while the left-wing Farabundo Martí National Liberation Front, which was supported by the Cuban government, was responsible for 5 percent. When The Huffington Post asked the Romney campaign about Bain Capital accepting funds from families tied to death squads, a spokeswoman forwarded a 1999 Salt Lake Tribune article to explain the campaign's position on the matter. She declined to comment further. "Romney confirms Bain had investors in El Salvador. But, as was Bain's policy with any big investor, they had the families checked out as diligently as possible," the Tribune wrote. "They uncovered no unsavory links to drugs or other criminal activity." Nobody with a basic understanding of the region's history could believe that assertion. By 1984, the media had thoroughly exposed connections between the death squads and the Salvadoran oligarchy, including the families that invested with Romney. The sitting U.S. ambassador to El Salvador charged that several families, including at least one that invested with Bain, were living in Miami and directly funding death squads. Even by 1981, El Salvador's elite, largely relocated to Miami, were so angered by the public perception that they were financing death squads that they reached out to the media to make their case. The two men put forward to represent the oligarchs were both from families that would invest in Bain three years later. The most cursory review of their backgrounds would have turned up the ties. The connection between the families involved with Bain's founding and those who financed death squads was made by the Boston Globe in 1994 and the Salt Lake Tribune in 1999. This election cycle, Salon first raised the issue in January, and the Los Angeles Times filled out more of the record earlier this month. There is no shortage of unsavory links. Even the Tribune article referred to by the Romney campaign reports that "about $6.5 million of $37 million that established the company came from wealthy El Salvadoran families linked to right-wing death squads." The Salaverria family, whose fortune came from producing cotton and coffee, had deep connections to the right-wing Nationalist Republican Alliance (ARENA), a political party that death-squad leader Roberto D'Aubuisson founded in the fall of 1981. The year before, El Salvador's government had pushed through land reforms and nationalized the coffee trade, moves that threatened a ruling class whose financial and political dominance was built in large part on growing coffee. ARENA controlled and directed death squads during its early years. On March 24, 1980, Oscar Romero, the archbishop of San Salvador and an advocate of the poor, was celebrating Mass at a chapel in a small hospital when he was assassinated on D'Aubuisson's orders, according to a person involved in the murder who later came forward. The day before, Romero, an immensely popular figure, had called on the country's soldiers to refuse the government's orders to attack fellow Salvadorans. "Before another killing order is given," he advised in his sermon, "the law of God must prevail: Thou shalt not kill." In 1984, Robert White, the former U.S. ambassador to El Salvador, named two Salaverria brothers -- Julio and Juan Ricardo -- as two of six Salvadoran exiles in Miami who had directly funded death squads, repeating in sworn congressional testimony a claim he'd made earlier as ambassador. The group became known as the "Miami Six." White testified that a source close to the Miami Six had notified the U.S. embassy of their activities in January 1981. White was pushed out of his job by the incoming Reagan administration in 1981; he was considered insufficiently supportive of the Salvadoran ruling class. (D'Aubuisson endorsed Ronald Reagan in 1984.) When contacted by phone recently, White reiterated his claim about the Salaverria brothers, but said he couldn't reveal his source's identity in order to protect the source. "The Salaverria family were very well-known as backers of D'Aubuisson," White told The Huffington Post. "These guys were big-money contributors. ... They were total backers of D'Aubuisson and the extremist solution, including death squads." Alfonso Salaverria was a close associate of Orlando de Sola, a leading death-squad figure, and, like him, supported D'Aubuisson. The Salaverria family also violently resisted land reform efforts. When the Salvadoran government seized about 140 of the country's largest farms in March 1980, 73-year-old Raul Salaverria was the only landowner to openly resist, the Washington Post reported at the time. A brief exchange of gunfire between government forces and Salaverria's people resulted in two injuries, and 1,500 weapons were allegedly found on the property. Eight years later, workers in an agrarian reform co-operative whose land once belonged to the Salaverrias barely escaped an assassination attempt. "Members of the co-op suspect the former owners, the Salaverria family, were behind the violence," a 1988 Human Rights Watch report said. The family denied involvement. Francisco de Sola and his cousin, Herbert Arturo de Sola, also invested early in Bain, according to the Los Angeles Times. Two other members of the de Sola family were "limited partners," according to the Boston Globe, but the Romney campaign declined to provide The Huffington Post with their names. The de Sola family was one of El Salvador's most powerful coffee growers and a financier of the ARENA party. Herbert's brother was the notorious Orlando de Sola, who resisted the peace negotiations toward the end of the civil war. The Romney campaign acknowledges Orlando de Sola's connection to death squads but insists he is not representative of the de Sola family investors. While Romney told the Tribune in 1999 that the backgrounds of the families had been checked diligently, he had explained to the Boston Globe in 1994 that Bain's due diligence included only the backgrounds of the individual investors, not their family members. "We investigated the individuals' integrity and looked for any obvious signs of illegal activity and problems in their background, and found none. We did not investigate in-laws and relatives." Deflecting the association with Orlando, Strachan, whom Romney had charged with vetting the investors, described him that same year to the Globe as "the black sheep of the family. ... He was kicked out of the family business." Yet there is strong evidence that Orlando was anything but a black sheep in the de Sola family. Indeed, he was a leading public face of the Salvadoran elites in Miami, speaking, for example, on behalf of the El Salvador Freedom Foundation, the organization which arranged a U.S. press conference for D'Aubuisson as part of its public relations activities on behalf of the oligarchs and ARENA. An Associated Press story from April 1981 includes Orlando de Sola and Alfonso Salaverria speaking on behalf of the oligarchs in exile. The story also makes reference to White's charges regarding the funding of death squads, indicating that the charges were already well known by that point. But the ties run deeper still. In 1990, Orlando de Sola, D'Aubuisson and founding Bain investor Francisco de Sola allegedly assassinated two left-wing activists then in Guatemala, according to a report by that country's government, which cited its intelligence sources. The activists had just held a meeting with then-Sen. Chris Dodd (D-Conn.), who was attempting to broker a Salvadoran peace deal. Francisco de Sola later pleaded his and his cousin Orlando's innocence to the U.S. ambassador. The Inter-American Commission on Human Rights looked further into the killings and concluded that elements of the Salvadoran right were indeed the mostly likely assassins, but said that it couldn't confirm the guilt of the de Solas or D'Aubuisson. It deemed the investigation incomplete and called for a deeper look. The three men were never charged. Francisco de Sola is now president of the Salvadoran Foundation for Economic and Social Development. His assistant, Ada Chang, said that he was traveling and unavailable to comment, but she confirmed to HuffPost that he had been accused of murdering the two leftists in 1990. Whether he committed the crime or not, the fact that Guatemalan intelligence would associate him with Orlando de Sola and D'Aubuisson, and place them in Guatemala together, casts further doubt on Strachan's claim that Orlando de Sola was merely a "black sheep" who had been "kicked out of the family business." Orlando de Sola, who is serving an unrelated prison sentence for fraud, told the Los Angeles Times that he did not personally benefit from the Bain investments. "I would say their relationship with Bain Capital was a step to diversify into foreign investments," he said of his family. Ricardo Poma was the first investor Romney thanked when he traveled to Miami in 2007. The head of the Poma Group, he became one of the three members of the Bain Capital investment committee, according to Strachan's memoir. The Poma family were financiers of D'Aubuisson's ARENA party. The Regalado-Dueñas family, like many of El Salvador's other powerful clans, amassed much of their wealth and political power through the coffee industry. Along with the Alvarez family, they also helped to found Banco Comercial, one of the biggest banks in El Salvador. The Regalado-Dueñas and Alvarez families were leading supporters of ARENA. Arturo Dueñas "regularly supplied" the head of an ARENA-affiliated "paramilitary unit ... with a variety of official Salvadoran documents," according to a redacted 1984 CIA document, which uses the euphemism for death squad. (Salvadoran government documents were used by death squads to assemble lists of people to kill.) Miguel Dueñas and Ricardo Poma did not respond to requests for comment. The Salaverria brothers are dead, according to Ambassador White. Jeffery Paige, author of "Coffee and Power: Revolution and the Rise of Democracy in Central America" and a professor at the University of Michigan, has studied the political economy of Central American oligarchies. Romney's claim to have checked out the backgrounds of the families and come away satisfied befuddles Paige. "These people benefited from one of the most exploitative and repressive agricultural systems in Latin America. That's why they had a revolution," Paige said. "This money, certainly there wasn't much concern where it came from and what these people had done to make that money." Sergio Bendixen, who now does polling for President Barack Obama, spent a significant amount of time in El Salvador in the early '80s, doing political polling for Univision. He said that he met D'Aubuisson on many occasions and found him to be one of the warmest, most charming and charismatic people he has ever met. But he said D'Aubuisson was also very upfront about what he saw as the justifiable use of death squads. "There were 10 or 30 bodies in the street every morning," Bendixen recalled of his time there. "D'Aubuisson said it was necessary. The message needed to be sent [that] if you were associated with the communists or socialists, you had to be killed. He said it was an instrument in keeping the violence down, because others would see the consequences." Bendixen suggested that a cursory look would have shown Romney what those families were involved with. "If anybody tries to tell you there was a line, a Chinese wall, between ARENA and the death squads, that's just not the way it was," he said. The Salvadoran elite in Miami talked openly at the time, he said, of supporting the death squads battling the rebels. It wasn't a source of shame, Bendixen recalled, but a source of pride. "They were proud of the fact that they were supporting their country against the communists," he said. As Romney now seeks support from the Latino community in his campaign for president, his knowledge of Bain's all-too-few degrees of separation from Salvadoran death squads may become a topic of interest. "Under Ronald Reagan, the U.S. sent billions of dollars to the murderous regime, which utilized that aid to fund the military and death squads in an effort to preserve the unjust privileges of the Salvadoran oligarchy," said Arturo J. Viscarra, an immigration lawyer, who, like many other Salvadorans, emigrated to the United States in order to escape the civil war. He said his family left the country in 1980 after his father began receiving death threats. "To now learn that a man that may become president of the U.S. deserves some of his success due to the incredible inequality that the U.S. helped to preserve in El Salvador is ironic," Viscarra said. "It's morbidly funny." The U.S. involvement in the bloodshed is now seen as a black mark on the nation's record. When President Obama visited Central America in March 2011, he made a symbolic stop at Romero's grave, lighting a candle for the archbishop. Romney, however, has shown no public remorse for signing up such investors, although the concept of culpability is not foreign to him. When he returned to Miami in 2007, he condemned those who had financed torture and other human rights abuses during the Salvadoran civil war -- just not those he was connected to. "These friends didn't just help me; they taught me," Romney said. "Ricardo's brother had been tortured and murdered by rebel terrorists in El Salvador. Miguel himself had been chained to a floor in Guatemala for weeks and tortured. And their torturers were financed by Fidel Castro. I learned from these friends about the human cost when Castro has money." Mitt's mystery money in Bermuda Posted by AzBlueMeanie: On Tuesday, Vanity Fair visited Mitt''s money in the Cayman Islands in this report by Nicholas Shaxson. Investigation: Mitt Romney's Offshore Accounts, Tax Loopholes, and Mysterious I.R.A. | Vanity Fair. On Wednesday, the AP in the Washington Post visits Mitt's mystery money in Bermuda. Mystery Bermuda-based company and other undisclosed Romney assets hint at larger wealth: For nearly 15 years, Republican presidential candidate Mitt Romney's financial portfolio has included an offshore company that remained invisible to voters as his political star rose. Based in Bermuda, Sankaty High Yield Asset Investors Ltd. was not listed on any of Romney's state or federal financial reports. The company is among several Romney holdings that have not been fully disclosed, including one that recently posted a $1.9 million earning — suggesting he could be wealthier than the nearly $250 million estimated by his campaign. The omissions were permitted by state and federal authorities overseeing Romney's ethics filings, and he has never been cited for failing to disclose information about his money. But Romney's limited disclosures deprive the public of an accurate depiction of his wealth and a clear understanding of how his assets are handled and taxed, according to experts in private equity, tax and campaign finance law. Sankaty was transferred to a trust owned by Romney's wife, Ann, one day before he was sworn in as Massachusetts governor in 2003, according to Bermuda records obtained by The Associated Press. The Romneys' ownership of the offshore firm did not appear on any state or federal financial reports during Romney's two presidential campaigns. Only the Romneys' 2010 tax records, released under political pressure earlier this year, confirmed their continuing control of the company. The mystery surrounding Sankaty reinforces Romney's history of keeping a tight rein on his public dealings, already documented by his use of private email and computer purges as Massachusetts governor and his refusal to disclose his top fundraisers. The Bermuda company had almost no assets, according to Romney's 2010 tax returns. But such partnership stakes could still provide significant income for years to come, said tax experts, who added that the lack of disclosure makes it impossible to know for certain. Named for a historic Massachusetts coastal lighthouse, Sankaty was part of a cluster of similarly named hedge funds run by Bain Capital, the private equity firm Romney founded and led until 1999. The offshore company was used in Bain's $1 billion takeover of Domino's Pizza and other multimillion-dollar investment deals more than a decade ago. Romney's campaign declined to answer detailed questions from AP about Sankaty. Romney aides have said in the past that some disclosures were not required because those assets were valued by his financial advisers at less than $1,000 — below the minimum threshold under federal rules set by the U.S. Office of Government Ethics. A financial snapshot of Sankaty in Romney's 2010 tax returns showed the holding with almost no value at the time— with $10,000 in both assets and liabilities. "Everything on the filings is reported as required," campaign spokeswoman Andrea Saul said in a brief statement. "If OGE has an issue with any filings, they would let us know." The agency declined to comment. While Sankaty no longer plays an active role in Bain's current deals, private equity experts said such holdings could provide significant income to Romney under his 10-year separation agreement from Bain, which expired in 2009. Investment funds typically churn "carried interest," profit shares due to the managers of the funds that often range as much as 20 percent of a fund's annual profit — known as "the carry." Even after investment funds are exhausted, profit shares and other late earnings from those stakes can continue to stream, arriving as lucrative "tails," tax experts say. In some circumstances, the analysts added, offshore companies like Sankaty could also offer limited tax deferral advantages. * * * The use of offshore companies such as Sankaty is allowed under U.S. tax laws. They are typically set up as shell corporations by private equity and hedge funds to route investments from large foreign and institutional investors, such as large pension plans, into corporate takeovers. The money is used to provide equity and buy up debt. In turn, the investors gain U.S. tax advantages by passing their funds through the offshore "blocker" corporations, avoiding a high 35 percent tax on earnings that the Internal Revenue Service describes as "unrelated business income." Set up in Bermuda in 1997, Sankaty served as Romney's partnership stake in Bain's Sankaty group, which invests in bonds, bank loans and corporate debt instruments. That first wave of Sankaty funds managed more than $100 million in investments in the late 1990s and early 2000s, according to a corporate analyst familiar with the funds. The analyst insisted on anonymity because the analyst was not authorized to discuss the funds publicly. * * * Romney's 2010 tax returns show him and his wife as sole owners of Sankaty. A 2011 Bermuda legal document lists Malt as Sankaty's president. Michael F. Goss, currently Bain Capital's chief operating officer, is listed as vice president, and Quorum Corporate Ltd., a Bermuda law firm, as secretary. Malt deferred questions about Sankaty to the Romney campaign; Bain Capital and Quorum declined to comment. The candidate's 2010 tax returns listed at least 20 investment holdings besides Sankaty that had not been previously disclosed on federal reports. At least seven were foreign investments. Bain Capital Inc., the holding that posted the $1.9 million earning, was listed on Romney's state ethics reports in 2001 and 2002, when he ran for governor, but was missing from any annual ethics report until Romney's trust included it last month on his 2012 financial statement. Sankaty is the only offshore holding in the Romneys' portfolio under their full control. On his 2010 taxes, Romney's blind trust filed an IRS form identifying Sankaty as a "controlled foreign corporation." That filing is required for any U.S. taxpayer who owns more than 50 percent of a foreign company. Romney's 2010 tax returns indicate that he and his wife control all 12,000 shares. Several U.S. Securities and Exchange documents from the late 1990s and 2000s depicted Romney as Sankaty's owner at the time, but when he ran for Massachusetts governor in 2001 and 2002, Romney did not list the company on annual disclosure forms required by the Massachusetts State Ethics Commission. The ethics commission would not comment on the omissions. . . * * * Bermuda legal documents show that on Jan. 1, 2003, the day before Romney was sworn in as governor, his wife's trust acquired 12,000 shares of Sankaty. The transfer was not made public. The month before, Romney had placed his assets in the state-approved trust overseen by Malt. The move legally allowed the trust to describe Romney's holdings in 2003 only as "various investments and securities" — without providing details. The trust filed similar disclosures between 2004 and 2007, the last year of Romney's term. Romney's use of Sankaty as his partnership stake in Bain deals is documented in several U.S. Securities and Exchange Commission reports between 1998 and 2000. The company controlled 50,000 shares of Global-Tech Appliances Inc., a Chinese appliance firm that Bain briefly invested in. Sankaty was also used to manage 385,000 shares in the 1999 takeover of Domino's, as well as the $75 million investment into the Stericycle waste disposal firm and a $150 million investment in the US LEC telecommunication firm. Romney was named as sole owner and president of Sankaty in several of those documents. Though no longer active at Bain by then because he had left to head Salt Lake City's Olympic Games bid, Romney remained a participant because of his partnership stake. Even though Sankaty is no longer used for Bain investments, several tax analysts said its legal offshore status still could be used by Romney to defer some taxes on some of the "carried interest" income related to the Bain deals. Romney has said he gets no tax break. He told an audience at a Maine town hall appearance in February that "I have not saved one dollar by having an investment somewhere outside this country." But the lack of disclosure over the years, private equity experts said, makes it impossible to tell. Reporters must love investigating Mitt's tax avoidance shelters. They get to go to the Carribean and other exotic locations on an expense account. How do I get this gig? The question every reporter should be asking is "What else is Mitt Romney hiding from the public?" Romney's undisclosed offshore assets, including Sankaty co. in Bermuda, hint at greater wealth July 4, 2012 2:02 PM Republican Presidential candidate, former Massachusetts Governor Mitt Romney speaks during a campaign event at the Electronic Instrumentation and Technology company June 27, 2012 in Sterling, Virginia. (Getty) (AP) WASHINGTON - For nearly 15 years, Republican presidential candidate Mitt Romney's financial portfolio has included an offshore company that remained invisible to voters as his political star rose. Based in Bermuda, Sankaty High Yield Asset Investors Ltd. was not listed on any of Romney's state or federal financial reports. The company is among several Romney holdings that have not been fully disclosed, including one that recently posted a $1.9 million earning suggesting he could be wealthier than the nearly $250 million estimated by his campaign. The omissions were permitted by state and federal authorities overseeing Romney's ethics filings, and he has never been cited for failing to disclose information about his money. But Romney's limited disclosures deprive the public of an accurate depiction of his wealth and a clear understanding of how his assets are handled and taxed, according to experts in private equity, tax and campaign finance law. Sankaty was transferred to a trust owned by Romney's wife, Ann, one day before he was sworn in as Massachusetts governor in 2003, according to Bermuda records obtained by The Associated Press. The Romneys' ownership of the offshore firm did not appear on any state or federal financial reports during Romney's two presidential campaigns. Only the Romneys' 2010 tax records, released under political pressure earlier this year, confirmed their continuing control of the company. Not all of Romeny's VP choices are fat cats Romney camp puts his net worth between $190M - $250M Obama's 2011 assets valued between $2.6M - $8.3M The mystery surrounding Sankaty reinforces Romney's history of keeping a tight rein on his public dealings, already documented by his use of private email and computer purges as Massachusetts governor and his refusal to disclose his top fundraisers. The Bermuda company had almost no assets, according to Romney's 2010 tax returns. But such partnership stakes could still provide significant income for years to come, said tax experts, who added that the lack of disclosure makes it impossible to know for certain. "We don't know the big picture," said Victor Fleischer, a University of Colorado law professor and private equity