ANNUAL REVIEW 2017

We invest in primary funds, secondaries, and co-investments, using the distinctive insights we gain from having specialist global teams that share relationships, investment opportunities, and information across the AlpInvest platform.

Size, global reach, and experience are vital to success in . In addition, our pro-active investment approach and strong relationships with general partners (‘GPs’) worldwide give us broad access to an increasingly scarce set of attractive investment opportunities. We offer investors a broad range of solutions to their private equity investment needs and pursue a disciplined, discerning, and consistent investment strategy. Our 69 investment professionals are dedicated to applying their collective skills, insights, knowledge, and experience to maximize value for our investors.

OVERVIEW AND INVESTMENTS FINANCIAL PERFORMANCE 05 Opening our business 28 Risk management 06 Strategic review 32 Investment performance 08 Market and investment review 34 Fund Investments overview 10 Fund Investments 36 Secondary Investments overview 12 Secondary Investments 37 Equity Co-Investments overview 14 Co-Investments 38 Equity Co-Investments Portfolio overview 39 Mezzanine Co-Investments overview 40 Important information TEAM AND GOVERNANCE 17 Governance 18 Managing Directors 24 Responsible investing 26 Human resources 27 Remuneration policy

ALPINVEST ANNUAL REVIEW 2017 1 2 OVERVIEW AND INVESTMENTS 03-15 AND INVESTMENTS OVERVIEW

OVERVIEW AND INVESTMENTS

05 Our business 06 Strategic review 08 Market and investment review 10 Fund Investments 12 Secondary Investments 14 Co-Investments

ALPINVEST ANNUAL REVIEW 2017 3 2017 OVERVIEW

>18 0 150 >300 5 Number of investors at Number of employees, Number of general partner Number of offices across December 31, 2017 of whom 69 are investment relationships three continents professionals

Assets under Management 2017 Total investments1 2017 Total realizations1 (as per December 31, 2017) €37.0bn €3,670m €8,138m

COMMITMENTS RECEIVED FROM INVESTORS1 Since firm’s inception

BY ALPINVEST STRATEGY BY INVESTOR TYPE

€41.9bn Fund 92.4% Investments Pension funds2 €15.1bn Secondary €72bn Investments Total commitments €11.6bn Equity Co-Investments 7.6% €2.0bn Mezzanine companies Co-Investments and others €1.1bn Other

1 Equity and Mezzanine Co-Investments include commitments received in respect of mandates investing in opportunities arising out of an investor’s own separate private equity relationships and invitations and in respect of co-investments of any state-focused investment program. 2 Including Private Sector Asset Managers servicing pension funds.

4 OVERVIEW AND INVESTMENTS 03-15 AND INVESTMENTS OVERVIEW OUR BUSINESS

AlpInvest is a leading global private that we can offer our clients a highly differentiating products and high-quality equity investor with €37bn of assets differentiated strategy in an increasingly investor services. We have also increased under management and a track record mature private equity market. We believe our investment in our people and systems that spans nearly two decades. We invest that the most promising investment to ensure that we can continue to provide across three main strategies – fund opportunities are found in parts of the our investors with exceptional levels of investments, secondary investments and market that are difficult either to access transparency and deliver on our promises co-investments (including mezzanine) or identify, and we have designed our to them. – to generate strong returns for our operations and built our capabilities clients through customized private accordingly. Our experienced teams have In 2011, we became part of one of the most equity programs and commingled funds. a deep understanding of their respective respected and largest alternative asset markets and they combine this with our managers, (‘Carlyle’). We offer our investors access to strong relationships and information AlpInvest benefits from access to the high-quality multi-manager and direct captured from all corners of the private firm’s distribution platform, its high-quality investment programs globally. As one of equity landscape to uncover value and investor services professionals, and its the largest private equity investors in the avoid overly competitive situations. expertise to support the development world with an on-the-ground presence of innovative products and investment across three continents, we offer a distinct Our guiding philosophy is to build robust strategies for the benefit of our clients. and comprehensive view on the private portfolios of investments for our clients However, our investment decisions equity market. that are well diversified by private equity remain, and will continue to remain, fully segment, investment style, and vintage independent of our parent, and the two As of December 31, 2017, AlpInvest has year. We believe that, by taking this organizations are subject to appropriate 150 employees, including 69 investment approach, we can generate attractive and rigorous information barriers. professionals and 21 Managing Directors, returns for our investors through all many of whom have worked together stages of the economic cycle. Strong foundations for over a decade. Based in New York, Over the past few years, we have , and Hong Kong, with small Focus on investor needs strengthened the AlpInvest business representative offices in Indianapolis Since inception, AlpInvest has provided through the promotion and appointment and San Francisco, our dedicated and customized solutions to investors. We of high-calibre team members across experienced teams provide seamless have always worked closely with clients to our business lines and investment global coverage of private equity offer comprehensive global programs and in systems. We have solidified our investment opportunities. specialized strategies to help them meet reputation as a trusted private equity their objectives. More recently, we have advisor and now benefit from a strong Strong relationships, solid platform complemented these tailored solutions to and diversified investor base. Across our three lines of business, provide a selection of commingled funds With these sound foundations in place, AlpInvest has over 300 relationships with to enable a broader set of clients to access we remain committed to using our general partners (GPs) globally. Our teams our investment capability. strong network of relationships and work collaboratively to share insights and deep knowledge of private equity information, a culture that is complemented AlpInvest was founded 18 years ago as markets to continue delivering good by state-of-the-art IT systems, giving the private equity investment manager for returns to our clients. We will also AlpInvest a highly-detailed picture of two founder pension funds. Over the past continue to grow AlpInvest through the fund manager performance and strategy. few years, we have grown our investor development of complementary new We believe this enables us to identify base considerably and we now have over products that will increase clients’ opportunities ahead of other investors, 180 investors, well diversified by investor investment options, help them meet while also providing robust due diligence type and geographic location. AlpInvest their objectives, and contribute to capabilities that underpin a very selective has been able to significantly expand its further innovation in the private approach to investment selection. client base and attract some of the world’s equity industry. AlpInvest’s platform advantage means largest private equity investors by offering

