1297704--3/13/2008--NGP_Capital_Resources

related topics

{investment, property, distribution}

{tax, income, asset}

{loan, real, estate}

{personnel, key, retain}

{competitive, industry, competition}

{gas, price, oil}

{cost, contract, operation}

{stock, price, operating}

{stock, price, share}

{acquisition, growth, future}

{control, financial, internal}

{interest, director, officer}

{operation, international, foreign}

Risks Related to Our Business and Investments Economic downturns and the volatility of oil and natural gas prices could impair our portfolio companies operations and ability to satisfy obligations to their respective lenders, including us, which could negatively impact our ability to pay dividends and cause the loss of all or part of your investment. High oil and natural gas prices may increase the availability of alternative sources of capital and reduce demand for our targeted investments. Our ability to grow will depend on our ability to raise capital. We operate in a highly competitive market for investment opportunities. We are a relatively new company with a limited operating history. Investing in privately-held companies may be riskier than investing in publicly-traded companies due to the lack of available public information. Many of our portfolio investments are not publicly traded and, as a result, there is uncertainty as to the value of our portfolio investments. Our equity investments may lose all or part of their value, causing us to lose all or part of our investment in those companies. Our Manager and our management team have limited experience managing a business development company and we cannot assure you that their past experience will be sufficient to manage our company as a business development company. A failure on our part to maintain our status as a business development company would significantly reduce our operating flexibility. We will be subject to corporate-level income tax if we are unable to qualify as a RIC. The energy industry is subject to many risks. When we are a debt or minority equity investor in a portfolio company, we generally will not be in a position to control the entity, and management of the portfolio company may make decisions that could decrease the value of our portfolio holdings. The lack of liquidity in our investments may adversely affect our business. We may experience fluctuations in our quarterly results. We may choose to invest a portion of our portfolio in investments that may be considered highly speculative, which could negatively affect our ability to pay dividends and cause a loss of part of your investment. We currently use borrowed funds to make investments and are exposed to the typical risks associated with leverage. We fund a portion of our investments with borrowed money, which magnifies the potential for gain or loss on amounts invested and may increase the risk of investing in us. We may be exposed to risks associated with changes in interest rates. We may not have sufficient funds to make follow-on investments. Our decision not to make a follow-on investment may have a negative impact on a portfolio company in need of such an investment or may result in a missed opportunity for us. If we issue senior securities, such as debt or preferred stock, we will be exposed to additional risks. Our Board of Directors may change most of our operating policies and strategies without prior notice or stockholder approval, the effects of which may be adverse. We may choose to waive or defer enforcement of covenants in the debt securities held in our portfolio, which may cause us to lose all or part of our investment in these companies. Our portfolio investments may be concentrated in a limited number of portfolio companies, which would magnify the effect if one of those companies were to suffer a significant loss. This could negatively affect our ability to pay dividends and cause the loss of all or part of your investment. Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies. As a result, the holders of such debt may be entitled to payments of principal or interest prior to us, preventing us from obtaining the full value of our investment in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company. Failure to deploy new capital may reduce our return on equity. We may invest a portion of our assets in foreign securities. Investing in foreign securities typically involves more risks than investing in U.S. securities. These risks can increase the potential for losses by us and negatively affect our stock price. Risks Related to Our Manager Our manager and our management team have limited experience managing a BDC and a RIC, and we cannot assure you that their past experience will be sufficient to manage our company as a BDC and a RIC. Our management team may provide services to other investors, which could reduce the amount of time and effort that they devote to us, which could negatively affect our performance. Our future success is dependent upon the members of our management team and their access to investment professionals of our Manager s affiliates and the loss of any of them could detrimentally affect our operations. Our obligation to reimburse our Manager for certain expenses could result in a conflict of interest. We pay our Manager a base management fee based upon our total assets, which may lead our Manager to cause us to incur more debt than is prudent in order to maximize its compensation. We pay our Manager incentive compensation based on our portfolio s performance. This arrangement may lead our Manager to recommend riskier or more speculative investments in an effort to maximize its incentive compensation. The payment of part of the incentive compensation on a quarterly basis may lead our Manager to accelerate or defer interest payable by our portfolio companies in a manner that could result in fluctuations in the timing and amount of dividends. We may be obligated to pay our Manager incentive compensation even if we incur a loss. While our management team currently does not provide advisory services to other investment vehicles that may have common investment objectives with ours, our management team may do so in the future and may face conflicts of interest in allocating investments. Our Manager s liability is limited under the investment advisory agreement, and we have agreed to indemnify our Manager against certain liabilities, which may lead our Manager to act in a riskier manner on our behalf than it would when acting for its own account. We are a different vehicle from any other NGP-affiliated fund. A failure on our part to maintain our status as a BDC would significantly reduce our operating flexibility. We will be subject to corporate-level income tax if we are unable to qualify as a RIC. We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income. If we are unable to pay required distributions, we may fail to qualify as a RIC and thus be subject to corporate-level income tax. Regulations governing our operation as a BDC affect our ability to, and the way in which we, raise additional capital. Changes in laws or regulations governing our operations and those of our portfolio companies, our Manager or its affiliates may adversely affect our business or cause us to alter our business strategy. Our ability to enter into transactions with our affiliates is restricted.

Full 10-K form ▸

1297704--3/13/2008--NGP_Capital_Resources_CO