expert who urged corporate tax code reforms during congressional testimony last year. "Most of these disclosure rules are designed for people who have passive ownership of stocks and bonds. But in this case, he continues to own management interests that fluctuate greatly in value long after his time with the company and even the end of his separation agreement. And the public has no clear idea where the money is coming from or when it will end." Named for a historic Massachusetts coastal lighthouse, Sankaty was part of a cluster of similarly named hedge funds run by Bain Capital, the private equity firm Romney founded and led until 1999. The offshore company was used in Bain's $1 billion takeover of Domino's Pizza and other multimillion-dollar investment deals more than a decade ago. Romney's campaign declined to answer detailed questions from AP about Sankaty. Romney aides have said in the past that some disclosures were not required because those assets were valued by his financial advisers at less than $1,000 below the minimum threshold under federal rules set by the U.S. Office of Government Ethics. A financial snapshot of Sankaty in Romney's 2010 tax returns showed the holding with almost no value at the time with $10,000 in both assets and liabilities. "Everything on the filings is reported as required," campaign spokeswoman Andrea Saul said in a brief statement. "If OGE has an issue with any filings, they would let us know." The agency declined to comment. While Sankaty no longer plays an active role in Bain's current deals, private equity experts said such holdings could provide significant income to Romney under his 10-year separation agreement from Bain, which expired in 2009. Investment funds typically churn "carried interest," profit shares due to the managers of the funds that often range as much as 20 percent of a fund's annual profit known as "the carry." Even after investment funds are exhausted, profit shares and other late earnings from those stakes can continue to stream, arriving as lucrative "tails," tax experts say. In some circumstances, the analysts added, offshore companies like Sankaty could also offer limited tax deferral advantages. The implications of Romney's Bain profit-sharing became clear last month when his trust reported that one rarely disclosed asset had posted a $1.9 million payout. The income was described as a "true-up" payment, catch-up income that made up for unpaid earnings owed to Romney as part of his Bain separation agreement. Such sizable earnings are possible "depending on the terms of the agreement," said tax law expert Michael Kosnitzky, an attorney at the New York firm of Boies, Schiller & Flexner. The Romney campaign acknowledged recently that it could not rule out more large future payments. The use of offshore companies such as Sankaty is allowed under U.S. tax laws. They are typically set up as shell corporations by private equity and hedge funds to route investments from large foreign and institutional investors, such as large pension plans, into corporate takeovers. The money is used to provide equity and buy up debt. In turn, the investors gain U.S. tax advantages by passing their funds through the offshore "blocker" corporations, avoiding a high 35 percent tax on earnings that the Internal Revenue Service describes as "unrelated business income." Computer model shows perfect storm for Obama By Dan Lothian, CNN White House Correspondent updated 8:18 AM EDT, Mon June 11, 2012 STORY HIGHLIGHTS Professor creates computer model to judge economy's effect on Obama's campaign Model analyzes approval ratings, economic conditions and consumer confidence Professor says best comparison for Obama is to Jimmy Carter in 1980 One key difference between the two is that Carter had lost support within his party Washington (CNN) -- President Barack Obama is running against former Massachusetts Gov. Mitt Romney, but the economy may truly be his greatest opponent. "It's not the only factor, but it's arguably the most important factor," said George Washington University associate professor John Sides, who has created a computer model to analyze the impact of the economy on the presidential campaign. "The forecasting model suggests a very close race with maybe a slight edge to Obama, but not necessarily a large edge -- nothing he can be very confident in," Sides said. Obama faces a perfect storm that threatens to sink his prospects of a second term. The price of gas is dropping but is still high. The stock market remains volatile, unemployment ticked up again, and the eurozone crisis lingers. In a brief statement Friday after which he also took a few questions, Obama described the depth of the nation's troubled economic recovery. "The hole we have to fill is much deeper, and the global aftershocks are much greater," he said. Romney utilized offshore tax havens to help investors Practice called 'perfectly legal' Email|Print| Text size –+By Bob Drogin Los Angeles Times / December 19, 2007 http://www.boston.com/news/nation/articles/2007/12/19/romney_utilized_offshore_tax_havens_to_help_investors/ While in private business, Mitt Romney used shell companies in two offshore tax havens to help eligible investors avoid paying US taxes, federal and state records show. Related political coverage: Obama toughens trail persona; Clinton shows a softer side Selling the personal side of Clinton Huckabee ad delivers a Christmas message Video Mike Huckabee's Christmas wish Romney used offshore tax havens to help investors Romney has another teary moment Campaign Notebook Romney dismisses fund-raiser photo, says he's firmly antiabortion Scot Lehigh Humanizing Hillary More coverage of Campaign '08 more stories like this Romney gained no personal tax benefit from the legal operations in Bermuda and the Cayman Islands. But aides of the Republican presidential hopeful and former colleagues acknowledged that the tax-friendly jurisdictions helped attract billions of additional investment dollars to Romney's former company, Bain Capital, and thus boosted profits for Romney and his partners. Romney has based his White House bid, in part, on the skills he learned as cofounder and chief of Bain Capital, one of the nation's most successful private equity groups. His campaign cites his record while governor of Massachusetts of closing state tax loopholes; his involvement with foreign tax havens had not come to light before. In the Cayman Islands, Romney was listed as a general partner and personally invested in BCIP Associates III Cayman, a private equity fund that is registered at a post office box on Grand Cayman Island and that indirectly buys equity in US companies. The arrangement shields foreign investors from US taxes they would pay for investing directly in US companies. Romney still retains an investment in the Cayman fund through a trust. Campaign disclosure forms show the investment paid him more than $1 million last year in dividends, interest, and capital gains. In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital's Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans. Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer's office in downtown Hamilton, capital of the British island territory. "It's just a mail drop, essentially," said Marc B. Wolpow, who worked with Romney for nine years at Bain Capital and who set up Sankaty Ltd. in October 1997 without ever visiting Bermuda. "There's no one doing any work down there other than lawyers." Investing through what's known as a blocker corporation in Bermuda protects tax-exempt American institutions, such as pension plans, hospitals, and university endowments, from paying a 35 percent tax on what the Internal Revenue Service calls "unrelated business income" from domestic hedge funds that invest in debt, specialists say. Kevin Madden, Romney's campaign spokesman, said there was nothing improper about the Bermuda arrangement or in Romney's investment in the Cayman fund. In neither case, Madden said, did Romney gain the ability to defer or avoid paying US taxes. "I would disagree that these could be described as tax loopholes," he said. "These are perfectly normal and perfectly legal arrangements that American companies put together to be successful in the market." Romney first purchased a 3.25 percent share of the Cayman fund and was listed as a "general partner (passive)" before his retirement from Bain Capital in late 2001, records show. He put his financial assets into a blind trust in January 2003, when he took office as governor of Massachusetts. Brad Malt, who controls Romney's financial trust, said Bain Capital organized the Cayman fund to attract money from foreign institutional investors. "This is not Mitt trying to do something strange," he said. "This is Bain trying to raise some number of billions from investors around the world." The privately held Cayman fund does not disclose its total investment pool. But Securities and Exchange Commission records show it has invested through a Delaware partnership in a California-based network of healthcare centers, a Texas real estate group, a New Jersey phosphate manufacturer, and numerous other companies. Romney is the wealthiest candidate running for president, with a personal fortune of as much as $250 million, according to financial disclosure forms he filed in August. His financial trust retains investments in at least 32 Bain and Sankaty equity, hedge, and debt funds, among other assets, the documents disclosed. Under his retirement agreement, Romney retains a share of the profits at Bain Capital, as well as the right to make new investments in Bain funds through his trust, until February 2009. Malt said he repeatedly had increased Romney's stake in the Cayman fund since 2003. He said he was unaware of the specific figures, but added that he knew he "wrote a lot of checks" and that it pays a return of 20 percent to 30 percent a year. Corporations, Elections, Money in Politics, Politics, Romney, Top Stories Romney Invested in Medical-Waste Firm That Disposed of Aborted Fetuses, Government Documents Show And these documents challenge Romney's claim that he left Bain Capital in early 1999. —By David Corn | Mon Jul. 2, 2012 3:00 AM PDT Joe Burbank/Orlando Sentinel/Zuma Earlier this year, Mitt Romney nearly landed in a politically perilous controversy when the Huffington Post reported that in 1999 the GOP presidential candidate had been part of an investment group that invested $75 million in Stericycle, a medical-waste disposal firm that has been attacked by anti-abortion groups for disposing aborted fetuses collected from family planning clinics. Coming during the heat of the GOP primaries, as Romney tried to sell South Carolina Republicans on his pro-life bona fides, the revelation had the potential to damage the candidate's reputation among values voters already suspicious of his shifting position on abortion. More MoJo coverage of Mitt Romney: The Mystery of Romney's Exit From Bain EXCLUSIVE: Romney Invested Millions in Chinese Firm That Profited on US Outsourcing Romney Tax Tips: 10 Ways to Stiff the IRS Mitt Romney's Long History of Misremembering His Past Get-Rich-Quick Profiteers Love Mitt Romney, and He Loves Them Back How Romney Fibs—and Gets Away With It But Bain Capital, the private equity firm Romney founded, tamped down the controversy. The company said Romney left the firm in February 1999 to run the troubled 2002 Winter Olympics in Salt Lake City and likely had nothing to with the deal. The matter never became a campaign issue. But documents filed by Bain and Stericycle with the Securities and Exchange Commission—and obtained by Mother Jones—list Romney as an active participant in the investment. And this deal helped Stericycle, a company with a poor safety record, grow, while yielding tens of millions of dollars in profits for Romney and his partners. The documents—one of which was signed by Romney—also contradict the official account of Romney's exit from Bain. The Stericycle deal—the abortion connection aside—is relevant because of questions regarding the timing of Romney's departure from the private equity firm he founded. Responding to a recent Washington Post story reporting that Bain-acquired companies outsourced jobs, the Romney campaign insisted that Romney exited Bain in February 1999, a month or more before Bain took over two of the companies named in the Post's article. The SEC documents undercut that defense, indicating that Romney still played a role in Bain investments until at least the end of 1999. Here's what happened with Stericycle. In November 1999, Bain Capital and Madison Dearborn Partners, a Chicago-based private equity firm, filed with the SEC a Schedule 13D, which lists owners of publicly traded companies, noting that they had jointly purchased $75 million worth of shares in Stericycle, a fast-growing player in the medical-waste industry. (That April, Stericycle had announced plans to buy the medical-waste businesses of Browning Ferris Industries and Allied Waste Industries.) The SEC filing lists assorted Bain-related entities that were part of the deal, including Bain Capital (BCI), Bain Capital Partners VI (BCP VI), Sankaty High Yield Asset Investors (a Bermuda-based Bain affiliate), and Brookside Capital Investors (a Bain offshoot). And it notes that Romney was the "sole shareholder, Chairman, Chief Executive Officer and President of BCI, BCP VI Inc., Brookside Inc. and Sankaty Ltd." Advertise on MotherJones.com The document also states that Romney "may be deemed to share voting and dispositive power with respect to" 2,116,588 shares of common stock in Stericycle "in his capacity as sole shareholder" of the Bain entities that invested in the company. That was about 11 percent of the outstanding shares of common stock. (The whole $75 million investment won Bain, Romney, and their partners 22.64 percent of the firm's stock—the largest bloc among the firm's owners.) The original copy of the filing was signed by Romney. Another SEC document filed November 30, 1999, by Stericycle also names Romney as an individual who holds "voting and dispositive power" with respect to the stock owned by Bain. If Romney had fully retired from the private equity firm he founded, why would he be the only Bain executive named as the person in control of this large amount of Stericycle stock? The documents—one of which was signed by Romney—also call into question the account of Romney's exit from Bain that the company and the Romney campaign have provided. Stericycle was a lucrative investment for Romney and Bain. The company had entered the medical-waste business a decade earlier, when it took over a food irradiation plant in Arkansas and began zapping medical waste, rather than strawberries, with radiation. The company subsequently replaced irradiation with a technology that used low-frequency radio waves to sterilize medical waste—gowns, masks, gloves, and other medical equipment—before it was transported to an incinerator. By mid-1997, Stericycle was the second-largest medical-waste disposal business in the nation. Two years later, it was the largest. With 240,000 customers, its operations spanned the United States, Canada, and Puerto Rico. Fortune ranked it No. 10 on its list of the 100 fastest growing companies in the nation. But the company had its woes, accumulating a troubling safety record along the way. In 1991, the Occupational Safety and Health Administration cited its Arkansas operation for 11 workplace safety violations. The facility had not provided employees with sufficient protective gear, and it had kept body parts, fetuses, and dead experimental animals in unmarked storage containers, placing workers at risk. In 1995, Stericycle was fined $3.3 million—later decreased to $800,000—by Rhode Island for knowingly exposing workers to life-threatening diseases at its medical-waste treatment facility in Woonsocket. Two years later, workers at another of its medical-waste processing plants in Morton, Washington, were exposed to tuberculosis. In 2002 and 2003—after Bain and its partners had bought their major interest in the firm—Stericycle reached settlements with the attorneys general in Arizona and Utah after it was accused of violating antitrust laws. It paid Arizona $320,000 in civil penalties and lawyers' fees, and paid Utah $580,000. Despite the firm's regulatory run-ins, the deal worked out well for Bain. In 2001, the Bain-Madison Dearborn partnership that had invested in the company sold 40 percent of its holdings in Stericycle for about $88 million—marking a hefty profit on its original investment of $75 million. The Bain-related group sold the rest of its holdings by 2004. By that point it had earned $49.5 million. It was not until six years later that anti-abortion activists would target Stericycle for collecting medical waste at abortion clinics. This campaign has compared Stericycle to German firms that provided assistance to the Nazis during the Holocaust. A Stericycle official told Huffington Post that its abortion clinics business constitutes a "small" portion of its total operations. (Stericycle declined a request for comment from Mother Jones.) In 1995, Stericycle was fined by Rhode Island for knowingly exposing workers to life-threatening diseases at its medical-waste treatment facility. In response to questions from Mother Jones, a spokeswoman for Bain maintained that Romney was not involved in the Stericycle deal in 1999, saying that he had "resigned" months before the stock purchase was negotiated. The spokeswoman noted that following his resignation Romney remained only "a signatory on certain documents," until his separation agreement with Bain was finalized in 2002. And Bain issued this statement: "Mitt Romney retired from Bain Capital in February 1999. He has had no involvement in the management or investment activities of Bain Capital, or with any of its portfolio companies since that time." (The Romney presidential campaign did not respond to requests for comment.) But the document Romney signed related to the Stericycle deal did identify him as a participant in that particular deal and the person in charge of several Bain entities. (Did Bain and Romney file a document with the SEC that was not accurate?) Moreover, in 1999, Bain and Romney both described his departure from Bain not as a resignation and far from absolute. On February 12, 1999, the Boston Herald reported, "Romney said he will stay on as a part-timer with Bain, providing input on investment and key personnel decisions." And a Bain press release issued on July 19, 1999, noted that Romney was "currently on a part-time leave of absence"—and quoted Romney speaking for Bain Capital. In 2001 and 2002, Romney filed Massachusetts state disclosure forms noting he was the 100 percent owner of Bain Capital NY, Inc.—a Bain outfit that was incorporated in Delaware on April 13, 1999—two months after Romney's supposed retirement from the firm. A May 2001 filing with the SEC identified Romney as "a member of the Management Committee" of two Bain entities. And in 2007, the Washington Post reported that R. Bradford Malt, a Bain lawyer, said Romney took a "leave of absence" when he assumed the Olympics post and retained sole ownership of the firm for two more years. All of this undermines Bain's contention that Romney, though he maintained an ownership interest in the firm and its funds, had nothing to do with the firm's activities after February 1999. The Stericycle deal may raise red flags for anti-abortion activists. But it also raises questions about the true timing of Romney's departure from Bain and casts doubt on claims by the company and the Romney campaign that he had nothing to do with Bain business after February 1999. The REAL Story of Romney and Sankaty Advisors http://www.pauldrockton.com/Sankaty.html Sankaty Advisors Managed by Romney As I reported a few years back, Sankaty Advisors was managed by Mitt Romney, tarnishing his image as a sharp businessman. "Romney operated "offshore" shell companies to help investors avoid paying taxes. Sadly, such entities have also been used for laundering money for Illuminati/CIA narcotics operations. The locations of these funds raises a "red flag" . The fund was also investing in our stock market, another favorite way to launder drug money. "In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital's Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans.... In 2008, it was reported that Sankaty advisors lost a whole lot of money: "Some high profile credit investment funds of private equity firm Bain Capital LLC are facing losses of as much as 50 percent, the Wall Street Journal reported on Thursday. The firm's credit affiliate, Sankaty Advisors LLC, has lost between 40 percent and 50 percent across two funds that bought up highly secured corporate loans, people familiar with the matter told the paper." (Source) Institutional Investers Got Soaked by Romney: "Some of these institutions include Harvard University, the Massachusetts Institute of Technology and the University of Notre Dame, the Journal said. All these institutions have some money invested in Bain's money-losing credit funds, two of which include Sankaty's Special Situations and Prospect Harbor..." (Ibid) So Did the Mormon Church Which brings us back to Mormon Inc., Beneficial Life Insurance and Deseret Management: "Beneficial has seen its investment portfolio decline significantly due to its exposure to mortgage-backed and other structured securities, resulting in losses of $600 million over the past two years. Deseret Management had to infuse $594 million into Beneficial to make up the deficit." Deseret Management is the for-profit arm of the Mormon Church. Romney Made a Fortune on Economic Decline The main reason Romney does not want to disclose tax returns for the past ten years is that they will show that he made a fortune off of losing other people's money. Romney was into Credit Default Swaps, Short-selling and other derivatives up to his neck. "Sankaty Advisors, the credit and fixed income affiliate of Bain Capital, is one of the nation's leading private managers of high-yield credit, with approximately $19 billion in committed capital. Sankaty invests in a wide variety of securities, including leveraged loans, high-yield bonds, distressed debt, mezzanine debt, credit default swaps, structured products, and select equity investments." (Source) Romney and Credit Default Swaps Credit Default Swaps allowed Romney to profit when mortgage bonds took a hit. The Swaps pay full face value to the swap holder when a bond holder goes into default. Lower Credit Ratings on bonds are a boon to the Credit Default Swap holder, because they increase the likelihood of a default and make a swap more valuable. Conclusion: Romney was a key player in bringing about the economic collapse, a fact he is doing his best to hide by not disclosing his tax returns from the past ten years. Profitting from other people's losses would not do much for his popularity in this year's Presidential election. No wonder Fox News owner, Ruport Murdoch, is tweeting about Romney losing against Obama. (Source) Buy Silver Bullion and 90% silver coins. Email pdrockton Mitt Romney and the Collapse of Mormon Inc. Romney's Company loses 50% of Investors' Money with "No Apology" Mitt Romney virtually "owns" Mormon Inc. "Mitt and Ann Romney's charitable foundation gave $4,325,000 to the Mormon Church in three hefty installments in 2003, 2008 and 2009," ... "That was 74 percent of their foundation's donations from 2002 to 2009, during which time the couple gave a total of $5,854,916 to charity." (Source) What isn't disclosed, however, is what Mormon Inc. gave to Mitt Romney (Besides being a shill for the Republican Party and the Romney for President Campaign through the Deseret News and Deseret Book), Romney also allegedly had the inside track on managing Mormon Inc's. financial resources. I reported this in my blog that was deleted by Google (at Romney's request?): "Citibanks toxic derivatives, which forced the bank's subsequent collapse, were fraudulently transferred to a Salt Lake City "Key Bank" in order to make Citibank look better during the recent audit. Reportedly, Romney is working with the White House and Fed, to move these toxic assets into the LDS Church's investment portfolio. These toxic derivatives would place trillions of dollars of liabilities on the Church's books. Derivatives are responsible for the largest transfer of wealth in the World's entire history. Estimated at $1,000 trillion dollars outstanding in the global market. In this one case, Romney would become a major player in helping to loot the LDS Church!" (Source) Romney's possible link to money laundering for the drug cartels and the intelligence communities also deserves further investigation: "Romney operated "offshore" shell companies to help investors