ALPINVEST ANNUAL REVIEW 2017 5 STRATEGIC REVIEW

With a highly diversified investor base now established, continued strong realizations for investors, and excellent progress across a range of fundraising initiatives, AlpInvest’s growth in 2017 has strengthened our foundations, from which we can source highly promising investment opportunities and continue to develop our business.

Paul de Klerk Chairman, CFO/COO

I am delighted to report on a successful New investors welcomed 2017 for AlpInvest. We considerably We are especially encouraged by the strengthened our investor base, with fact that we attracted commitments from solid fundraising across our secondaries, many high-quality institutional investors co-investment, mezzanine and primary new to AlpInvest in 2017, in addition to lines of business; made significant further investments from our existing distributions to our existing investors; clients. Since 2011, we have grown our and continued to deploy capital at a investor base from our two founding healthy pace. investors (limited partners, ‘LPs’), APG and PGGM, to over 180 at the end of 2017. In aggregate, we raised over $5.4bn in new While we expect to continue to attract commitments across the AlpInvest platform new investors over the coming years, we during 2017. In April, we reached a final believe we have now achieved our strategic close on our sixth secondaries program, objective of building a well-diversified mix ASP VI, with $3.3bn in commitments of LPs by investor type and geographic to the commingled fund and $3.2bn1 in region, creating the foundations for further funds from separately managed accounts, development of the AlpInvest business. comfortably exceeding our target of $6bn. In addition, by the end of 2017, we had This achievement is the result of AlpInvest’s already received commitments of over strong track record. The support provided $3bn for co-investments and over $1bn by The Carlyle Group, which acquired for primary fund investments. Overall, AlpInvest in 2011, has also played a vital our fundraising total for 2017 is a strong role in helping us attract such a varied

1 Includes amounts which require investor consent to result that reflects the solid performance group of new clients. While we continue be invested we have generated for our clients over the to operate on an independent basis from course of our 18-year history. Carlyle, we have forged a strong and fruitful 6 OVERVIEW AND INVESTMENTS 03-15 AND INVESTMENTS OVERVIEW