avoid paying taxes. Sadly, such entities have also been used for laundering money for Illuminati/CIA narcotics operations. The locations of these funds raises a "red flag" . The fund was also investing in our stock market, another favorite way to launder drug money. "In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital's Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans." (Ibid) Looks like Mitt Romney and Bain Capital helped engineer the global collapse: "Established in 1984, Bain Capital is one of the world's leading private investment firms with approximately $60 billion in assets under management. Bain Capital's affiliated advisors make private equity, public equity, venture capital, leveraged debt asset, and global macro asset investments across multiple industries and sectors. Since inception, Bain Capital's competitive advantage has been grounded in a people-intensive, value-added investment approach that enables the firm to deliver industry-leading returns for Bain Capital investors. The Bain Capital Private Equity is headquartered in Boston, with offices in New York, London, Munich, Mumbai, Hong Kong, Shanghai, and Tokyo. Sankaty Advisors, the credit and fixed income affiliate of Bain Capital, is one of the nation's leading private managers of high-yield credit with approximately $19 billion in committed capital. with approximately $19 billion in committed capital. Sankaty invests in a wide variety of securities, including leveraged loans, high-yield bonds, distressed debt, mezzanine debt, credit default swaps, structured products, and select equity investments. Absolute Return Capital (ARC) is the global macro affiliate of Bain Capital and commenced trading in 2004. ARC manages assets in fixed income, equity, commodity, and currency markets." (Source) In 2008, it was reported that Sankaty advisors lost a whole lot of money: "Some high profile credit investment funds of private equity firm Bain Capital LLC are facing losses of as much as 50 percent, the Wall Street Journal reported on Thursday. The firm's credit affiliate, Sankaty Advisors LLC, has lost between 40 percent and 50 percent across two funds that bought up highly secured corporate loans, people familiar with the matter told the paper." (Source) A whole lot of institutional investors took the hit: "Some of these institutions include Harvard University, the Massachusetts Institute of Technology and the University of Notre Dame, the Journal said. All these institutions have some money invested in Bain's money-losing credit funds, two of which include Sankaty's Special Situations and Prospect Harbor..." (Ibid) Which brings us back to Mormon Inc., Beneficial Life Insurance and Deseret Management: "Beneficial has seen its investment portfolio decline significantly due to its exposure to mortgage-backed and other structured securities, resulting in losses of $600 million over the past two years. Deseret Management had to infuse $594 million into Beneficial to make up the deficit." (Source) Beneficial Life is owned by the Mormon Church through Deseret Management. As a Non-Profit, Mormon Inc., does not have to disclose all of its financial holdings to the General Membership of the Church. In essence, Church leadership can conduct business without any accountability, and is free to expose Mormon Inc., to whatever risk brings the greatest short-term gain. While the Church leadership counsel's Church members to avoid debt and stay away from risky investments, it seems to be living by a completely different set of rules, with sacred money that originated with members' tithes and offerings. Mitt Romney gave the Church a few million dollars, the Church needs to disclose exactly what they gave Mitt Romney in return. It would be interesting to know how much money their poster child's investments cost Mormon Inc. Perhaps the billions of dollars in over-runs on the Mormon Inc. Mall being built in downtown Salt Lake City are being used to cover up some of these losses. Only an audit from an outside source, say the FBI's White Collar Crimes Division, would tell the whole story. Don't hold your breath. Mormons that think their Church is solvent, and able to meet increasing demands on its Welfare Programs, will soon find out what the consequences of their blind obedience really means. God is incorruptable. Man is not. Any man that follows another blindly, while thinking he is doing God's will, is the biggest fool of all. Buy Silver Now! email pdrockton@aol.com Bain Capital From Wikipedia, the free encyclopedia (Redirected from Sankaty Advisors) Jump to: navigation, search This article is about the investment firm. For the management consulting company, see Bain & Company. Bain Capital LLC Type Private, LLC Industry Private equity Founded 1984 Founder(s) Bill Bain [1], Mitt Romney, T. Coleman Andrews III, Eric Kriss Headquarters Boston, Massachusetts, U.S. with offices in Chicago, New York, London, Palo Alto, Luxembourg, Tokyo, Hong Kong, Shanghai and Mumbai Key people Joshua Bekenstein, John Connaughton, Paul Edgerley, Mark Nunnelly, Stephen Pagliuca, Jordan Hitch Products Venture capital, investment management, public equity, high-yield assets, Mezzanine capital, leveraged buyouts and growth capital Total assets US$ 66 billion (2012) Employees 400+ (2012)[2] Website www.baincapital.com In late 2011, Bain Capital moved its headquarters to the John Hancock Tower in Boston, Massachusetts. Bain occupies 210,000 sq. ft. from the 36th to 43rd floors.[3] Bain Capital is a Boston-headquartered alternative asset management and financial services company that specializes in private equity, venture capital, credit and public market investments. Bain invests across a broad range of industry sectors and geographic regions. As of early 2012, the firm managed approximately $66 billion of investor capital across its various investment platforms. The firm was founded in 1984 by partners from the consulting firm Bain & Company. Since inception it has invested in or acquired hundreds of companies including AMC Entertainment, Aspen Education Group, Brookstone, Burger King, Burlington Coat Factory, Clear Channel Communications, Domino's Pizza, DoubleClick, Dunkin' Donuts, D&M Holdings, Guitar Center, Hospital Corporation of America (HCA), Sealy, The Sports Authority, Staples, Toys "R" Us, Warner Music Group and The Weather Channel. As of the end of 2011, Bain Capital had approximately 400 professionals, most with previous experience in consulting, operations or finance.[2] Bain is headquartered at the John Hancock Tower in Boston, Massachusetts with additional offices in New York City, Chicago, Palo Alto, London, Luxembourg, Munich, Mumbai, Hong Kong, Shanghai and Tokyo. The company, and its actions during its first 15 years, have become the subject of political and media scrutiny as a result of co-founder Mitt Romney's later political career, especially his 2012 presidential campaign.[4] Contents [hide] 1 History 1.1 1984 founding and early history 1.2 1990s 1.3 1999-2002: Romney departure and political legacy 1.4 Early 2000s 1.5 Bain and the 2000s buy-out boom 1.6 Since 2008 2 Businesses and affiliates 2.1 Bain Capital Private Equity 2.2 Bain Capital Ventures 2.3 Brookside Capital 2.4 Sankaty Advisors 2.5 Absolute Return Capital 3 Appraisals and critiques 4 Investments gallery 5 See also 6 References 7 Bibliography 8 External links History [edit] 1984 founding and early history Bain Capital was founded in 1984 by Bain & Company partners Mitt Romney, T. Coleman Andrews III, and Eric Kriss. In 1983, Bill Bain offered Romney the chance to head a new venture that would invest in companies and apply Bain's consulting techniques to improve operations.[5] In the face of skepticism from potential investors, Romney and his partners spent a year raising the $37 million in funds needed to start the new operation, which had fewer than ten employees.[6][7][8][9] In addition to the three founding partners, the early team included Fraser Bullock, Robert F. White, Joshua Bekenstein, Adam Kirsch, and Geoffrey S. Rehnert.[10] Early investors also included members of elite Salvadoran families who fled the country's civil war.[11] They and other wealthy Latin Americans invested $9 million primarily through offshore companies registered in Panama.[12] New employees hired were generally in their twenties and top-ranked graduates from Stanford University or Harvard University, both of which Romney had attended.[13] While Bain Capital was founded by Bain executives, the firm was not an affiliate or a division of Bain & Company but rather a completely separate company. Initially, the two firms shared the same offices - in an office tower at Copley Place in Boston[14] - and a similar approach to improving business operations. However, the two firms had put in place certain protections to avoid sharing information between the two companies and the Bain & Company executives had the ability to veto investments that posed potential conflicts of interest.[15] Bain Capital also provided an investment opportunity for partners of Bain & Company. Bain Capital's original $37 million fund was raised entirely from private individuals in mid-1984.[10] The firm initially gave a cut of its profits to Bain & Company, but Romney later persuaded Bill Bain to give that up.[16] Bain Capital was an initial investor in Staples, Inc. The Bain Capital team was initially reluctant to invest its capital. By 1985, things were going poorly enough that Romney considered closing the operation, returning investors' money back to them, and having the partners go back to their old positions.[17] The partners saw weak spots in so many potential deals that by 1986, very few had been done.[18] At first, Bain Capital focused on venture capital opportunities.[18] One of Bain's earliest and most notable venture investments was in Staples, Inc., the office supply retailer. The funding enabled Staples to expand from one store in 1986 to over 2000 stores in 2011[citation needed]. In 1986, Bain provided $4.5 million to two supermarket executives, Leo Kahn and Thomas G. Stemberg, to open an office supply supermarket in Brighton, Massachusetts.[19] The fast-growing retail chain went public in 1989[20] and in 1996 the company had grown to over 1,100 stores.[21] Bain Capital eventually reaped a nearly sevenfold return on its investment, and Romney sat on the Staples board of directors for over a decade.[8][9][18] Another very successful investment occurred in 1986 when $1 million was invested in medical equipment maker Calumet Coach, which eventually returned $34 million.[22] A few years later, Bain Capital made an investment in the technology research outfit the Gartner Group, which ended up returning a 16-fold gain.[22] Bain invested the $37 million of capital in its first fund in twenty companies and by 1989 was generating an annualized return in excess of 50 percent. By the end of the decade, Bain's second fund, raised in 1987 had deployed $106 million into 13 investments.[23] As the firm began organizing around funds, each such fund was run by a specific general partnership – that included all Bain Capital executives as well as others – which in turn was controlled by Bain Capital Inc., the management company that Romney had full ownership control of.[24] As CEO, Romney had the final approval say on every deal made.[25] [edit] 1990s Beginning in 1989, the firm, which began as a venture capital source investing in start-up companies, adjusted its strategy to focus on leveraged buyouts and growth capital investments in more mature companies.[26] By the end of 1990, Bain had raised $175 million of capital and financed 35 companies with combined revenues of $3.5 billion.[27] In July 1992, Bain acquired Ampad (originally American Pad & Paper) from Mead Corporation, which had acquired the company in 1986. Mead which had been experiencing difficulties integrating Ampad's products into its existing product lines, generated a cash gain of $56 million on the sale.[28] Under Bain's ownership, the company enjoyed a significant growth in sales from $106.7 million in 1992 to $583.9 million in 1996, when the company was listed on the New York Stock Exchange. Under Bain's ownership, the company also made a number of acquisitions, including writing products company SCM in July 1994, brand names from the American Trading and Production Corporation in August 1995, WR Acquisition and the Williamhouse-Regency Division of Delaware, Inc. in October, 1995, Niagara Envelope Company, Inc. in 1996, and Shade/Allied, Inc. in February 1997.[29] Ampad's revenue began to decline in 1997 and the company laid off employees and closed production facilities to maintain profitability. However, the company filed for bankruptcy in 2001 and the assets were acquired in 2003 by Crescent Investments. Bain's ownership of Ampad, is estimated to have generated more than $100 million in profit for Bain.[30] In 1994, Bain acquired Totes, a producer of umbrellas and overshoes.[31] Three years later, Totes, under Bain's ownership, acquired Isotoner, a producer of leather gloves.[32] Bain, together with Thomas H. Lee Partners, acquired Experian, the consumer credit reporting business of TRW, in 1996 for more than $1 billion. Formerly known as TRW's Information Systems and Services unit, Experian is one of the leading providers of credit reports on consumers and businesses in the US.[33] The company was sold to Great Universal Stores for $1.7 billion just months after being acquired.[34] Other notable Bain investments of the late 1990s included Sealy Corporation, the manufacturer of mattresses;[35] Alliance Laundry Systems;[36] Domino's Pizza[37] and Artisan Entertainment.[38] Much of the firm's profits was earned from a relatively small number of deals, with Bain Capital's overall success and failure rate being about even. One study of 68 deals that Bain Capital made up through the 1990s found that the firm lost money or broke even on 33 of them.[39] Another study that looked at the eight-year period following 77 deals during the same time found that in 17 cases the company went bankrupt or out of business, and in 6 cases Bain Capital lost all its investment. But 10 deals were very successful and represented 70 percent of the total profits.[40] Romney took two leaves of absence from Bain Capital during the first half of the decade. From January 1991 to December 1992,[41][18] Romney served as the CEO of Bain & Company where he led the successful turnaround of the consulting firm. In November 1993, he took a leave of absence for his unsuccessful 1994 run for the U.S. Senate seat from Massachusetts; he returned the day after the election in November 1994.[42][18][43] In 1994, Bain invested in Steel Dynamics, based in Fort Wayne, Indiana, a prosperous steel company that has grown to the fifth largest in the U.S.A, employs about 6,100 people, and produces carbon steel products with 2010 revenues of $6.3 billion on steel shipments of 5.3 million tons.[44] In 1993, Bain acquired the Armco Worldwide Grinding System steel plant in Kansas City, Missouri and merged it with its steel plant in Georgetown, South Carolina to form GST Steel. The Kansas City plant had a strike in 1997 and Bain closed the plant in 2001 laying off 750 workers when it went into bankruptcy. The South Carolina plant closed in 2003 but subsequently reopened under a different owner. At the time of its bankruptcy it reported $553.9 million in debts against $395.2 in assets. Bain reported $58.4 million in profits, the employee pension fund had a liability of $44 million.[45][46][47][48] Bain's investment in Dade Behring represented a significant investment in the medical diagnostics industry. In 1994, Bain, together with Goldman Sachs Capital Partners completed a carveout acquisition of Dade International,[49] the medical diagnostics division of Baxter International in a $440 million acquisition. Dade's private equity owners merged the company with DuPont's in vitro diagnostics business in May 1996 and subsequently with the Behring Diagnostics division of Hoechst AG in 1997.[50] Aventis, the successor of Hoechst, acquired 52% of the combined company.[51] In 1999, the company reported $1.3 billion of revenue and completed a $1.25 billion leveraged recapitalization that resulted in a payout to shareholders.[50] The dividend, taken together with other previous shareholder dividends resulted in an eightfold return on investment to Bain Capital and Goldman Sachs.[22][40] Revenues declined from 1999 through 2002 and despite attempts to cut costs through layoffs the company entered into bankruptcy in 2002. Following its restructuring, Dade Behring emerged from Bankruptcy in 2003 and continued to operate independently until 2007 when the business was acquired by Siemens Medical Solutions. Bain and Goldman lost their remaining stock in the company as part of the bankruptcy.[52] By the end of the decade, Bain Capital was on its way to being one of the top private equity firms in the nation,[16] having increased its number of partners from 5 to 18, having 115 employees overall, and having $4 billion under its management.[7][8] It had made between 100 and 150 deals where it acquired and then sold a company.[22][39][40] [edit] 1999-2002: Romney departure and political legacy Romney took a third leave of absence from Bain Capital in February 1999 when he became the head of the Salt Lake Organizing Committee for the 2002 Winter Olympics.[53][54] The decision caused turmoil at Bain Capital, with a power struggle ensuing.[55] Some partners left and founded the Audax Group and Golden Gate Capital.[25] Other partners threatened to leave, and there was a prospect of eight-figure lawsuits being filed.[55] Romney was worried that the firm might be destroyed, but the crisis ebbed.[55] According to some interviews and press releases during 1999, Romney said he was keeping a part-time function at Bain, but was leaving running day-to-day operations to Bain's executive committee.[56][25] A management committee, consisting of five of the fourteen remaining active partners with the firm, was given this role.[25] During his leave of absence, Romney continued to be listed in filings to the U.S. Securities and Exchange Commission[57] as "sole shareholder, sole director, Chief Executive Officer and President".[58][59] The SEC filings reflected the legal reality[60] and the ownership interest in the Bain Capital management company.[24][61] In practice, former Bain partners have stated that Romney's attention was mostly occupied by his Olympics position.[62][60] He did stay in regular contact with his partners, and traveled to meet with them several times, signing corporate and legal documents and paying attention to his own interests within the firm and to his departure negotiations.[61] Bain Capital Fund VI in 1998 was the last one Romney was involved in; investors were worried that with Romney gone, the firm would have trouble raising money for Bain Capital Fund VII in 2000, but in practice the $2.5 billion was raised without much trouble.[25] Discussions over the final terms of Romney's departure dragged on during this time, with Romney negotiating for the best deal he could get and his continuing position as CEO and sole shareholder giving him the leverage to do so.[60][25] Although he had left open the possibility of returning to Bain after the Olympics, Romney made his crossover to politics permanent with an announcement in August 2001.[53] His separation from the firm was finalized in early 2002.[25][63] Romney negotiated a ten-year retirement agreement with Bain Capital[25] that allowed him to receive a passive profit share and interest as a retired partner in some Bain Capital entities, including buyout and Bain Capital investment funds, in exchange for his ownership in the management company.[64][65] Because the private equity business continued to thrive, this deal would bring him millions of dollars in annual income.[65] Romney was the first and last CEO of Bain Capital; since his departure became final, it has continued to be run by management committee.[25] Bain Capital itself, and especially its actions and investments during its first 15 years, came under press scrutiny as the result of Romney's 2008 and 2012 presidential campaigns.[22][66][67] Bain Capital made as few comments about those actions and investments as possible, as even by the standards of the private equity industry it was known for its commitment towards secrecy about itself and privacy for its clients and investors.[67] Romney's leave of absence and the level of activity he had within the firm during the 1999-2002 period also garnered attention.[68][69][70][71][72][73] [edit] Early 2000s In 2002, Bain acquired Burger King together with TPG Capital and Goldman Sachs Capital Partners. Bain Capital began the new decade by closing on its seventh fund, Bain Capital Fund VII, with over $3.1 billion of investor commitments. The firm's most notable investments in 2000 included the $700 million acquisition of Datek, the online stock brokerage firm,[74] as well as the $305 million acquisition of KB Toys from Consolidated Stores.[75] Datek was ultimately merged with Ameritrade in 2002. KB Toys, which had been financially troubled since the 1990s as a result of increased pressure from national discount chains such as Wal-Mart and Target, filed for Chapter 11 bankruptcy protection in January 2004. Bain had been able to recover value on its investment through a dividend recapitalization in 2003.[76] In early 2001, Bain purchased a 30 percent stake, worth $600 million, in Huntsman Corporation, a leading chemical company owned by Jon Huntsman, Sr.[77][78] With a significant amount of committed capital in its new fund available for investment, Bain was one of a handful of private equity investors capable of completing large transactions in the adverse conditions of the early 2000s recession. In July 2002, Bain together with TPG Capital and Goldman Sachs Capital Partners, announced the high profile $2.3 billion leveraged buyout of Burger King from Diageo.[79] However, in November the original transaction collapsed, when Burger King failed to meet certain performance targets. In December 2002, Bain and its co-investors agreed on a reduced $1.5 billion purchase price for the investment.[80] The Bain consortium had support from Burger King's franchisees, who controlled approximately 92% of Burger King restaurants at the time of the transaction. Under its new owners, Burger King underwent a major brand overhaul including the use of The Burger King character in advertising. In February 2006, Burger King announced plans for an initial public offering.[81] In late 2002, Bain remained active acquiring Houghton Mifflin Company for $1.28 billion, together with Thomas H. Lee Partners and The Blackstone Group. Houghton Mifflin and Burger King represented two of the first large club deals, completed since the collapse of the Dot-com bubble.[82] In November 2003, Bain completed an investment in Warner Music Group. In 2004 Bain acquired the Dollarama chain of dollar stores, based in Montreal, Quebec, Canada and operating stores in the provinces of Eastern Canada for $1.05 billion CAD. In March 2004, Bain acquired Brenntag Group from Deutsche Bahn AG (Exited in 2006; sold to BC Partners for $4B). In August 2003, Bain acquired a 50% interest in Bombardier Inc.'s recreational products division, along with the Bombardier family and the Caisse de dépôt et placement du Québec, and created Bombardier Recreational Products or BRP. [edit] Bain and the 2000s buy-out boom Bain led a consortium in the buyout of Toys "R" Us in 2004 In 2004 a consortium comprising KKR, Bain Capital and real estate development company Vornado Realty Trust announced the $6.6 billion acquisition of Toys "R" Us, the toy retailer. A month earlier, Cerberus Capital Management, made a $5.5 billion offer for both the toy and baby supplies businesses.[83] The Toys 'R' Us buyout was one of the largest in several years.[84] Following this transaction, by the end of 2004 and in 2005, major buyouts were once again becoming common and market observers were stunned by the leverage levels and financing terms obtained by financial sponsors in their buyouts.[85] The following year, in 2005, Bain was one of seven private equity firms involved in the buyout of SunGard in a transaction valued at $11.3 billion. Bain's partners in the acquisition were Silver Lake Partners, TPG Capital, Goldman Sachs Capital Partners, Kohlberg Kravis Roberts, Providence Equity Partners, and The Blackstone Group. This represented the largest leveraged buyout completed since the takeover of RJR Nabisco at the end of the 1980s leveraged buyout boom. Also, at the time of its announcement, SunGard would be the largest buyout of a technology company in history, a distinction it would cede to the buyout of Freescale Semiconductor. The SunGard transaction is also notable in the number of firms involved in the transaction, the largest club deal completed to that point. The involvement of seven firms in the consortium was criticized by investors in private equity who considered cross-holdings among firms to be generally unattractive.[86][87] Bain led the buyout of Dunkin' Brands for $2.4 billion in 2005 Bain led a consortium, together with The Carlyle Group and Thomas H. Lee Partners to acquire Dunkin' Brands. The private equity firms paid $2.425 billion in cash for the parent company of Dunkin' Donuts and Baskin-Robbins in December 2005.[88] In 2006, Bain Capital and Kohlberg Kravis Roberts, together with Merrill Lynch and the Frist family (which had founded the company) completed a $31.6 billion acquisition of Hospital Corporation of America, 17 years after it was taken private for the first time in a management buyout. At the time of its announcement, the HCA buyout would be the first of several to set new records for the largest buyout, eclipsing the 1989 buyout of RJR Nabisco. It would later be surpassed by the buyouts of Equity Office Properties and TXU.[89] In August 2006, Bain was part of the consortium, together with Kohlberg Kravis Roberts, Silver Lake Partners and AlpInvest Partners, that acquired a controlling 80.1% share of semiconductors unit of Philips for €6.4 billion. The new company, based in the Netherlands, was renamed NXP Semiconductors.[90][91] During the buyout boom, Bain was active in the acquisition of various retail businesses.[92] In January 2006, Bain announced the acquisition of Burlington Coat Factory, a discount retailer operating 367 department stores in 42 states, in a $2 billion buyout transaction.[93] Six months later, in October 2006, Bain and The Blackstone Group acquired Michaels Stores, the largest arts and crafts retailer in North America in a $6.0 billion leveraged buyout. Bain and Blackstone narrowly beat out Kohlberg Kravis Roberts and TPG Capital in an auction for the company.[94] In June 2007, Bain agreed to acquire HD Supply, the wholesale construction supply business of Home Depot for $10.3 billion.[95] Bain, along with partners Carlyle Group and Clayton, Dubilier & Rice, would later negotiate a lower price ($8.5 billion) when the initial stages of the subprime mortgage crisis caused lenders to seek to renegotiate the terms of the acquisition financing.[96] Just days after the announcement of the HD Supply deal, on June 27, Bain announced the acquisition of Guitar Center, the leading musical equipment retailer in the U.S. Bain paid $1.9 billion, plus $200 million in assumed debt, representing a 26% premium to the stock's closing price prior to the announcement.[97] Bain also acquired Edcon Limited, which operates Edgars Department Stores in South Africa and Zimbabwe for 25 billion-rand ($3.5 billion) in February 2007.[98] Other investments during the buyout boom included: Bavaria Yachtbau, acquired for €1.3 billion in July 2007[99] as well as Sensata Technologies, acquired from Texas Instruments in 2006 for approximately $3 billion.[100] [edit] Since 2008 In the wake of the closure of the credit markets in 2007 and 2008, Bain managed to close only a small number of sizable transactions. In July 2008, Bain, together with NBC Universal and The Blackstone Group agreed to purchase The Weather Channel from Landmark Communications.[101][102] Subsequent investments include, but are not limited to: July 2008 – Bain, together with Thomas H. Lee Partners, acquired Clear Channel Communications.[103] July 2008 – Bain acquired D&M Holdings for $442 million.[104] June 2009 – Bain Capital announced a deal to acquire a 16% stake in Chinese electronics manufacturer GOME Electrical Appliances for $300 million.[clarification needed] March 2010 – Bain acquired Styron (polystyrene, latex), a division of The Dow Chemical Company, for $1.6 billion.[105] October 2010 – Bain acquired Gymboree for $1.8 billion.[106] July 2011 – Bain acquired Securitas Direct AB together with Hellman & Friedman January 2012 – Bain acquired Physio-Control for $478 million.[107] [edit] Businesses and affiliates Bain Capital's family of funds includes private equity, venture capital, public equity, and leveraged debt assets. [edit] Bain Capital Private Equity Bain Capital Private Equity has raised ten funds and invested in more than 250 companies. The private equity activity includes leveraged buyouts and growth capital in a wide variety of industries.[108] Bain began investing in Europe in 1989 through its London-based affiliate Bain Capital Europe.[109] Bain also operates international affiliates Bain Capital Asia and Bain Capital India. Bain Capital Private Equity is made up of more than 250 investment professionals, including 38 managing directors operating from offices in Boston, Hong Kong, London, Mumbai, Munich, New York, Shanghai, and Tokyo, as of the beginning of 2011. Historically, Bain has primarily relied on private equity funds, pools of committed capital from pension funds, insurance companies, endowments, fund of funds, high net worth individuals, sovereign wealth funds and other institutional investors. Bain's own investment professionals are the largest single investor in each of its funds. From 1993, when Bain raised its first institutional fund through the beginning of 2012, Bain had completed fundraising for 11 funds with total investor commitments of over $38 billion, including its global private equity funds and separate funds focusing specifically on investments in Europe and Asia. Since 1998, each of Bain's global funds has invested alongside a coinvestment fund that invests only in certain larger transactions. The following is a summary of Bain's private equity funds raised from its inception through the beginning of 2012:[110] Fund Vintage Year Committed Capital ($m) Bain Capital Fund IV 1993 $300 Bain Capital Fund V 1995 $500 Bain Capital Fund VI 1998 $1,400[111] Bain Capital Fund VII 2000 $3,117[111] Bain Capital Fund VIII 2004 $4,250[111] Bain Capital Fund VIII-E (Europe) 2004 $1,015 Bain Capital Fund IX 2006 $10,000[111] Bain Capital Europe III 2008 € 3,500 Bain Capital Asia 2008 $1,000 Bain Capital Fund X 2008 $11,800[111] Bain Capital Asia II 2011 $2,000 [edit] Bain Capital Ventures Main article: Bain Capital Ventures Bain Capital Ventures is the venture capital arm of Bain Capital, focused on seed through late-stage growth equity, investing in business services, consumer, healthcare, internet & mobile, and software companies. Bain Capital Ventures has raised approximately $1.53 billion of investor capital since 2001 across four investment funds. The firm's 30 investment professionals are currently investing its fourth fund, Bain Capital Venture Fund 2009, which raised $525 million from investors.[112] The following is a summary of Bain's private equity funds raised from its inception through the beginning of 2012:[110] Fund Vintage Year Committed Capital ($m) Bain Capital Venture Fund 2001 $250 Bain Capital Venture Partners 2005 2005 $250 Bain Capital Venture Partners 2007 2007 $500 Bain Capital Venture Partners 2009 2009 $525 Bain Capital Venture Partners 2012 2012 $600[113] Since 2001, Bain Capital Ventures' most notable investments include DoubleClick, LinkedIn,[114] Shopping.com, Taleo Corporation, MinuteClinic and SurveyMonkey.[115] [edit] Brookside Capital Brookside Capital is the public equity affiliate of Bain Capital. Established in October 1996, Brookside's primary objective is to invest in securities of publicly traded companies that offer opportunities to realize substantial long-term capital appreciation. Brookside employs a long/short equity strategy to reduce market risk in the portfolio[116] [edit] Sankaty Advisors Sankaty Advisors, the fixed income affiliate of Bain Capital, is one of the nation's leading private managers of high yield debt securities. With $15.7 billion of assets under management, Sankaty invests in a wide variety of securities, including leveraged loans, high-yield bonds, distressed securities, mezzanine debt, convertible bonds, structured products and equity investments. Sankaty has approximately 140 employees, including 80 investment professionals across offices in Boston, Chicago, New York and London.[117] [edit] Absolute Return Capital Absolute Return Capital (ARC) is the absolute return affiliate of Bain Capital managing approximately $1.2 billion of capital. Approximately one-third of the capital managed by ARC represents commitments from Bain investment professionals. Established in May 2004, ARC invests across fixed income, equity and commodity markets to produce attractive risk-adjusted returns while maintaining low correlation to traditional investments.[118] [edit] Appraisals and critiques Bain Capital's approach of applying consulting expertise to the companies it invested in became widely copied within the private equity industry.[8][119] University of Chicago Booth School of Business economist Steven Kaplan said in 2011 that the firm "came up with a model that was very successful and very innovative and that now everybody uses."[9] In his 2009 book The Buyout of America: How Private Equity Is Destroying Jobs and Killing the American Economy, Josh Kosman described Bain Capital as "notorious for its failure to plow profits back into its businesses," being the first large private-equity firm to derive a large fraction of its revenues from corporate dividends and other distributions. The revenue potential of this strategy, which may "starve" a company of capital,[120] was increased by a 1970s court ruling that allowed companies to consider the entire fair-market value of the company, instead of only their "hard assets", in determining how much money was available to pay dividends.[121] In at least some instances, companies acquired by Bain borrowed money in order to increase their dividend payments, ultimately leading to the collapse of what had been financially stable businesses.[43] [edit] Investments gallery Selected Bain Capital investments Sports Authority (invested 1987) Guitar Center (acquired June 2006) Hospital Corporation of America (acquired July 2006) Gymboree (acquired October 2010) Clear Channel Communications (acquired July 2008) Houghton Mifflin (acquired December 2002) Staples, Inc. (invested 1986) D&M Holdings (acquired July 2008) Domino's Pizza (acquired September 1998) The Weather Channel (acquired September 2008) Burger King (acquired December 2002) Sealy Corporation (acquired November 1997) Brookstone (acquired 1991) Burlington Coat Factory (acquired January 2006) Dunkin' Donuts (acquired December 2005) Steel Dynamics (1994) Read Standard Chartered begins fightback on Iran allegations | 7:18pm EDT 1 Mars rover Curiosity sends home first color photo | 2:01pm EDT 2 Wisconsin Sikh temple gunman killed himself: FBI 7:35pm EDT 3 Obama's lead over Romney grows despite voters' pessimism 3:55pm EDT 4 Romney opens attack on Obama over welfare law 07 Aug 2012 5 Discussed 170 Obama urges "soul searching" on ways to reduce gun violence 108 Chick-fil-A faces "kiss-in" protest in gay marriage flap 102 Obama's lead over Romney grows despite voters' pessimism REG - Sankaty Credit Opps - Financial Statements 31.12.2010 and 2009 * Reuters is not responsible for the content in this press release. Mon Mar 28, 2011 11:17am EDT RNS Number : 7642D Sankaty Credit Opps (Offshore) I Ld 28 March 2011  Sankaty Credit Opportunities (Offshore) I, Ltd. (a Cayman Islands Exempted Limited Company) Financial Statements December 31, 2010 and 2009 Sankaty Credit Opportunities (Offshore) I, Ltd. Statements of Assets and Liabilities December 31, 2010 and 2009 (Expressed in U.S. Dollars) 2010 2009 Assets Investment in the Partnership, at fair value $ 11,441,665 $ 15,375,944 Cash and cash equivalents 1,000 1,000 Total assets $ 11,442,665 $ 15,376,944 Commitments to Partnership Net Assets Net assets are comprised of: Class C ordinary shares (100 shares, par value $ 1,000 $ 1,000 $0.01 per share) Class A preference shares (4,999,900 shares authorized, par value $0.01 per share) 12,750,958 17,840,654 Accumulated earnings attributable to preference shares (1,309,293) (2,464,710) Total Net Assets $ 11,442,665 $ 15,376,944 Net asset value per Class A preference share (Based on 600 shares outstanding) $ 19,069 $ 25,627 Sankaty Credit Opportunities (Offshore) I, Ltd. Statements of Operations For the Years Ended December 31, 2010 and 2009 (Expressed in U.S. Dollars) 2010 2009 Investment income Investment income allocated from the Partnership $ 1,328,386 $ 1,134,100 Expenses allocated from the Partnership (240,951) (325,749) Net investment income 1,087,435 808,351 Realized and unrealized gain (loss) allocated from the Partnership Net realized gain (loss) 260,408 (1,750,036) Net increase (decrease) in unrealized appreciation (376,739) 4,024,919 Net realized and unrealized gain (loss) (116,331) 2,274,883 Incentive allocation from the Partnership 184,313 (673,338) Net increase (decrease) in net assets resulting from operations $ 1,155,417 $ 2,409,896 Sankaty Credit Opportunities (Offshore) I, Ltd. Statements of Change in Net Assets For the Years Ended December 31, 2010 and 2009 (Expressed in U.S. Dollars) 2010 2009 Increase in net assets from: Operations: Net investment income $ 1,087,435 $ 808,351 Net realized gain (loss) 260,408 (1,750,036) Net increase (decrease) in unrealized appreciation (376,739) 4,024,919 Incentive allocation 184,313 (673,338) Net increase (decrease) in net assets resulting from operations 1,155,417 2,409,896 Distributions to preferred shareholders Distribution of profits - (2,315) Distribution of capital (5,089,696) (3,571,495) Total Distributions (5,089,696) (3,573,810) Total decrease in net assets (3,934,279) (1,163,914) Net assets: Beginning of year 15,376,944 16,540,858 End of year $ 11,442,665 $ 15,376,944 Sankaty Credit Opportunities (Offshore) I, Ltd. Statements of Cash Flows For the Years Ended December 31, 2010 and 2009 (Expressed in U.S. Dollars) 2010 2009 Cash flows from operating activities . Net increase in net assets resulting from operations $ 1,155,417 $ 2,409,896 Adjustments to reconcile net increase in partners' capital resulting from operations to net cash provided by operating activities: Allocation of net investment income from Partnership (1,087,435) (808,351) Distributions received from the Partnership 5,089,696 3,573,810 Net realized gain (loss) (260,408) 1,750,036 Net change in unrealized appreciation 376,739 (4,024,919) Incentive allocation from the Partnership (184,313) 673,338 Net cash provided by operating activities 5,089,696 3,573,810 Cash used for financing activities Distribution of profits to preferred shareholders - (2,315) Distribution of capital to preferred shareholders (5,089,696) (3,571,495) Net cash used for financing activities (5,089,696) (3,573,810) Net increase (decrease) in cash - - Cash at beginning of year 1,000 1,000 Cash at end of year $ 1,000 $ 1,000 1. Organization Sankaty Credit Opportunities (Offshore) I, Ltd. (the "Overseas Company") is a Cayman Islands exempted limited company, which commenced operations on August 12, 2002. The Overseas Company invests substantially all of its net proceeds from the issuance of Preference Shares and Class C shares in Sankaty Credit Opportunities, L.P. (the "Partnership"), a Delaware limited partnership, having the same investment objectives as the Overseas Company. Sankaty Credit Opportunities Investors, LLC, a Delaware limited liability company, serves as the General Partner of the Partnership. Sankaty Advisors, LLC, a Delaware limited liability company and an affiliate of the General Partner, serves as the investment advisor (the "Investment Advisor") of the Partnership. The preference shares are issued in two separate classes, Class A and Class B, and are registered on the Irish Stock Exchange. The performance of the Overseas Company is directly affected by the performance of the Partnership. The financial statements of the Partnership are attached to these financial statements and should be read in conjunction with the Overseas Company's financial statements. At December 31, 2010 and 2009, the Overseas Company owned 6.1% and 5.9%, respectively, of the Partnership. The Overseas Company committed $30,000,000 to the Partnership, of which $17,249,042 and $12,159,346 had been returned as of December 31, 2010 and 2009, respectively. 2. Significant Accounting Policies These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates, and such differences could be material. Set forth below is a summary of the Overseas Company's significant accounting policies. Events or transactions occurring after period end through the date that the financial statements were issued, March 22, 2011, have been evaluated in the preparation of the financial statements. Accounting for Investments The Overseas Company's contributions to (or withdrawals from) the Partnership are recognized concurrently with limited partners' contributions to (or withdrawals from) the Partnership. Investment transactions in the Partnership are accounted for on the trade date. Realized gains and losses of the Partnership are determined on the specific identification basis. Valuation of Investments The Overseas Company records its proportionate investment in the Partnership at fair value. The fair value of the Overseas Company's investment in the Partnership reflects the Overseas Company's proportionate interest in the total partners' capital of the Partnership. Valuation policies of the investments held by the Partnership is discussed in Note 2 of the Partnership's Notes to Financial Statements. The General Partner considers the investment in the Partnership to be a Level III investment. The General Partner believes more relevant disclosure regarding fair value measurements relates to the Partnership's investment portfolio. Income and Expense Recognition The Overseas Company records its share of the Partnership's investment income, expenses, and realized and unrealized gains and losses in proportion to the Overseas Company's interest in the Partnership at the beginning of each allocation period, as a percentage of total partners' capital of the Partnership at the end of the preceding period, adjusted for any capital contributions to or withdrawals from the Partnership for the current period. Administrative costs of the Overseas Company including fees related to listing on the Irish Stock Exchange are paid by the Partnership and then allocated to the Overseas Company's partners' capital account. Such expenses are included in expenses allocated from the Partnership in the Statements of Operations. Income Taxes The Offshore Company is a Cayman Islands exempted company treated as a corporation for United States Federal income tax purposes. Under the current laws of the Cayman Islands, there are no income, estate, transfer, sale or other taxes imposed on the Offshore Company. The Offshore Company trades stocks and securities for its own accounts, therefore, should not be deemed to be engaged in a trade or business in the United States subject to United States federal income tax. Dividends as well as certain types of interest and other income received by the Offshore Company from sources within the United States may be subject to United States withholding tax at a rate of 30%. Dividends as well as certain types of interest and other income, including capital gains on the sale of securities of non-U.S. issuers, received by the Offshore Company from non-U.S. sources may be subject to withholding and other taxes imposed at various rates levied by the jurisdiction in which the income is sourced. To the extent the Offshore Company incurs any tax liabilities, such liabilities will reduce each partner's capital by their allocable share. The Offshore Company requires the Investment Advisors to determine whether tax positions of the Offshore Company are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the 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 Investment Advisor has determined that there were no tax positions which met the recognition and measurement requirements of the relevant accounting standard, and therefore, the Offshore Company did not record an expense related to uncertain positions on the Offshore Company's Statements of Operations for the years ended December 31, 2010 and 2009. The Offshore Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Offshore Company is subject to examination by federal, state, local and foreign jurisdictions, where applicable. As of December 31, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2007 forward (with limited exceptions). Foreign currency transactions The accounting records of the Partnership and the Overseas Company are maintained in U.S. dollars. Investments, other assets and liabilities of the Partnership denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at each period end. Purchases and sales of securities, income receipts, and expense payments are translated into U.S dollars at the prevailing exchange rate on the respective date of the transactions. The Overseas Company does not isolate realized and unrealized gains and losses attributable to changes in exchange rates from gains and losses that arise from changes in the fair values of investment activities. Such fluctuations are included with net realized and unrealized gains or losses. 3. Advisory Fee The Investment Advisor is entitled to compensation in the form of advisory fees. Fees pertaining to investment advisor services are not incurred by the Overseas Company, but rather are expenses of the Partnership. Accordingly, the advisory fee is a component of expenses allocated from the Partnership. In addition, the General Partner of the Partnership is entitled to receive carried interest after the limited partners reach a specified annualized rate of return which is included in the Incentive allocation on the Statements of Operations and Changes in Partners' Capital. Please refer to Notes 6 and 8 of the Partnership's financial statements for discussion of advisory fees and carried interest, respectively. 4. Share Capital Contributions and Withdrawals The Overseas Company has authorized capital of 4,999,900 Class A and Class B preference shares and 100 Class C ordinary shares each with a par value of $0.01 per share. Preference shares are issued at $50,000 per share and the Class C ordinary shares are issued at $10 per share. At December 31, 2010 and 2009 the Overseas Company had issued 600 Class A preference shares for $30,000,000 and 100 Class C shares for $1,000. The Class C shares have the right to attend and vote at the general meetings on all matters related to the operation of the Overseas Company, including the selection of officers and directors. The Class C shares do not participate in the net profits and losses of the Overseas Company. The preference shareholders are not entitled to attend or vote at general meetings of the Overseas Company, except on issues to be voted upon by the Overseas Company in its capacity as a limited partner of the Partnership pursuant to the Partnership Agreement. In addition, the holders of the preference shares are entitled to vote on any amendment to the Article of Association by which, if adopted, would adversely affect them. The directors of the Overseas Company, in their sole discretion, may require preference shares to be compulsory redeemed. At December 31, 2010, one preference shareholder held 100% of the Class A preference shares. Income, Expense, and Carried Interest Allocations Investment profits and losses, including those specific to New Issues and certain illiquid securities designated as such by the General Partner of the Partnership ("Designated Investments") are allocated to the shareholders of the Overseas Company in respect of each shareholders' Corresponding Interest in the Partnership. During the years ended December 31, 2010 and 2009, there were no realized profits and loss related to New Issues or Designated Investments. At December 31, 2010 and 2009, the Overseas Company's corresponding interest of unrealized losses related to Designated Investments were $1,415,937 and $2,139,144, respectively. During the year ended December 31, 2010, $184,313 of carried interest was reallocated from the General Partner back to the Overseas Company. During the year ended December 31, 2009, $673,338 of carried interest was allocated. Dividends and Distributions Dividends will be declared for each class of preference shares in accordance with distributions received by the Overseas Company in respect of the classes' relevant Corresponding Interest. Class C shares are not entitled to receive dividends. Distributions were made during the years ended December 31, 2010 and 2009 in the amount of $5,089,696 and $3,573,810, respectively, from the Overseas Company. The 2010 and 2009 distributions included $5,089,696 and $3,571,495, respectively, return of original capital contributed. Liquidation Upon any liquidation, dissolution or winding up of the Overseas Company, the holders of preference shares will be entitled, after payment of the debts and other liabilities of the Overseas Company, to distributions payable in cash or in kind, in an amount equal to the paid in capital of the preference shares. If the assets of the Overseas Company are not sufficient to pay the full amount set forth above, then each holder of preference shares shall share ratably in any distribution of assets in proportion to the amount that would be payable to such holder if the entire amount payable to all holders were paid in full. Save in respect of paying to each holder of Class C shares the amount paid up on such shares (in aggregate $1,000) in priority to any other payment on a return of capital on a winding up, Class C shares carry no right to participate in any distributions. After the paid in capital of the preference shares and the Class C shares has been paid in full, all accrued and unpaid dividends will be apportioned and paid in the same proportions as dividends are apportioned between the preference shares. Save in respect of paying to each holder of Class C shares the amount paid up on such shares in priority to any other payment on a return of capital on a winding up, Class C shares carry no right to participate in any distribution. 