relationship with our parent over the secondary investments and €570m in relations and business development team years. We have certainly benefited from co-investment and mezzanine opportunities. is now 13-strong, with our people located working closely with Carlyle’s investor This is comparable to 2016 and in line worldwide to reflect the global nature of relations team and leveraging its strong with our anticipated investment pace as our client base. Over the past few years, global network. our teams continued to be highly selective we have developed state-of-the-art IT against the high asset price backdrop. systems with the capacity to meet the Continued strong distributions increasingly complex information and In 2017, we distributed more than €8bn Staff developments reporting requirements of our investors. to our investors across all our business Our successful fundraising efforts during In 2017, we made further IT investments, lines. We are particularly pleased with this 2017 enabled us to invest further in our upgrading our CRM tools as part of our result as it represents a more than €750m team. We were delighted to welcome effort to continually improve client increase on distributions made in 2016 Ruulke Bagijn as Managing Director and service standards. and is the second-highest annual amount co-Head of our Primary Investment team returned to investors in our history. in September. A highly expert professional, In addition, as we have increased our who has worked extensively in fund investor base, we have strengthened The total consists of almost €3.7bn return selection across a number of alternative our processes to make sure we offer of committed capital and over €4.9bn assets, Ruulke brings LP experience to allocations fairly to our investors. We of gross investment gains, generating AlpInvest from her time at one of our apply objective allocation principles and a multiple of well over 2x cost of capital founding investors, PGGM, where she was review the investment allocations given to for our investors. Importantly, strong Co-CIO Investment Management and CIO investors each month to ensure that we returns were achieved in each of our Private markets, and thereafter at AXA are operating in compliance with our three strategies, with good performance Investment Managers – Real Assets, investors’ expectations. reported across the board. While some where she was the Global Head of Real of the investment gains have inevitably Assets Private Equity and a member of Priorities for 2018 stemmed from the environment of higher its Management Board. Further, Eric During 2018, we will build on our asset prices seen in 2017, our consistent Hanno was named co-Head of AlpInvest’s successes of 2017 and continue to develop approach to constructing robust portfolios Primary Funds business, and Rich Dunne the AlpInvest business. Our primary and investing across economic cycles joined Rob de Jong as co-Head of the fund investment fundraising made underpins these good results. Co-investment business. Chris Perriello good progress in 2017, and we expect was named co-Head of the Secondaries to maintain momentum through 2018. Investment pace on target business alongside Wouter Moerel. We High valuations in all private equity also made some significant promotions. With substantial amounts of capital raised sectors continued to be a feature of the Julian Rampelmann became Managing across our lines of business in 2017, we are market in 2017, as loose monetary policy Director in our secondaries business, also well positioned to take advantage of remained in place in many of the world’s and Todd Ruggini was made Managing attractive private equity opportunities that developed markets. Nevertheless, as Director in co-investments. emerge in 2018 and beyond. As ever, our prudent and experienced investors, focus will be on the careful construction we remained true to our philosophy of Focus on investor relations of robust portfolios of high-quality maintaining a steady investment pace Our efforts in attracting new investors investments, leveraging our strong global by seeking out opportunities that are off have been underpinned by a focus on networks to source opportunities away the beaten track, while taking a cautious strengthening our investor relations from highly competitive situations, and to stance in areas we believe to be nearing capability to ensure that we continue to generate strong returns for our investors. market peaks. We made total investments provide high-quality service levels to all of over €3.6bn in 2017, including €1.9bn our clients, even as their numbers have in primary fund investments, €1.1bn in grown significantly. AlpInvest’s investor

ALPINVEST ANNUAL REVIEW 2017 7 MARKET AND INVESTMENT REVIEW

Strong, synchronized global growth led to healthy deal-making in 2017, with private equity exits and investment activity remaining solid in an elevated pricing environment. We maintain a close eye on future developments as monetary policy starts to tighten in some of our key markets and we will continue to focus on building portfolios that are resilient through all stages of the economic cycle.