6. Administrator and Board of Directors The Partnership has entered into an administration agreement with Walkers SPV Limited (the "Administrator"). The Administrator is responsible for, among other things: (i) maintaining the register of shareholders of the Overseas Company and generally performing all actions related to the issuance and transfer of preference shares of the Overseas Company and the safe-keeping of certificates therefore, if any; (ii) disseminating the net asset value of the preference shares in accordance with the Articles of Association of the Overseas Company; (iii) keeping such books and records as are required by law or otherwise for the proper conduct of the affairs of the Overseas Company; and (iv) performing all other ancillary services necessary in connection with the administration of the Overseas Company. In addition, all issued and outstanding Class C ordinary shares are held by the Administrator. For the years ended December 31, 2010 and 2009, $13,402 and $606, respectively, of administrative expenses and directors fees were paid by the Partnership and then allocated to the Overseas Company. Board of Directors The Overseas Company's Board of Directors is made up of two officers of the Administrator. They are all independent non-executive directors and have the overall management responsibility of the Overseas Company. The names of the directors are: Karen Ellerbe Mora Goddard 7. Other Required Disclosure For the year ended December 31, 2010, the ratio of net investment income to average net assets before and after carried interest was 8.33% and 9.74%, respectively, the ratio of expenses to average net assets before and after carried interest was 1.85% and .43%, respectively, and the total return of the Overseas Company before and after carried interest was 7.37% and 9.31%, respectively. For the year ended December 31, 2009, the ratio of net investment income to average net assets before and after carried interest was 5.02% and 0.84%, respectively, the ratio of expenses to average net assets before and after carried interest was 2.02% and 6.21%, respectively, and the total return of the Overseas Company before and after carried interest was 21.68% and 16.79%, respectively. These ratios include amounts allocated from the Partnership. 8. Operating Performance The operating performance for years ended December 31, 2010 and 2009 was as follows: Class A 2010 2009 Class A preference share operating performance: Net asset value, beginning of year $ 25,627 $ 27,566 Net investment income 1,812 1,347 Net realized and unrealized gain (loss) on investments (194) 3,792 Incentive allocation 307 (1,122) Distribution of profits to preferred shareholders - (4) Distribution of capital to preferred shareholders (8,483) (5,952) Net increase (decrease) in net asset value (6,558) (1,939) Net asset value, at end of year $ 19,069 $ 25,627 9. Guarantees In the normal course of business, the Overseas Company enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Overseas Company's maximum exposure under these is unknown, as this would involve future claims that may be made against the Overseas Company that have not yet occurred. However, based on experience, management expects the risk of loss to be remote. 10. Off-balance sheet, market and credit risk Due to the nature of the "master-feeder" structure, the Overseas Company may be materially affected by the actions of other limited partners investing in the Partnership. Off-balance sheet, market and credit risk of the Partnership's investments are discussed in Notes 2 and 5 in the Partnership's Notes to the Financial Statements. 11. Subsequent Events Management has evaluated the events and transactions that have occurred through March 22, 2011, the date the financial statements were issued, and subsequent to year end, and noted no items requiring adjustment of the financials statements or additional disclosures. . Sankaty Credit Opportunities, L.P. Financial Statements December 31, 2010 and 2009 Sankaty Credit Opportunities, L.P. Statements of Assets, Liabilities and Partners' Capital December 31, 2010 and 2009 2010 2009 Assets Investments, at fair value (cost $240,241,490 and $294,014,947) $ 140,184,098 $ 201,123,830 Cash and cash equivalents 19,660,820 42,492,403 Restricted cash for credit default swaps 26,400,679 19,141,763 Credit default swaps, at fair value (cost $0 and $0) 7,061 27,814 Unrealized appreciation of forward currency contracts 313,296 522,529 Interest receivable 1,394,537 2,944,512 Receivable for investments sold 720,239 - Other assets 41,250 142,431 Total assets $ 188,721,980 $ 266,395,282 Liabilities Credit default swaps, at fair value (proceeds $0 and $0) $ 2,124,228 $ 5,517,250 Unrealized depreciation of forward currency contracts 57,312 313,506 Due to broker - margin 588 896,556 Management fee payable - 5,041 Distribution payable - 28,084 Deferred taxes payable 736,247 269,733 Accrued expenses and other liabilities 115,475 153,700 Total liabilities 3,033,850 7,183,870 Commitments Partners' capital 185,688,130 259,211,412 Total liabilities and partners' capital $ 188,721,980 $ 266,395,282 The accompanying notes are an integral part of these financial statements. 2 Sankaty Credit Opportunities, L.P. Statements of Operations For the Years Ended December 31, 2010 and 2009 2010 2009 Investment Income Income: Interest $ 14,813,397 $ 17,224,331 Dividends and other income 7,344,906 1,631,107 Total investment income 22,158,303 18,855,438 Expenses: Advisory Fee - net 2,980,148 3,859,616 Professional fees and operating expenses 894,107 1,385,883 Interest expense on securities sold short 268 2,432 Total expenses 3,874,523 5,247,931 Net investment income 18,283,780 13,607,507 Net realized and unrealized gains and losses Net realized gain (loss) on investments and securities sold short (1,224,078) (23,345,470) Net realized gain (loss) on foreign currency transactions (1,254,650) 982,124 Net realized gain on forward currency contracts 515,686 1,182,507 Net realized gain (loss) on credit default swaps 4,422,978 (3,415,926) Net change in unrealized appreciation of investments and securities sold short (net of increase in deferred withholding taxes of $518,888 and $175,336, respectively) (7,685,163) 55,681,233 Net change in unrealized appreciation on credit default swaps 3,372,269 11,949,217 Net change in unrealized appreciation of forward currency contracts 46,961 (4,453,702) Net change in unrealized appreciation from foreign currency translation (680) 64,401 Net realized and unrealized gains (losses) (1,806,677) 38,644,384 Net increase in partners' capital resulting from operations $ 16,477,103 $ 52,251,891 The accompanying notes are an integral part of these financial statements. 3 Sankaty Credit Opportunities, L.P. Statement of Changes in Partners' Capital For the Years Ended December 31, 2010 and 2009 Limited* General Partners Partner Total Balance at December 31, 2008 $ 274,169,908 $ (2,182,303) $ 271,987,605 Distributions (60,728,782) (4,299,302) (65,028,084) Advisory Fee - Net (3,859,616) - (3,859,616) Carried Interest (10,748,732) 10,748,732 - Allocation of net decrease in partners' capital resulting from operations (excluding management fee and carried interest) 55,212,695 898,812 56,111,507 Balance at December 31, 2009 $ 254,045,473 $ 5,165,939 $ 259,211,412 Distributions (84,443,279) (5,557,106) (90,000,385) Advisory Fee - Net (2,980,148) - (2,980,148) Carried Interest (1,588,239) 1,588,239 - Allocation of net increase (decrease) in partners' capital resulting from operations (excluding management fee and carried interest) 19,120,169 337,082 19,457,251 Balance at December 31, 2010 (before reallocation of carried interest) 184,153,976 1,534,154 185,688,130 Reallocation of Carried Interest** 4,523,429 (4,523,429) - Balance at December 31, 2010 $ 188,677,405 $ (2,989,275) $ 185,688,130 * Included in the limited partners' capital account balance at December 31, 2010 and 2009 are $6,250,399 and $8,830,690, respectively, which relate to limited partners who are members of the Bain Capital Group. The Investment Advisor has waived management fees with respect to these limited partners for the years ended December 31, 2010 and 2009. **Reallocation of Carried Interest is a reallocation from the General Partner to the Limited Partners as if the Fund had realized all investments as of December 31, 2010. Included in the current year reallocation is an adjustment of $6,824,953, related to a previous unrecorded reallocation of carried interest as of December 31, 2009. The impact of this adjustment has been deemed by the General Partner to be immaterial to the financial statements taken as a whole for years ended December 31, 2010 and 2009. In accordance with the Limited Partnership Agreement, carried interest allocable to the General Partner from the Limited Partners is $1,588,239 for the year ended December 31, 2010. The accompanying notes are an integral part of these financial statements. 4 Sankaty Credit Opportunities, L.P. Statements of Cash Flows For the Years Ended December 31, 2010 and 2009 2010 2009 Cash used for operating activities: Net increase in partners' capital resulting from operations $ 16,477,103 $ 52,251,891 Adjustments to reconcile net increase (decrease) in partners' capital resulting from operations to net cash provided by operating activities: Purchases of investments (36,009,363) (51,799,929) Payments for credit default swaps - (9,297,832) Purchases of covers of securities sold short - (126,839) Proceeds from sales of investments 55,067,152 19,929,016 Proceeds from credit default swaps 4,422,978 5,881,906 Proceeds from sales of securities sold short - 91,576 Proceeds from principal paydowns of investments 43,301,912 57,598,780 Non-cash interest and dividend income (11,049,449) (11,454,062) Decrease in restricted cash (7,258,916) 45,636,293 Decrease in interest and receivable 1,549,975 1,088,197 Decrease (increase) in other asset 101,181 (59,931) (Decrease) increase in deferred tax payable 466,514 227,711 Decrease in management fee payable (5,041) (950,574) Increase (decrease) in accrued expenses and other liabilities (38,225) 142,648 Net realized gain (loss) on investments and securities sold short 1,224,078 23,345,470 Net realized gain (loss) on credit default swaps (4,422,978) 3,415,926 Net change in unrealized appreciation of investments and securities sold short 7,685,163 (55,681,233) Net change in unrealized appreciation on credit default swaps (3,372,269) (11,949,217) Net change in unrealized appreciation of forward currency contracts (46,961) 4,453,702 Net cash provided by operating activities 68,092,854 72,743,499 Cash used for financing activities: Partners' capital distributions (90,000,385) (65,000,000) Decrease in distribution payable (28,084) - Decrease in Due to broker - margin (895,968) (2,672,698) Net cash used for financing activities (90,924,437) (67,672,698) Net (decrease) increase in cash and cash equivalents (22,831,583) 5,070,801 Cash and cash equivalents, beginning of year 42,492,403 37,421,602 Cash and cash equivalents, end of year $ 19,660,820 $ 42,492,403 Supplemental disclosure of cash flow information: Cash paid for interest $ 268 $ 565 The accompanying notes are an integral part of these financial statements. 5 Sankaty Credit Opportunities, L.P. Condensed Schedule of Investments December 31, 2010 Investments 75.4%* Fair Value Corporate Fixed Income 0.1%* Beverage and Tobacco $ 135,750 Nonferrous Metals/Minerals 96,218 Total Corporate Fixed Income (Cost $2,832,794) 231,968 Senior Bank Debt 4.3%* Cable Television 3,865,649 Food Products 4,102,298 Total Senior Bank Debt (Cost $7,760,268) 7,967,947 Mezzanine 26.1%* Automotive 1,567,032 Business Equipment and Services (3) 9,210,667 Conglomerates (1) 13,984,773 Food Products (2) 14,272,364 Healthcare 639,031 Leisure 8,169,390 Oil and Gas 330,000 Retailers (other than food/drug) 213,068 Total Mezzanine (Cost $77,328,745) 48,386,325 Common Stock 16.1%* Automotive 199 Beverage and Tobacco 630,512 Business Equipment and Services 361,291 Electronic/Electric 5,521,509 Financial Intermediaries 3,743 Food Products 2,722,318 Healthcare 948,856 Insurance 3,609,000 Leisure 288,696 Nonferrous Metals/Minerals 2,007,312 Oil and Gas 12,654,502 The accompanying notes are an integral part of these financial statements. 6 Sankaty Credit Opportunities, L.P. Condensed Schedule of Investments December 31, 2010 Investments (continued) Fair Value Common Stock (continued) Retailers (other than food/drug) $ 848,788 Surface Transportation 352,983 - Total Common Stock (Cost $69,391,922) 29,949,709 Preferred Stock 7.4%* Business Equipment and Services 82,768 Electronic/Electric 5,461,551 Food Products 4,676,585 Retailers (other than food/drug) 3,581,368 Total Preferred Stock (Cost $16,536,582) 13,802,272 Warrants 1.2%* Business Equipment and Services 561,463 Electronic/Electric 803,209 Surface Transportation 909,322 Total Warrants (Cost $1,011,881) 2,273,994 Structured Investments 20.2%* Financial Intermediaries 664,150 Structured Finance Obligation (4) 36,907,733 Total Structured Investments (Cost $65,379,298) 37,571,883 Total Investments (Cost $240,241,490) $ 140,184,098 Credit Default Swaps -1.1%* Providing Protection -1.1%* Chemical/Plastics $ 7,061 Structured Finance Obligation (2,124,228) Total Providing Protection (Cost $0) (2,117,167) Total Credit Default Swaps (Cost $0) $ (2,117,167) Forward Contracts 0.1%* Euro/USD $ 255,984 Total Forward Contracts (Cost $0) $ 255,984 The accompanying notes are an integral part of these financial statements. 7 Sankaty Credit Opportunities, L.P. Condensed Schedule of Investments December 31, 2010 The geographical categorization by country of issuer of the value of investments is as follows: USA 84.9% Canada 4.8% Germany 4.3% Luxembourg 0.6% Other 5.4% 100.0% At December 31, 2010, the country of the reference asset of the credit default swaps providing protection were as follows: USA 100.3% United Kingdom -0.3% 100.0% *All investment category percentages are calculated as a percentage of total partners' capital of $185,688,130. (1) Continental Cement Company LLC, fair value of $13,984,773 represents 7.5% of partners' capital of the Partnership. (2) Harvest Time Bread Company, fair value of $10,912,331 represents 5.9% of partners' capital of the Partnership. (3) Restaurant Technologies, Inc., fair value of $9,933,253 represents 5.3% of partners' capital of the Partnership. (4) Chatham Light CLO, Ltd, fair value of $9,650,000 represents 5.2% of partners' capital of the Partnership. The accompanying notes are an integral part of these financial statements. 8 Sankaty Credit Opportunities, L.P. Condensed Schedule of Investments December 31, 2009 Investments 77.6%* Fair Value Corporate Fixed Income 3.2%* Beverage and Tobacco $ 135,750 Broadcast Radio and Television 780 Electronic/Electric 7,486,010 Retailers (other than food/drug) 793,212 Total Corporate Fixed Income (Cost $11,827,438) 8,415,752 Senior Bank Debt 12.5%* Aerospace and Defense 946,713 Cable Television 4,716,323 Chemical/Plastics 3,352,825 Equipment Leasing 1,545,889 Leisure (1) 16,650,888 Telecommunications/Cellular communications 5,191,348 Total Senior Bank Debt (Cost $36,617,317) 32,403,986 Mezzanine 30.3%* Automotive 9,972,921 Business Equipment and Services 8,489,811 Conglomerates (2) 14,174,237 Financial Intermediaries 6,442,123 Food Products (3) 13,561,473 Healthcare 8,468,236 Leisure 7,814,787 Oil and Gas 457,600 Retailers (other than food/drug) 2,120,392 Surface Transportation 7,102,116 Total Mezzanine (Cost $88,363,687) 78,603,696 Common Stock 17.4%* Automotive 1,508 Beverage and Tobacco 546,007 Business Equipment and Services 144,192 Electronic/Electric 10,386,623 Financial Intermediaries 139,864 The accompanying notes are an integral part of these financial statements. 9 Sankaty Credit Opportunities, L.P. Condensed Schedule of Investments December 31, 2009 Investments (continued) Fair Value Food Products (4) $ 17,605,869 Healthcare 140,571 Insurance 5,694,200 Leisure 290,193 Oil and Gas 7,461,886 Retailers (other than food/drug) 1,953,542 Surface Transportation 741,600 Total Common Stock Investments (Cost $73,502,151) 45,106,055 Preferred Stock 3.4%* Business Equipment and Services 208,780 Electronic/Electric 3,000,374 Food Products 3,953,794 Healthcare 443,895 Retailers (other than food/drug) 1,003,638 Surface Transportation 133,000 Total Preferred Stock Investments (Cost $13,001,432) 8,743,481 Warrants 0.3%* Business Equipment and Services 766,979 Food Products 25 Total Warrant Investments (Cost $890,800) 767,004 Structured Investments 10.4%* Financial Intermediaries 23,390 Structured Finance Obligation 27,060,466 Total Structured Investments (Cost $69,812,122) 27,083,856 Total Investments (Cost $294,014,947) $ 201,123,830 Credit Default Swaps -2.1%* Providing Protection -2.1%* Chemical/Plastics (111,961) Retailers (other than food/drug) 6,345 Structured Finance Obligation (5,383,820) Total Providing Protection (Cost $0) (5,489,436) Total Credit Default Swaps (Cost $0) $ (5,489,436) The accompanying notes are an integral part of these financial statements. 10 Sankaty Credit Opportunities, L.P. Condensed Schedule of Investments December 31, 2009 Fair Value Forward Contracts 0.1%* Pounds Sterling/USD $ 284,432 Euro/USD (276,430) Canadian Dollar/USD 201,021 Total Forward Contracts (Cost $0) $ 209,023 The geographical categorization by country of issuer of the value of investments is as follows: USA 93.9% Germany 2.3% Netherlands 3.7% 100.0% At December 31, 2009, the country of issuer of the credit default swaps providing protection were as follows: USA 97.6% United Kingdom 2.4% 100.0% *All investment category percentages are calculated as a percentage of total partners' capital of $259,211,412. (1) Sankaty LuxCo S.à.r.l: Manchester United - PIK Loan, fair value of $16,650,888 represents 6.4% of partners' capital of the Partnership. (2) Continental Cement Company LLC, fair value of $14,174,237 represents 5.5% of partners' capital of the Partnership. (3) Harvest Time Bread Company, fair value of $14,062,619 represents 5.4% of partners' capital of the Partnership. (4) Mountain City Meat Co., Inc. fair value of $17,897,576 represents 6.9% of partners' capital of the Partnership. The accompanying notes are an integral part of these financial statements. 11 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 1. Organization Sankaty Credit Opportunities, L.P. (the "Partnership") is a Delaware limited partnership, which commenced operations on August 12, 2002. Sankaty Advisors, LLC, a Delaware limited liability company and the credit affiliate of Bain Capital, LLC, serves as the investment advisor of the Partnership (the "Investment Advisor"). Sankaty Credit Opportunities Investors, LLC, a Delaware limited liability company and an affiliate of the Investment Advisor, serves as the General Partner of the Partnership (the "General Partner"). The investment objective of the Partnership is to provide superior risk-adjusted returns to the limited partnership interests by opportunistically investing in distressed/stressed debt and bank loans, mezzanine investments, structured products and special situations. The Partnership's aggregate committed capital for investments is $500 million, of which all had been funded as of December 31, 2010 and 2009. At December 31, 2010 and 2009, the General Partner held $5 million, or 1% of the aggregate commitments of all partners. The Partnership was originally scheduled to continue until August 12, 2010, unless at some earlier date the Partnership ceases to have a general partner or all partners consent in writing to the termination of the Partnership or the General Partner elects to extend the life of the Partnership. On August 9, 2010, the General Partner extended the term of the Partnership until August 12, 2012. The Bank of New York Mellon Trust Company serves as the Partnership's custodian and loan administrator. J.P.Morgan and Goldman Sachs and Co. act as custodians for the Partnership's corporate fixed income and public equity securities under prime brokerage agreements. In addition to direct commitments, Sankaty Credit Opportunities (Offshore) I, Ltd., Sankaty Credit Opportunities (Offshore) I, L.P., and Sankaty Credit Opportunities (Offshore Plan Assets) I, L.P. were established to acquire interests in the Partnership. At December 31, 2010, Sankaty Credit Opportunities (Offshore) I, Ltd., Sankaty Credit Opportunities (Offshore) I , L.P., and Sankaty Credit Opportunities (Offshore Plan Assets) I, L.P., owned 6.1%, 52.9%, and 6.6% of partners' capital, respectively. At December 31, 2009, Sankaty Credit Opportunities (Offshore) I, Ltd., Sankaty Credit Opportunities (Offshore) I , L.P., and Sankaty Credit Opportunities (Offshore Plan Assets) I, L.P., owned 5.9%, 50.9%, and 6.3% of partners' capital, respectively. 2. Significant Accounting Policies These financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in accordance with GAAP requires the General Partner to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates, and such differences could be material. Events or transactions occurring after period end through the date that the financial statements were issued, March 22, 2011, have been evaluated in the preparation of the financial statements. Valuation of Investments, Credit Default Swaps and Securities Sold Short The Investment Advisor, in consultation with the General Partner, fair values the investments owned by the Partnership. Corporate fixed income securities are generally fair valued based on the "high bid average" price obtained from an independent pricing service. Senior bank debt securities are generally fair valued based on the "mean of mean" price obtained from a loan pricing service. Public equities are generally fair valued based on the closing price listed on a United States securities exchange or, if unavailable, at the last bid price for long positions and last ask price for short positions. Swap contracts and other derivatives are fair valued as described below. For additional info related to derivative instruments utilized, please see the following footnotes: 2, 4, 5 and 6. Investments that cannot be valued, as described above, (primarily mezzanine investments, structured investments and special situations) are valued at fair value as determined in good faith by the General Partner. In determining the fair value of an investment, the General Partner considers such factors as 12 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 financial statements, earnings forecasts, recent transactions in the same or similar securities and valuation information obtained from broker-dealers, recognized quotation services or independent appraisal firms. The fair value assigned to these investments is based upon available information and does not necessarily represent the amount that might ultimately be realized upon sale. Equity investments in structured financing vehicles (such as CLOs) are valued by the General Partner using a model that utilizes inputs determined by the General Partner to discount present value of future cash flows from the investment. The General Partner determines the fair value of certain securities, including certain structured investments, held by the Partnership on the basis of prices provided by principal market makers. Due to the inherent uncertainty of valuation, this estimated fair value may differ from the value that would have been used had a ready market for the security existed, and the difference could be material. Investments in Limited Partnerships are valued as the Partnership's proportionate investment in the net assets of the limited partnership at fair value. The definition of "fair value" for the purposes of accounting principles generally accepted in the United States of America can and will differ from that used within the covenants of the Partnership's debt financing commitments. Cash and Cash Equivalents Cash includes cash held at retail banks, custodial banks and prime brokers. Included in cash and cash equivalents and restricted cash at December 31, 2010 are $37,353,848 invested overnight in four highly liquid money market investment vehicles. As of December 31, 2010, the vehicles were bearing interest from 0.01% to 0.06%. Included in cash and cash equivalents at December 31, 2009 are $37,987,815 invested overnight in two highly liquid money market investment vehicles and bearing interest at .01%. Cash balances are presented gross of amounts due to retail banks, custodial banks, and prime brokers. Due to Broker - Margin Due to broker - margin represents short term margin debt balances held at various brokers. Restricted Cash Restricted cash for collateral held for credit default swaps represents cash collateral maintained in accounts by the respective swap agreement counterparties. Included in restricted cash is $19,500,328 restricted in relation to Designated Investments. Investment Transactions, Investment Income and Expenses Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined using the specific identification method. Interest income is recorded on the accrual basis. Expenses are recorded on the accrual basis. Premiums and discounts on securities purchased and securities sold short are amortized, using the effective yield method, over the life of the respective security when cash collection is expected and included in interest income (long investments) and interest expense (short investments). Discounts on securities with fair value below 50% of par are not amortized. Certain fees received or paid on bank loans are recorded as a cost basis adjustment or as income. Dividend income is recorded on the ex-dividend date net of withholding taxes. Distributions from collateralized debt obligations are recorded as dividend income on the Statements of Operations during the collateralized debt obligation's reinvestment period. Subsequent to this reinvestment period, distributions are recorded as a return of capital. Dividend and interest income paid in the form of additional shares or par value is recorded at current fair value. For the Partnership's investments in revolving bank loans, the cost basis of the investments purchased are adjusted for the cash received for the discount on the total balance committed. The fair value is also adjusted for price appreciation or depreciation on the unfunded portion. As a result, the purchase of commitments not completely funded may result in a negative fair value until it is offset by the future amounts called and funded. In some cases, the Partnership invests in securities indirectly through one or more holding companies or other entities in which other parties affiliated with the Partnership and/or the Investment Advisor may also be investors. In cases where the Partnership invests directly through such an entity, the Condensed Schedule of Investments reflects the Partnership's proportionate share of the underlying investment. 13 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 Restricted Securities The Partnership is permitted to invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. At December 31, 2010 and 2009, the fair value of restricted securities (excluding 144A issues) amounted to $15,914,212 and $21,118,507, respectively. Income Taxes As a partnership, the Partnership itselfis not subject to U.S. Federal income taxes. Each partner is individually liable for income taxes, if any, on its share of the Partnership's net taxable income. Interest, dividends and other income realized by the Partnership from non-US sources and capital gains realized on the sale of securities of non-U.S. issuers may be subject to withholdings and other taxes levied by the jurisdiction in which the income is sourced. As of December 31, 2010 and 2009, $736,247 and $269,733, respectively, was the estimated payable relating to deferred taxes and is included in Deferred taxes payable on the Statements of Assets, Liabilities and Partners' Capital. For foreign partners invested in the Partnership, a reduction in capital could be made for withholding taxes (30% or lower treaty rate) on their allocable share of dividends as well as certain interest and other income received by the Partnership from sources within the United States. The Partnership requires the General Partner to determine whether tax positions of the Partnership are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the 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 were no tax positions which met the recognition and measurement requirements of the relevant accounting standard, and therefore, the Partnership did not record an expense related to uncertain positions on the Partnership's Statements of Operations for the year ended December 31, 2010 and 2009. The Partnership files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Partnership is subject to examination by federal, state, local and foreign jurisdictions, where applicable. As of December 31, 2010, the tax years that remain subject to examination by the major tax jurisdictions under the statute of limitations is from the year 2007 forward (with limited exceptions). Securities Sold Short Upon selling a security short, the Partnership recognizes the proceeds received as restricted cash in the Statements of Assets, Liabilities and Partners' Capital and securities sold short is established as an offsetting liability. The cash is retained by the Partnership's prime broker(s) as collateral for the short position. The liability is marked-to-market while the position remains open to reflect the current settlement obligation and the amount of collateral is adjusted accordingly. When a closing purchase is entered into by the Partnership offsetting the security sold short, a gain or loss is realized based on the difference between the proceeds originally received and the purchase cost. A short sale creates a risk of a theoretically unlimited loss, in that the price of the underlying security could theoretically increase without limit thus increasing the cost to the Partnership of buying those securities necessary to cover a short position. There can be no assurance that the security necessary to cover a short position will be available for purchase. Purchasing securities to close out the short position can itself cause the price of the securities to rise further, thereby exacerbating the loss. As a result, short sales create risk that the Partnership's ultimate obligation to satisfy the delivery requirements may exceed the amount of the proceeds initially received or the liability recorded in the Statements of Assets and Liabilities and Partners' Capital. 14 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 Foreign Currency Translation The accounting records of the Partnership are maintained in U.S. dollars. The fair values of foreign securities, currency holdings and other assets and liabilities are translated to U.S. dollars based on the current exchange rates each business day. Income and expenses denominated in foreign currencies are translated at current exchange rates when accrued or incurred. Unrealized gains and losses on foreign currency holdings and non-investment assets and liabilities attributable to the change in exchange rates are included in the net increase in unrealized appreciation from foreign currency translation in the Statements of Operations. Net realized gains and losses attributable to changes in exchange rates on foreign currency holdings and non-investment assets and liabilities are included in net realized loss on foreign currency transactions in the Statements of Operations. The portion of both realized and unrealized gains and losses on investments, credit default swaps, securities sold short and swap contracts that result from fluctuations in foreign currency exchange rates is not separately disclosed, but is included in net realized and unrealized gains on investments, credit default swaps and securities sold short in the Statements of Operations. New Accounting Guidance In January 2010, the FASB issued guidance that requires new disclosures and clarifies existing disclosure requirements, about fair value measurements. The new guidance requires (a) disclosure of gross significant transfers in and/or out between Levels I and II and the reasons for those transfers, (b) disclosure of all transfers in/out of Level III (significant transfers to be presented gross) and the reasons for those transfers, and (c) purchases, sales, issuances and settlements to be disclosed separately (i.e. gross) within the Level III roll-forward. The guidance also clarifies (a) the levels of disaggregation in presenting fair value disclosures for each class of assets and liabilities and (b) the disclosures about valuation techniques and inputs that are required for fair value measurements that fall within either Level II or Level III. The standard enhances the fair value disclosure requirements and thus, its adoption during the year had no impact on the statement of assets and liabilities, statement of operations or the statement of changes in partners' capital. 3. Derivatives FASB Accounting Standards Codification ("ASC") 815-10-50 requires qualitative disclosures about the objectives and strategies for using derivative instruments, quantitative disclosures about the fair value of, and gains and losses on, derivative instruments. The Partnership transacts in a variety of derivative instruments including, forwards, swaps and options primarily for trading purposes with each instrument's primary risk exposure being interest rate, credit, foreign exchange or equity risk. The fair value of these derivative instruments is included either as a separate line item, or in the case of purchased options within the Investments line item, in the Statement of Assets, Liabilities and Partners' Capital with changes in fair value reflected as realized gains (losses) or net change in unrealized gains (losses) within the Statement of Operations. 15 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 The following table lists fair value of derivatives by contract type as included in the Statement of Assets, Liabilities and Partners' Capital for the years ended December 31, 2010 and 2009: (Dollars in thousands) Notional/ contractual amount Gross Derivative Assets (at fair value) Gross Derivative Liabilities (at fair value) Forward currency contracts (4,271) 313 (57) Credit Default Swaps 25,416 7 (2,124) Total $ 21,145 $ 320 $ (2,181) Netting (see note below) * - - Carrying value of derivatives on the Statements of Assets, Liabilities and Partners' Capital $ 320 $ (2,181) During the year ended December 31, 2010, the average notional exposure on forward currency contracts and credit default swaps were ($6,409,781) and $40,161,418, respectively. *Note: GAAP permits the netting of derivative assets and liabilities and the related cash collateral received and paid when a legally enforceable master netting agreement exists between the Partnership and a derivative counterparty. (Dollars in thousands) Notional/ contractual amount Gross Derivative Assets (at fair value) Gross Derivative Liabilities (at fair value) Forward currency contracts (26,501) 661 (453) Credit Default Swaps 64,386 28 (5,517) Total $ 37,885 $ 689 $ (5,970) Netting (see note below) * (139) 139 Carrying value of derivatives on the Statements of Assets, Liabilities and Partners' Capital $ 550 $ (5,831) During the year ended December 31, 2009, the average notional exposure on forward currency contracts, credit default swaps and purchased options were ($29,958,656), $81,999,234 and $549,242, respectively. 16 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 The following table indicates the gains and losses on derivatives, by contract type, as included in the Statement of Operations for the years ended December 31, 2010 and 2009. The gains (losses) recognized in the Statement of Operations related to derivatives were: (Dollars in thousands) For the year ended December 31, 2010 Forward currency contracts 279 Credit Default Swaps 7,795 Total $ 8,074 The gains (losses) recognized in the statement of operations related to derivatives were: (Dollars in thousands) For the year ended December 31, 2009 Forward currency contracts (3,271) Credit Default Swaps 8,533 Purchased Options (1,049) Total $ 4,213 The above gains (losses) on derivatives have been recognized as realized or change in unrealized on the Statement of Operations. The significant accounting policies relating to recording of derivatives and related gain/(loss) have been summarized in Note 2 of the financial statements. By using derivative instruments, the Partnership is exposed to the counterparty's credit risk - the risk that derivative counterparties may not perform in accordance with the contractual provisions offset by the value of any collateral received. The Partnership's exposure to credit risk associated with counterparty non-performance is limited to collateral posted and the unrealized gains inherent in such transactions that are recognized in the Statements of Assets, Liabilities and Partners' Capital. The Partnership mayminimize counterparty credit risk through credit monitoring procedures, executing master netting arrangements and managing margin and collateral requirements, as appropriate. The Partnership records counterparty credit risk valuation adjustments, if material, on certain derivative assets in order to appropriately reflect the credit quality of the counterparty. 17 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 Forward Currency Contracts The Partnership enters into forward currency contracts in connection with settling planned purchases or sales of securities or to hedge the currency exposure associated with the Partnership's investments. A forward currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. Forward currency contracts are fair valued daily and the change in value is recorded as an unrealized gain or loss. Forward currency contracts are valued at the prevailing forward exchange rate of the underlying currencies. Realized gains and losses equal to the difference between the fair value of the contract at the time it was opened and the fair value at the time it was closed are recorded upon delivery or receipt of the currency or, if a forward currency contract is offset by entering into another forward currency contract with the same broker, upon settlement of the net gain or loss. These contracts may involve market risk in excess of the unrealized gain or loss reflected in the Partnership's Statements of Assets, Liabilities and Partners' Capital. The Partnership may be exposed to risk if the counterparties are unable to meet the terms of the contract or if there are movements in foreign currency values that are unfavorable to the Partnership. Unrealized gains and losses relating to the Partnership's forward currency contracts are recorded on the Statements of Assets, Liabilities and Partners' Capital by type on a net basis. On the Condensed Schedules of Investments, derivatives contracts are presented net by type of derivative contract, considering long and short contracts separately. Credit Default Swaps The Partnership uses credit default swaps to provide a measure of protection against defaults of corporate issuers (i.e., to reduce risk where the Partnership owns or has exposure to the issuer) or to take an active long or short position with respect to the likelihood of a particular issuer's default. The reference obligation of the swap can be a single issuer, a "basket" of issuers, or an index. The underlying reference assets are corporate debt or loans. Under the forms of each transaction, the Partnership receives or makes payments quarterly based on a specified interest rate on a fixed notional amount. Net interest earned on swaps and realized gains or losses from closing out transactions is included in net realized gain (loss) on credit default swaps in the Statements of Operations. Generally, a credit event for corporate reference obligations means bankruptcy, failure to pay, obligation acceleration, repudiation/moratorium or restructuring. If a credit event occurs, the seller typically must pay the contingent payment to the buyer, which is typically the par value of the reference obligation, though the actual payment may be mitigated by netting arrangements and collateral. After a credit event occurs, this amount may be reduced by anticipated recovery rates, segregated collateral and netting arrangements that may incorporate multiple transactions with a given counterparty. The contingent payment may be a cash settlement or a physical delivery of the reference obligation in return for payment of the face amount of the obligation. The Partnership closes out transactions by entering into offsetting transactions. When transactions are closed out, a realized gain is recognized. In connection with these agreements, cash or securities are posted as collateral with the counterparty which is included in Restricted cash for credit default swaps on the Statements of Assets, Liabilities and Partners' Capital. The Partnership values credit default swaps based on quotes obtained from a third party pricing service, which are derived from market inputs such as the underlying credit of the reference obligation. When a fair value is unavailable as described above fair values are determined in good faith by the General Partner. Entering into these agreements involves, to varying degrees, elements of credit, legal, market, and documentation risk in excess of the amounts recognized on the Statements of Assets, Liabilities and Partners' Capital. Such risks involve the possibility that there will be no liquid market for these agreements, and that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements. The Partnership may from time to time enter into various managed tranche credit default swap transactions ("Swap Transactions") whereby the Partnership contributes a net amount to financial intermediaries and 18 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 provides protection, in aggregate, on pools of underlying reference assets. The net amount contributed consists of a gross amount paid upfront by the Partnership for potential credit events and a gross amount of upfront interest received by the Partnership for certain tranches of these pools. As of December 31, 2010, the Partnership held one pool of credit default swaps, of various credit quality, with a notional amount of $24,416,418. As of December 31, 2009, the Partnership held six Swap Transactions on three pools of credit default swaps, of various credit quality, with a notional amount of $55,136,418. Upfront amounts received or paid are recorded as credit default swap proceeds or cost, respectively, and accreted over the life of the respective swap contracts and are included in net realized gain on swap contracts in the Statements of Operations. Unrealized gains and losses relating to the Partnership's swap contracts are recorded on the Statements of Assets, Liabilities and Partner's Capital on a gross basis. On the Condensed Schedules of Investments, derivative contracts are presented net by type of derivative contract, considering long and short contracts separately. As of December 31, 2010 and 2009, the Partnership is the seller ("providing protection") on a total notional amount of $25,416,418 and $64,386,418, respectively. The notional amount of the swaps are not recorded in the financial statements; however the notional amount does approximate the maximum potential amount of future payments that the Partnership could be required to make if the Partnership was the seller of protection and a credit event was to occur. Those credit default swaps for which the Partnership is providing protection at December 31, 2010 are summarized as follows: Written Credit Derivative Contracts Single Name Credit Default Swap (in thousands) Credit Default Swap Basket (in thousands) Total Debt Loan Debt Loan Fair value of written credit derivatives $ 7 $ - $ - $ (2,124) $ (2,117) Maximum potential amount of future payments 1,000 - - 24,416 25,416 Collateral held by the Partnership or other third parties which the Partnership can obtain upon occurrence of triggering event 132 - - 6,084 6,216 19 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 Maximum Potential Amount of Future Payments by Contract Term (in thousands) Current credit rating on underlying securities 0-6 6-12 1-5 5-10 More than 10 years Total months months years years Investment Grade $ - $ - $ - $ - $ - $ - Non-Investment Grade 1,000 - - - - 1,000 Swap Transactions 24,416 - - - - 24,416 Total $ 25,416 $ - $ - $ - $ - $ 25,416 Those credit default swaps for which the Partnership is providing protection at December 31, 2009 are summarized as follows: Written Credit Derivative Contracts Single Name Credit Default Swap (in thousands) Credit Default Swap Basket (in thousands) Total Debt Loan Debt Loan Fair value of written credit derivatives $ (106) $ - $ - $ (5,384) $ (5,490) Maximum potential amount of future payments 9,250 - 29,190 25,946 64,386 Collateral held by the Partnership or other third parties which the Partnership can obtain upon occurrence of triggering event 858 - 3,675 13,011 17,544 Maximum Potential Amount of Future Payments by Contract Term (in thousands) Current credit rating on underlying securities 0-6 6-12 1-5 5-10 More than 10 years Total months months years years Investment Grade $ - $ - $ - $ - $ - $ - Non-Investment Grade 8,250 - 1,000 - - 9,250 Swap Transactions 29,190 1,530 24,416 - - 55,136 Total $ 37,440 $ 1,530 $ 25,416 $ - $ - $ 64,386 The credit rating disclosed above for each reference obligation where the Partnership is the seller of protection is a representation of the current payment/performance risk of the swap. Reference obligations with a credit rating of BBB or higher are considered Investment Grade while those with a credit rating of BB or lower are Non-Investment Grade. Swap Transactions are not rated by ratings agencies; however, the current credit ratings on the underlying pools of credit default swaps are predominately non-investment grade. In some cases, the Partnership has purchased related credit protection with respect to the underlying securities where it has previously sold credit protection, thereby limiting its exposure. In these instances, the extent of recourse is difficult to estimate and therefore not disclosed. Option Contracts The Partnership may buy call options and put options. The Partnership pays a premium for purchased options which are included in Cost of Investments on the Statements of Assets, Liabilities and Partners' Capital. Premiums paid for purchased options which expire are treated as realized losses. Premiums paid 20 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 for purchased options which are exercised or closed are offset against the proceeds from that transaction and included in realized gain or loss. Option contracts are fair valued daily using a third party valuation service and the change in value is recorded as an unrealized gain or loss. Unrealized gains and losses relating to the Partnership's derivative contracts are recorded on the Statement of Assets, Liabilities and Partners' Capital by type on a gross basis. On the Condensed Schedule of Investments, derivatives contracts are presented net by type of derivative contract, considering long and short contracts separately. 4. Fair Value Measurements The Partnership discloses the fair value of its investments in a hierarchy which prioritizes and ranks the level of market price observability used in measuring assets or liabilities at fair value. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Assets or liabilities with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, volatility statistics, specific and broad credit data, liquidity statistics, and other factors. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given investment is based on the lowest level of input that is significant to the fair value measurement. The Partnership's assessment of the significance of particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment. The General Partner considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the General Partner's perceived risk of that instrument. In determining an asset or liability's placement within the hierarchy, the General Partner separates the Partnerships investment portfolio into major categories as determined by the General Partner. Each of these categories can further be divided between those held long or short. Assets or liabilities measured and reported at fair value are classified and disclosed in one of the following categories: Level I - Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. The type of assets or liabilities included in Level I include listed equities. Level II - Inputs are other than quoted prices that are observable for the assets or liabilities either directly or indirectly, including inputs in markets that are not considered to be active. Certain investments and exchange traded and over-the-counter derivatives, such as forwards, and credit default swaps, are fair valued by the General Partner using observable inputs, such as quotations received from the counterparty, dealers or brokers, whenever available and considered reliable. In instances where models are used, the value of an over-the-counter derivative depends upon the contractual terms of, and specific risks inherent in, the instrument as well as the availability and reliability of observable inputs. Such inputs include market prices for reference securities, bid and ask prices yield curves, credit curves, measures of volatility, prepayment rates and correlations of such inputs. Certain exchange traded and over-the-counter derivatives, such as generic forwards, swaps and options, have inputs which can generally be corroborated by market data and are therefore classified within Level II. Assets or liabilities which are generally included in this category include corporate bonds and loans and credit default swaps where there is sufficient market activity for the investment, less liquid and restricted equity securities and certain exchange traded and over- 21 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 the-counter derivatives. Common stock investments that have quoted prices but that have legal restrictions on trading are valued on the quoted market price with a discount and are therefore classified as Level II. Level III - Investments and derivative instruments classified within Level III have significant unobservable inputs, as they trade infrequently or not at all. Level III instruments may include private equity investments, structured investments, certain bank loans and bridge loans, less liquid corporate debt securities (including distressed debt instruments and mezzanine), CDS Tranches, structured products (including CLOs, CDOs, and MBS). When observable prices are not available for these securities, the General Partner uses one or more valuation techniques (e.g., the market approach or the income approach) for which sufficient and reliable data is available. Within Level III, the use of the market approach generally consists of using comparable market transactions, while the use of the income approach generally consists of the net present value of estimated future cash flows, adjusted as appropriate for liquidity, credit, market and/or other risk factors. The inputs used by the General Partner in estimating the fair value of Level III investments include the original transaction price, recent transactions in the same or similar instruments, completed or pending third-party transactions in the underlying investment or comparable issuers, subsequent rounds of financing, recapitalizations and other transactions across the capital structure, offerings in the equity or debt capital markets, and changes in financial ratios or cash flows. Certain Level III investments, such as structured investments, utilized models which rely on assumptions determined by the General Partner such as default rates, discount rates, volatilities, loss severity and prepayment rates. Level III investments may also be adjusted to reflect illiquidity and/or non-transferability, with the amount of such discount estimated by the General Partner in the absence of market information. Certain other Level III investments, such as mezzanine and equity investments, may utilize comparable transactions and/or comparable trading multiples where such comparable multiples are available and appropriate. Assumptions include selection of comparable companies and other inputs include EBITDA, revenue, net debt and interest rates yields. The fair value measurement of Level III investments does not include transaction costs that may have been capitalized as part of the security's cost basis. Assumptions used by the General Partner due to the lack of observable inputs may significantly impact the resulting fair value and therefore the Partnership's results of operations. The Partnership may invest in a variety of financial instruments, in various geographies or and/or industries, and the inputs used by the General Partner may vary from one investment to another. Assets or liabilities which are generally included in this category include limited partnership interests, CDOs, privately placed debt, and privately placed equity, bonds, loans and credit default swaps for which there are no observable inputs. Those over-the-counter derivatives that have less liquidity or for which inputs are unobservable are classified within Level III. While the valuations of these less liquid over-the-counter derivatives may utilize some Level I and/or Level II inputs, they also include other unobservable inputs which are considered significant to the fair value determination. At each measurement date, the General Partner updates the Level I and Level II inputs to reflect observable inputs, though the resulting gains and losses are reflected within Level III due to the significance of the unobservable inputs. 22 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 The following tables summarize the valuation of the Partnership's assets or liabilities by the above fair value hierarchy levels as of December 31, 2010 and 2009: Assets at Fair Value as of December 31, 2010 (in thousands) Level I Level II Level III Total Cash Equivalents $ 37,354 $ - $ - $ 37,354 Investments: Corporate Fixed Income - - 232 232 Senior Bank Debt - - 7,968 7,968 Mezzanine - - 48,386 48,386 Preferred Stock - 5,461 8,341 13,802 Stock Warrants - 909 1,365 2,274 Structured Investments - - 37,572 37,572 Common Stock 3,105 10,374 16,471 29,950 Credit Default Swaps (Assets) - 7 - 7 Forward Contracts (Assets) - 313 - 313 Subtotal $ 40,459 $ 17,064 $ 120,335 $ 177,858 Liabilities at Fair Value as of December 31, 2010 (in thousands) Level I Level II Level III Total Credit Default Swaps (Liabilities) $ - $ - $ (2,124) $ (2,124) Forward Contracts (Liabilities) - (57) - (57) Subtotal $ - $ (57) $ (2,124) $ (2,181) Total $ 40,459 $ 17,007 $ 118,211 $ 175,677 23 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 Assets at Fair Value as of December 31, 2009 (in thousands) Level I Level II Level III Total Cash Equivalents $ 37,988 $ - $ - $ 37,988 Investments: Corporate Fixed Income - 8,280 136 8,416 Senior Bank Debt - 24,427 7,977 32,404 Mezzanine - - 78,604 78,604 Preferred Stock - - 8,743 8,743 Stock Warrants - - 767 767 Structured Investments - - 27,084 27,084 Common Stock 5,055 - 40,051 45,106 Credit Default Swaps (Assets) - 28 - 28 Forward Contracts (Assets) - 523 - 523 Subtotal $ 43,043 $ 33,258 $ 163,362 $ 239,663 Liabilities at Fair Value as of December 31, 2009 (in thousands) Level I Level II Level III Total Credit Default Swaps (Liabilities) $ - $ (133) $ (5,384) $ (5,517) Forward Contracts (Liabilities) - (314) - (314) Subtotal $ - $ (447) $ (5,384) $ (5,831) Total $ 43,043 $ 32,811 $ 157,978 $ 233,832 24 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 The following tables present changes in assets or liabilities that use Level III inputs for the years ended December 31, 2010 and 2009: Balance as of 12/31/2009 Net change in unrealized gains (losses) Net realized gains (losses) Purchases Sales or redemptions Gross Transfer into Level III Gross Transfer out of Level III Balance (in thousands) as of 12/31/2010 Investments: Corporate Fixed Income $ 136 $ (125) $ 125 $ 96 $ - $ - $ - $ 232 Senior Bank Debt 7,977 272 (268) 4,106 (7,985) 3,866 - 7,968 Mezzanine 78,604 (18,732) 263 23,966 (35,715) - - 48,386 Preferred Stock 8,743 1,524 (229) 6,103 (2,338) - (5,462) 8,341 Stock Warrants 767 477 1,016 257 (1,152) - - 1,365 Structured Investments 27,084 14,502 2,375 1,865 (8,254) - - 37,572 Common Stock 40,051 (18,143) 2,125 6,225 (3,413) - (10,374) 16,471 Credit Default Swaps (Liabilities) (5,384) 3,260 - - - - (2,124) Total $ 157,978 $ (16,965) $ 5,407 $ 42,618 $ (58,857) $ 3,866 $ (15,836) $ 118,211 25 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 Balance as of 12/31/2008 Net change in unrealized gains (losses) Net realized gains (losses) Net purchases, sales, or redemptions Net transfers into and/or (out of) Level III Balance (in thousands) as of 12/31/2009 Investments: Corporate Fixed Income $ 4,164 $ (2,366) $ 96 $ (1,893) $ 135 $ 136 Senior Bank Debt 8,819 6,636 238 (11,069) 3,353 7,977 Mezzanine 71,259 5,219 (5,776) 7,902 - 78,604 Preferred Stock 9,503 (1,170) 437 (27) - 8,743 Stock Warrants 467 300 5 (5) - 767 Structured Investments 16,597 5,249 419 4,819 - 27,084 Common Stock 37,172 17,585 (17,639) 2,933 - 40,051 Credit Default Swaps (Liabilities) (11,141) 5,757 (4,583) 4,583 - (5,384) Total $ 136,840 $ 37,210 $ (26,803) $ 7,243 $ 3,488 $ 157,978 All net realized and unrealized gains (losses) in the table above are reflected in the accompanying Statements of Operations. During the years ended December 31, 2010 and 2009, the change in unrealized appreciation of investments classified as Level III was ($20,954,562) and $54,191,270, respectively. See Note 2 for the Partnership's valuation techniques used to measure fair value. The Partnership's policy is to recognize transfers as of the end of the period. Transfers into Level III in the tables above are primarily due to financial instruments which had reduced transparency of market data or less observable trading activity during the year ended December 31, 2010. Transfers out of Level III in the tables above are primarily due to financial instruments which had increased transparency of market data or additional observable trading activity during the year ended December 31, 2010. There were no significant transfers of financial assets between Level I and II during the year ended December 31, 2010. If the Partnership determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for 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. The Partnership estimates the fair value of investments in investment companies that have calculated net asset value per share in accordance with the specialized accounting guidance for Investment Companies. Accordingly, in circumstances in which net asset value per share of an investment is not determinative of 26 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 fair value, the Partnership estimates the fair value of an investment in an investment company using the net asset value per share of the investment (or its equivalent) without further adjustment, if the net asset value per share of the investment is determined in accordance with the specialized accounting guidance for Investment Companies as of the reporting entity's measurement date. The adoption of this guidance does not have a material effect on the financial statements. There have been no significant changes in valuation techniques and related inputs used by the General Partner during the year ended December 31, 2010. 5. Market and Credit Risks of Debt Securities The Partnership's investing activities expose it to various types of risk that are associated with the financial instruments and markets in which it invests. The significant types of financial risks include: Market Risk Market risk encompasses the potential for both losses and gains and includes price risk, currency risk and interest rate risk. The fair value of investments and securities sold short will generally fluctuate with, among other things, changes in prevailing interest rates, general economic conditions, the condition of certain financial markets, developments or trends in any particular industry and the financial condition of the issuer. During periods of limited liquidity and higher price volatility, the Partnership's ability to dispose of investments at a price and time that the Partnership deems advantageous may be impaired. Price Risk The prices of securities held by the Partnership may decline in response to certain events, including those directly involving the companies whose securities are owned by the Partnership; conditions affecting the general economy; overall market changes; local, regional or global political, social or economic instability; and currency, interest rate and commodity price fluctuations. Currency Risk / Foreign Markets Risks The Partnership may invest in financial instruments and enter into transactions denominated in currencies other than its functional currency. Consequently, the Partnership may be exposed to risks that the exchange rate of its currency relative to other foreign currencies may change in a manner that has an adverse effect on the fair value of that portion of the Partnership's assets or liabilities denominated in currencies other than the functional currency. The Partnership may have investments in various countries, including emerging market countries. Investments in these countries involve risks, including, but not limited to, risks relating to adverse political, social, and economic developments in other countries, as well as risks resulting from the differences between the regulations to which issuers and markets are subject in different countries. These risks may include expropriation of assets, confiscatory taxation, withholding taxes on dividends and interest paid on Partnership investments, currency exchange controls, and other limitations on the use or transfer of Partnership assets and political or social instability. Such investments may also involve currency exchange rate risks. There may be rapid changes in the value of foreign currencies or securities, causing the fair value of Partnership investments to be volatile. Interest Rate Risk Interest rate risk refers to the risks associated with market changes in interest rates. Interest rate changes may affect the fair value of a debt instrument indirectly and directly. In general, rising interest rates will negatively impact the price of a 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. 27 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 The interest rate hedging transactions subject the Partnership to off balance-sheet risks, which include counterparty credit risk. The Partnership manages this exposure by entering into interest rate hedging transactions with internationally recognized financial institutions, which are expected to perform under the terms of the contracts, and evaluating the creditworthiness of the institutions by taking into account credit ratings and other factors. Liquidity Risk Liquidity risk is the risk that the Partnership will encounter difficulty in meeting obligations associated with financial liabilities. Among other things liquidity could be impaired by an inability to access secured and /or unsecured sources of financing. Leverage Risk The Partnership may use leverage directly and indirectly. The Partnership currently uses leverage indirectly mainly through credit default swaps. The use of leverage will increase the volatility of the Partnership. While the use of borrowed funds will increase returns if the Partnership earns a greater return on the incremental investments purchased with borrowed funds than it pays for such funds, the use of leverage will decrease returns if the Partnership fails to earn 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 net asset value of the Partnership than if the Partnership was not as leveraged. Financing Risk In the normal course of business, the Partnership enters into agreements with certain counterparties for OTC derivative transactions. These agreements contain among other conditions events of default and termination events, and various covenants and representations. There is no guarantee that the Partnership's borrowing arrangements or other arrangements for obtaining leverage will continue to be available, or if available, will be available on terms and conditions acceptable to the Partnership. Unfavorable economic conditions also could increase funding costs, limits access to the capital markets or result in a decision by lenders not to extend credit to the Partnership. In addition, a decline in fair value of the Partnership's assets may have particular adverse consequences in instances where they have borrowed money based on the fair value of those assets. A decrease in fair value of those assets may result in the lender (including derivative counterparties) requiring the Partnership to post additional collateral or otherwise sell assets at a time when it may not be in the Partnership's best interest to do so. Illiquidity of Investments The Partnership may invest in securities, bank debt and other claims, and other assets, which are subject to legal or other restrictions on transfer or for which no liquid market exists. The market prices, if any, for such investments tend to be volatile and may not be readily ascertainable, and, for various reasons, the Partnership may not be able to sell them when it desires to do so or to realize what it perceives to be their fair value in the event of a sale. Restricted securities are generally fair valued at a price lower than similar securities that are not subject to restrictions on resale. Some of the Partnership's investments may be illiquid and the Partnership may not be able to vary the portfolio in response to changes in economic and other conditions. The securities that are purchased in connection with privately negotiated transactions are not registered under the relevant securities laws, which may result in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the relevant registration requirements. Some of the bank loans, mezzanine securities and the collateralized loan obligation investments that are purchased and sold are traded in private, unregistered transactions and are therefore may be subject to restrictions on resale or otherwise have no established trading market. In addition, if the Partnership is required to liquidate all or a portion of its portfolio quickly, the Partnership may realize significantly less than the fair value at which it previously recorded those investments. The Partnership may from time to time invest in derivative contracts traded 28 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 over the counter, which are not traded in an organized public market and may be illiquid. Furthermore, the Partnership may face other restrictions in its ability to liquidate an investment in a business entity to the extent that the Partnership have or could be attributed with material non-public information regarding such business entity. Credit Risk Credit risk refers to the likelihood that an issuer will default in the payment of principal and/or interest on an instrument. Financial strength and solvency of an issuer are the primary factors influencing credit risk. In addition, subordination, lack or inadequacy of collateral 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. The Partnership is subject to the credit risk of its custodians, prime brokers and counterparties to the extent they may be unable to fulfill their obligations either to return the Partnership's securities or to repay amounts owed. Credit risk is measured by the loss the Partnership would record if its counter parties failed pursuant to terms of their obligations to the Partnership. Bank Loans The Partnership invests in loans originated by banks and other financial institutions. The loans invested in by the Partnership may include term loans and revolving loans, may pay interest at a fixed or floating rate and may be senior or subordinated and may be purchased in the form of assignments or participations in all or a portion of loans from third parties. Purchasers of bank loans are predominantly commercial banks, investment funds and investment banks. Based on activity in the bank loan market the Partnership is exposed to liquidity risk as well as the risk of the borrower. High Yield Debt The Partnership invests in high yield debt whose rating is typically below investment-grade by one or more nationally recognized statistical rating organizations or is unrated but of comparable credit quality to obligations rated below investment-grade, and has greater credit and liquidity risk than more highly rated debt obligations. As a result the Partnership is exposed to liquidity risk and the risk of the obligor. Structured Investments The Partnership invests in Structured Investments. The Structured Investments include investments in both Collateralized Debt Obligations and Collateralized Loan Obligations and are either debt or subordinated equity investments. These investments have limited secondary markets and in some instances can have restrictions on transfers. Debt investments are nonrecourse obligations; therefore, the debt is payable solely from the collateral obligations and all other assets pledged. Depending on the structure of the investment and the investment made, the Partnership's debt investments could be subordinate to other classes of debt. All equity interests are unsecured and subordinate to all classes of debt. Subordinated debt and equity investments represent leveraged investments in underlying assets. Credit Derivatives The Partnership invests in credit derivatives. These transactions generally provide for the transfer from one counterparty to another of certain credit risks inherent in the ownership of a financial asset such as a bank loan or a high yield debt security. Such risks include, among other things, the risk of default and insolvency of the obligor of such asset; the risk that the credit of the obligor or the underlying collateral will decline or that credit spreads for like assets will change. Credit derivatives are used to gain or reduce exposure to one or more reference assets, to reduce concentration risk, or to diversify the investment portfolio. 6. Transactions with Affiliates Advisory Fees From the initial closing date of August 12, 2002 (the "Initial Closing Date") until August 12, 2006, at the 29 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 beginning of each fiscal quarter, the Partnership paid the Investment Advisor a management fee at the annual rate of 1.5% of the capital commitments of the limited partners. Subsequent to August 12, 2006, the Partnership pays the Investment Advisor a management fee at the annual rate of 1.5% of partners' capital. The Investment Advisor may, in its sole discretion, waive the management fee with respect to certain members of the Bain Capital Group. In that case, the base for calculating the management fee will be reduced by such persons' capital commitments or allocable portion of partners' capital, as the case may be. For the years ended December 31, 2010 and 2009, $146,017 and $197,348 of management fees were waived, respectively. On January 1, 2005, the Partnership entered into an agreement with the Investment Advisor in respect of any managed Swap Transactions, as defined, whereby the Investment Advisor will furnish advice to the Partnership regarding the terms thereof and the composition of the related reference portfolio of the Swap Transactions. On the first business day of each fiscal quarter, the Partnership pays the Investment Advisor a Management Fee for advice on each Swap Transaction ("Swap Management Fee") in an amount equal to the product of the Notional Amount with respect to such Swap Transaction and an annual rate as noted below. The Partnership did not hold any tranches of managed Swap Transactions at December 31, 2010. The Partnership held the following tranches of managed Swap Transactions at December 31, 2009. Swap Transaction Notional Amount Tranche Fee Percentage Plum Island III $13.9 million 20 - 23% 0.30% Plum Island III $8.3 million 16 - 19% 0.55% Plum Island III $6.9 million 10 - 13% 0.70% During December 31, 2010 and 2009, the Partnership paid $65,083 and $248,262, respectively, of Swap Management Fees to the Investment Advisor which is included in professional fees and operating expenses on the Statements of Operations. At December 31, 2010 and 2009, $0 and $3,781 was payable, respectively, which is included in accrued expenses and other liabilities on the Statements of Assets, Liabilities and Partners' Capital. Collateralized Debt Obligations ("CDOs") The Partnership has invested in the following CDOs (both cash flow and market value CDOs) managed by the Investment Advisor. The Partnership's investments in these CDOs are reflected in the accompanying Condensed Schedule of Investments within the Structured Investments classification. These are fair valued by the General Partner as described in Note 2 and 4. Avery Point CLO, Ltd. ("Avery Point") The Partnership has invested in Avery Point, a cash flow CDO. This entity was established for the purpose of making leveraged investments in high yield securities - both bank loans and corporate bonds - and commenced operations in December 2003. Avery Point's capital structure consists of $510 million of various classes of debt, including Preference Shares. Preference Shares are unsecured and subordinated with respect to cash payments to all other debt holders. The Preference Share holders do not control the election of the directors. During the year ended December 31, 2003, the Partnership purchased a $9,450,000 face value investment in the Preference Shares of Avery Point for $9,331,875. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $5,057,640 and $4,866,750, respectively. During the year ended December 31, 2010, the Partnership received income distributions of $1,309,142 from its investment in Avery Point, which represents a return of the Partnership's investment in Avery Point. This amount is included in Cost of Investments in the accompanying Statement of Assets, Liabilities and Partner's Capital. During the year ended December 31, 2009, the Partnership received income distributions of $400,875 from its investment in Avery Point which are included in dividends and other income in the accompanying Statements of 30 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 Operations. The CDO pays management fees to the Investment Advisor equal to 0.10% annually of the sum of total par of the CDO and cash. The CDO may also pay subordinated management fees equal to 0.50% annually of the sum of total par of the CDO and cash if certain criteria in the CDO are met. Chatham Light CLO, Ltd. ("Chatham Light") The Partnership has invested in Chatham Light, a cash flow CDO. This entity was established for the purpose of making leveraged investments in high yield securities - both bank loans and corporate bonds - and commenced operations in December 2003. Chatham Light's capital structure consists of $139 million of various classes of debt, including Income Notes. Income Notes are unsecured and subordinated with respect to the cash payments to all other debt holders. The Income Note holders do not control the election of the directors. During the year ended December 31, 2004, the Partnership purchased a $20,000,000 face value investment in the Income Notes of Chatham Light for $20,000,000. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $9,650,000 and $1,630,000, respectively. During the years ended December 31, 2010 and 2009, the Partnership received income distributions of $2,615,591 and $450,896, respectively, from its investment in Chatham Light which are included in dividends and other income in the accompanying Statements of Operations. The CDO pays management fees to the Investment Advisor equal to 0.25% annually of the sum of total par of the CDO and eligible investments. The CDO may also pay subordinated management fees equal to 0.50% annually of the sum of total par of the CDO and eligible investments if certain criteria in the CDO are met. Chatham Light CLO II, Ltd. ("Chatham Light II") The Partnership has invested in Chatham Light II, a cash flow CDO. This entity was established for the purpose of making leveraged investments in high yield securities - both bank loans and corporate bonds - and commenced operations in August 2006. Chatham Light's capital structure consists of $536 million of various classes of debt, including Income Notes. Income Notes are unsecured and subordinated with respect to the cash payments to all other debt holders. The Income Note holders do not control the election of the directors. During the year ended December 31, 2007, the Partnership purchased a $11,000,000 face value investment in the Income Notes of Chatham Light for $11,000,000. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $8,090,500 and $7,813,300, respectively. During the years ended December 31, 2010 and 2009, the Partnership received income distributions of $2,668,310 and $345,944, respectively, from its investment in Chatham Light II which are included in dividends and other income in the accompanying Statements of Operations. The CDO pays management fees to the Investment Advisor equal to 0.25% annually of the sum of total par of the CDO and cash. The CDO may also pay subordinated management fees equal to 0.50% annually of the sum of total par of the CDO and cash if certain criteria in the CDO are met. During the year ended December 31, 2009, the Partnership purchased a $260,000 face value investment in the Class C Notes of Chatham Light II for $22,100. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $195,000 and $156,000, respectively. During the years ended December 31, 2010 and 2009, the Partnership earned interest income of $5,361 and $4,060, respectively, from its investment in Chatham Light II Class C Notes which is included in interest income in the accompanying Statements of Operations. The interest receivable at December 31, 2010 and 2009 is $846 and $844, respectively, which is included in Interest receivable in the Statements of Assets, Liabilities and Partners' Capital. During the year ended December 31, 2009, the Partnership purchased a $1,087,603 face value investment in the Class D Notes of Chatham Light II for $549,348. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $750,446 and $652,562. During the years ended December 31, 2010 and 2009, the Partnership earned interest income of $53,299 and $13,640, respectively, from its investment in Chatham Light II Class C Notes which is included in interest income in the accompanying Statements of Operations. The interest receivable at December 31, 2010 and 2009 is $8,531 and $8,521, 31 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 respectively, which is included in Interest receivable in the Statements of Assets, Liabilities and Partners Capital. Race Point CLO, Ltd. ("Race Point") The Partnership has invested in Race Point, a cash flow CDO. This entity was established for the purpose of making leveraged investments in high yield securities - both bank loans and corporate bonds - and commenced operations in November 2001. Race Point's capital structure consists of $503 million of various classes of debt, including Subordinated Interest. Subordinated Interest is unsecured and subordinated with respect to cash payments to all other debt holders. The Subordinated Interest holders do not control the election of the directors. Race Point had an optional redemption on November 14, 2010. At December 31, 2010 and 2009, the Partnership's investment of $5,000,000 face value in Race Point Subordinated Interest was fair valued at $1,141,500 and $1,531,500, respectively. During the years ended December 31, 2010 and 2009, the Partnership received distributions of $700,321 and $185,812, respectively, which represents a return of the Partnership's investment in Race Point. This amount is included in Cost of Investments in the accompanying Statement of Assets, Liabilities and Partners' Capital. The CDO pays management fees to the Investment Advisor equal to 0.275% annually of the sum of total par of the CDO and cash. The CDO may also pay subordinated management fees equal to 0.25% annually of the sum of total par of the CDO and cash if certain criteria in the CDO are met. Race Point II CLO, Ltd. ("Race Point II") The Partnership has invested in Race Point II, a cash flow CDO. This entity was established for the purpose of making leveraged investments in high yield securities - both bank loans and corporate bonds - and commenced operations in April 2003. Race Point II's capital structure consists of $550 million of various classes of debt, including Subordinated Interest. Subordinated Interest is unsecured and subordinated with respect to cash payments to all other debt holders. The Subordinated Interest holders do not control the election of the directors. During the year ended December 31, 2003, the Partnership purchased a $10,180,000 face value investment in the Subordinated Interest of Race Point II for $9,671,000. At December 31, 2010 and 2009, the Partnership's investment was fair valued at $5,620,378 and $5,018,740, respectively. During the years ended December 31, 2010 and 2009, the Partnership received distributions of $1,017,478 and $671,598, respectively, from its investment in Race Point II. Included in the 2010 and 2009 distribution is $1,017,478 and $461,622, which represents a return of the Partnership's investment in Race Point. The CDO pays management fees to the Investment Advisor equal to 0.10% annually of the sum of total par of the CDO and cash. The CDO may also pay subordinated management fees equal to 0.50% annually of the sum of total par of the CDO and cash if certain criteria in the CDO are met. Sankaty High Yield Partners II, L.P. ("Sankaty II") The Partnership has invested in Sankaty II, a market value CDO. This entity was established for the purpose of acquiring and managing a diverse portfolio of primarily below investment-grade assets consisting of senior bank debt, corporate fixed income securities, structured debt instruments, limited partnerships, mezzanine investments, equity securities and certain other investments. Sankaty II's capital structure consists of $214 million of debt and $179 million of limited partnership interests. During the year ended December 31, 2003, the Partnership purchased a 5.4% limited partnership interest in Sankaty II for $4,836,940. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $664,150 and $0, respectively. During the years ended December 31, 2010 and 2009, the Partnership did not receive any distributions from its limited partnership interest in Sankaty II. During the years ended December 31, 2010 and 2009, the Partnership was not charged any Sankaty II management fees. During the years ended December 31, 2010 and 2009, no carried interest was allocated to the Partnership. 32 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 During the year ended December 31, 2005, the Partnership purchased, at par, $3.85 million of Class E Junior Subordinated Secured Notes of Sankaty II. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $2,072,284 and $0. During the years ended December 31, 2010 and 2009, the Partnership did not earned interest income from its investment in Sankaty II Class E Notes which is included in interest income in the accompanying Statements of Operations. The interest receivable at December 31, 2010 and 2009 is $0, which is included in Interest receivable in the Statements of Assets, Liabilities and Partners' Capital. Sankaty II is currently in default and has stopped making interest payments. For the years ended December 31, 2010 and 2009, interest of $327,176 and $334,529, respectively, has been included as paid in kind and is included in the principal balance of the investment. During the year ended December 31, 2009, the Partnership purchased, $5.05 million Par of Class C Fixed Notes of Sankaty II for $3.13 million. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $4,189,322 and $3,678,884, respectively. During the years ended December 31, 2010 and 2009, the Partnership earned interest income of $275,036 and $70,513 from its investment in Sankaty II Class C Fixed Notes which is included in interest income in the accompanying Statements of Operations. The interest receivable at December 31, 2010 and 2009 is $12,137 and $30,804, respectively, which is included in Interest receivable in the Statements of Assets, Liabilities and Partners' Capital. Sankaty II is currently in default and has stopped making interest payments. For the years ended December 31, 2010 and 2009, interest of $178,860 and $39,710, respectively, has been included as paid in kind and is included in the principal balance of the investment. Sankaty High Yield Partners III, L.P. ("Sankaty III") The Partnership has invested in Sankaty III, a market value CDO. This entity was established for the purpose of acquiring and managing a diverse portfolio of primarily below investment-grade assets consisting of senior bank debt, corporate fixed income securities, structured debt instruments, limited partnerships, mezzanine investments, equity securities and certain other investments. Sankaty III's capital structure consists of $141 million of debt and $119 million of limited partnership interests. During the year ended December 31, 2006, the Partnership purchased, at par, $260,000 of Class E Junior Subordinated Secured Notes of Sankaty III. As of December 31, 2010 and 2009, the Partnership's investment was fair valued at $140,662 and $0. During the years ended December 31, 2010 and 2009, the Partnership earned interest totaling $0 and $0, respectively, from its investment in Sankaty III which is included in interest income in the Statements of Operations. The interest receivable at December 31, 2010 and 2009 is $0. Sankaty III is currently in default and has stopped making interest payments. For the years ended December 31, 2010 and 2009, interest of $22,143 and $23,927, respectively, has been included as paid in kind and is included in the principal balance of the investment. Rose Island, LLC ("Rose Island") Rose Island was formed by the Partnership and other affiliated entities for the sole purpose of making a loan in the principal amount of $25,969,501 to a third party entity for the purpose of providing a portion of the proceeds for the acquisition of certain loans issued by investment funds managed by Sankaty Advisors, LLC. Rose Island consisted only of the membership interest of the Partnership and affiliated entities of $25,969,501. During the year ended December 31, 2009, the Partnership purchased a $4,550,586 membership interest in Rose Island at par, of which $3,208,506 was paid down at par. During the year ended December 31, 2010, the remaining principal balance of $1,342,080 in Rose Island was paid down at par. During the year ended December 31, 2010 and 2009, the Partnership earned interest income of $196 and $5,839, respectively, which is included in interest income in the accompanying Statement of Operations. The interest receivable at December 31, 2010 and 2009 is $0 and $458, respectively, which is included in Interest receivable in the Statement of Assets, Liabilities and Partners' Capital. 33 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 Bain Capital Investments Certain other investments included in the accompanying Condensed Schedule of Investments have been issued by organizations in which investment funds advised by a related party have made substantial equity investments and may control the organization. At December 31, 2010 and 2009, the aggregate fair value of these securities was $51,382,366 and $65,597,582, respectively. From time to time the Partnership may sell investments to other entities advised by the Investment Advisor. All such cross trades are executed at a price provided by a third party, where available. If no third party price is available the Investment Advisor will purchase or sell the asset to a third party to determine a price or utilize another third party price source approved by the Investment Advisor Compliance Group. All such cross trades are reviewed by the Investment Advisor Compliance Group. During the year ended December 31, 2010, the Partnership sold investments for proceeds of $6,962,732 to other entities advised by the Investment Advisor or its affiliates at fair value resulting in net realized loss of $1,463,170. During the year ended December 31, 2009, the Partnership sold investments for proceeds of $2,091,768 to other entities advised by the Investment Advisor or its affiliates at fair value resulting in net realized loss of $45,363. Other Expenses and Payables During the years ended December 31, 2010 and 2009, $379,254 and $466,250, respectively, of the Partnership's expenses were paid by a related party of the General Partner, which were reimbursed by the Partnership. As of December 31, 2010 and 2009, there was no outstanding payable for these expenses. 7. Commitments Certain of the Partnership's investments in revolving bank loans included unfunded commitments. As of December 31, 2010 and 2009, unfunded commitments totaled $1,358,709 and $108,709, respectively. In the normal course of business, the Partnership enters into contracts that contain a variety of representations and warranties and which provide general indemnifications. The Partnership's maximum exposure under these is unknown, as this would involve future claims that may be made against the Partnership that have not yet occurred. However, based on experience, the General Partner expects the risk of loss to be remote. 8. Partners' Capital and Allocations Prior to the eighth anniversary of the Initial Closing Date, the aggregate capital commitments of all partners shall not exceed $500 million. The General Partner is required to maintain a capital commitment balance of at least 1% of the aggregate capital commitments of all partners. Limited Partners may not voluntarily withdraw all or any portion of their Book Capital Accounts until August 12, 2010 without the consent of the General Partner. The General Partner may not withdraw any portion of its Book Capital Account prior to August 12, 2010. The General Partner may at its sole discretion at any time and for any reason require a limited partner to withdraw all or any portion of its Basic Capital Account. Income, Expense, and Carried Interest Allocations The realized and unrealized investment profits and losses of the Partnership will initially be apportioned among the partners based on their Basic Capital Accounts as of the first day of the fiscal quarter. The portion of the realized and unrealized investment profits and losses is then first allocated to each limited partner until it reaches a Total Return reflecting an 8% annualized rate of return on its net capital contributions. Next, the investment profits and losses are allocated to the General Partner as carried 34 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 interest until the cumulative amount equals 20% of the net profits allocated to all partners in the current and all prior fiscal quarters. Lastly, 80% is allocated to the limited partners and 20% is allocated to the General Partner. As of the last business day of each fiscal period in which net loss was initially apportioned to the Limited Partners, such net loss will then be allocated between each Limited Partners and the General Partner so as to reverse any net profits allocated as provided above. During the years ended December 31, 2010 and 2009, $1,588,239 and $10,748,732 of carried interest was allocated, respectively. During the year ended December 31, 2010, $4,523,429 of carried interest was reallocated from the General Partner back to the Limited Partners. The General Partner may waive all or any part of the carried interest that it would otherwise be entitled to receive from partners who are members of the Bain Capital Group. For the years ended December 31, 2010 and 2009, $61,084 and $17,630 of carried interest was waived, respectively. From the Initial Closing Date until August 12, 2006, the management fee was allocated to the limited partners based on capital commitment balances as of the first day of the fiscal quarter. Thereafter, it has been allocated based on limited partners' Book Capital Accounts as of the first day of the fiscal quarter. Miscellaneous income and expenses are allocated based on each partner's Book Capital Account as of the first day of the fiscal quarter. New Issues Realized and unrealized profits and losses on certain securities involving initial public offerings are allocated only to those partners that are not considered restricted persons as defined by the Financial Industry Regulatory Authority Inc. ("FINRA"). The restricted partners are allowed New Issue gains and losses at the same percentage as their beneficial ownership unless the combined beneficial ownership of these partners exceeds 10%, in which case only 10% of the New Issue gains and losses will be allocated. The remaining New Issue gains and losses are allocated to those partners who do participate in New Issues. The accounts of those partners who do not participate in New Issues are credited with interest on their proportionate share of the funds utilized to purchase New Issues. During the years ended December 31, 2010 and 2009, there were no net profits from New Issues. Profits and Losses of Designated Investments Profits and losses relating to certain illiquid securities designated as such by the General Partner ("Designated Investments") are allocated to partners at the end of each fiscal quarter in proportion to the partners' respective share of each Designated Investment. Partners' respective share of the Designated Investment is based on their Basic Capital Accounts as of the beginning of the fiscal quarter in which the Designated Investment was originally acquired. As of December 31, 2010, the General Partner has designated the remaining restricted and illiquid investments that comprise the portfolio as Designated Investments. Designated Investments will be managed by the Partnership and will be sold when the Partnership deems to be in the best interest of the Partnership. There were $138,322,915 and $13,070,380 of Designated Investments held at December 31, 2010 and 2009, respectively, with a cost basis of $240,241,490 and $48,720,217, respectively. Distributions Distributions are made at the sole discretion of the General Partner. Generally, cash distributions representing profits are made in the same proportion as such profit is allocated to the capital accounts. Cash distributions representing returns of capital are made in proportion to the partners' Basic Capital Accounts (as defined in the Partnership Agreement). Distributions of publicly traded securities are fair valued at the last trade price or, if unavailable, at the last bid price on the date of distribution. 9. Lehman Brothers Holdings, Inc. During the year ended December 31, 2008, Lehman Brothers Holdings, Inc. ("LBHI") and certain of its affiliates sought protection under the insolvency laws of their jurisdictions of organization, including the United States, the United Kingdom and Japan. The Partnership had entered into swap transactions, securities trades and other transactions with LBHI and its affiliates. At the date of the bankruptcy filing, the Partnership had outstanding swap transactions with Lehman Brothers Special Financing ("LBSF"), an affiliate of LBHI, for which LBHI served as credit support provider. The Partnership had posted collateral 35 Sankaty Credit Opportunities, L.P. Notes to Financial Statements December 31, 2010 and 2009 amounts in accordance with the swap transactions. As a result of the bankruptcy filing, the Partnership terminated its trades and related agreements with LBSF and has initiated claims for damages. LBSF and LBHI may be unable to fulfill their commitments under the agreements; however the General Partner believes that the financial impact to the Partnership relating to these events is immaterial. 10. Other Required Disclosure For the year ended December 31, 2010, excluding the allocation of carried interest, the ratio of net investment income to average limited partners' capital was 8.37%, the ratio of expenses to average limited partners' capital before and after carried interest was 1.79% and .43%, respectively, and the limited partners' total return before and after carried interest was 7.43% and 9.3%, respectively. For the year ended December 31, 2009, excluding the allocation of carried interest, the ratio of net investment income to average limited partners' capital was 5.08%, the ratio of expenses to average limited partners' capital before and after carried interest was 1.96% and 5.99%, respectively, and the limited partners' total return before and after carried interest was 21.82% and 17.10%, respectively. 11. Subsequent Events Management has evaluated the events and transactions that have occurred through March 22, 2011, the date the financial statements were issued, and subsequent to year end, and noted no items requiring adjustment of the financial statements or additional disclosures. This announcement has been issued through the Companies Announcement Service of The Irish Stock Exchange. 36 This information is provided by RNS The company news service from the London Stock Exchange

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