Wouter Moerel Managing Director

In 2017, global M&A markets remained recent trade-related tensions escalate in flat, with $3.6trn of deals announced a trade war. during the year, down slightly from $3.8trn in 2016, according to Dealogic. Normalized exit market The moderate decline, however, should Broader M&A trends were mirrored in the be set in context: the value for 2017 was private equity exit numbers, as the total still the fifth highest since 2001, reflecting value of realizations by financial sponsors a resilience in deal-making appetite as worldwide fell to $295bn in 2017. This was global GDP grew by a healthy 3.7% last a decrease from $362bn in 2016, according year, according to International Monetary to Preqin data. Volumes also declined, Fund estimates. from 1,959 in 2016 to 1,799 last year. This reflects a normalization of the private This stronger-than-anticipated growth equity exit market after the high values and was underpinned by a synchronization volumes recorded in 2014 and 2015, which of economies worldwide, with all major were boosted by GPs realizing the large markets in expansion mode through the number of investments made in the run-up year – a relatively rare phenomenon that to the financial crisis. We would anticipate was last seen in 2010. In addition, the this more stable exit pattern to prevail in growth within many individual countries the short term, given that the aggregate was more balanced than in previous number of private equity portfolio years, with many economies experiencing companies has declined over recent years. a pick-up in investment rates and a reduction in their reliance on consumer Cautious approach to high prices spending trends. This should support The volume of investments by financial future growth and, for as long as the sponsors was essentially flat in 2017, momentum continues at a global level, according to Dealogic, with 1,201 increase world trade volumes unless deals completed in the year, compared 8 OVERVIEW AND INVESTMENTS 03-15 9 ALPINVEST ANNUAL REVIEW 2017 REVIEW ALPINVEST ANNUAL the economiccycle comes into its own. While we expect financing costs for private equity investmentsto increase as debt funding becomes more expensive, asset prices should soften, offering the opportunity for investment at more attractive valuations been has the than case over recent years. are therefore cautiouslyWe optimistic about the private equity market over the medium term, and we anticipate an increased pace of investment activity by volume as we move through 2018 and into With record2019. amounts of dry powder at their disposal, private equity funds ought to be in a strong position to take advantage of any decline in valuations. This would be a positive development for our primary fund investments, while our secondaries and co-investments businesses may also benefit from a more uncertain outlook on pricing. Over recent years, rising prices have reduced the number of sellers in the market, but as the cycle turns, we anticipate greater deal flow as asset owners adjust their valuation expectations and seek to liquidity.gain Our experience has shown us that uncertain times often bring some of the opportunities. investment attractive most We will therefore continue to monitor external events and remain committed to constructing robust portfolios behalf on of our clients, implementing our strategy to capitalize on opportunities that arise as the year progresses. Against this backdrop, AlpInvest’s strategy of identifying investment opportunities away from competitive pressures and through all stages of Opportunity in uncertainty 2019. In 2017, the Bank of England In 2017, (‘BoE’)2019. also increased interest rates by 25 basis points, while the European Central Bank (‘ECB’) is expected to terminate its asset purchase program by the end of this At thisyear. point, it seems highly likely that a decade of loose monetary policy is drawing to a close. We will be watching closely as central banks unwind their positions and normalize interest rates. Those in the United States, the UK and Europe have held on to record high amounts of assets as a result of their QE programs, with the Federal Reserve alone increasing its balance sheet from $900bn to around $4.5bn. The Federal Reserve has now become a net seller of assets and the BoE and the ECB are expected to follow suit over the medium term. As asset unprecedented an at proceed sales scale, we are cognizant of the risk that this poses to the continued growth of economies worldwide. We also believe that central banks have little room for mistakes and observe two key risks in this regard. The first is that the Federal Reserve raises rates too quickly, which has the potential to trigger a significant repricing of risk assets and a deceleration of economic growth or even recession. The second is that inflation jumps ahead of rate increases, which would make it challenging for the Federal Reserve to regain control. As a prudent investor, we take into consideration these and other risks that may emerge over the coming year as we deploy capital on behalf of our investors. We are also monitoring, for example, how the imposition of tariffs between the United States and China is affecting world trade, whilemaintaining an eye certainon geopolitical risks, which have the potential to affect the global macroeconomic outlook during 2018 beyond. and Shifting cycle As we go through 2018, it is becoming evident that we are entering a phase of a more normalized monetary policy, led by the United States. Last the Federal year, Reserve raised its funds rate three times. In 2018, we have already seen a further increase, with two more hikes anticipated by markets 2018) (as before of April 11, The balanced nature of the global economy led in 2017 us to look more closely at investments beyond the United States and Europe. Last many of the year, larger economies developing re-emerged from the slowdown they witnessed in the middle years of this decade. We expect this momentum to continue and we see primary fund investments and co-investments in these markets as increasingly attractive opportunities. While high company valuations are positive for private equity realizations, they present challenges for buyers. As a result, we believe the future environment will not be conducive to multiple arbitrage and in response we have applied necessary adjustments to our investment cases. In our co- investment transactions example, for we made the prudent assumption that valuations as a multiple of EBITDA would decline over the holding period. Strong economic growth has also reduced the headroom for private equity investors to generatereturns through margin improvement. We believe that margins are at a cyclical high, particularly in the United States, leaving top-line growth as the main value driver in private equity portfolio companies. These trends play well to our strategy of emphasising attractive mid-market investment opportunities in our portfolios, where we see lower valuations relative to those in larger deals and, importantly, where revenue growth can more easily be achieved. with 1,205 in 2016, although the total value rose to $362bn (versus $352bn in This2016). rise in value attests to further increases in asset prices seen as in 2017 loose relatively remained policy monetary and economic growth remained robust. FUND INVESTMENTS

Last year saw strong distributions, Fund Investments team, and added this part of the market compare more good fundraising momentum, and a another senior team member in our New favorably with those at the large end of the steady but cautious investment pace in York office. We expect to strengthen the deal spectrum. Our balanced approach our primary fund investment business, team further in 2018. to portfolio construction means that we with new opportunities emerging as committed selectively to larger global the private equity industry continues Investment discipline and pan-regional funds last year, while to mature. Our commitments were made against also accessing smaller, and often access- a backdrop of a record fundraising year constrained, attractive local market and In 2017, our primary fund investment for the private equity industry, with 921 sector-focused funds. business continued to make solid funds raising $453bn globally, according distributions to investors. In total, we to Preqin. When committing in such an During the year, we observed a trend for returned nearly €4.9bn – an increase on environment, AlpInvest’s disciplined increasing leverage being used at the fund the 2016 figure and one of the highest approach to fund selection comes into level. Where this is the case, we adjust our totals in AlpInvest’s history. This is a good sharp focus. Increased appetite over evaluation processes and benchmarks to result that validates our rigorous fund the past few years among institutional ensure that we compare the performance selection processes and our approach investors for alternative assets in general, of GPs on a like-for-like basis. This adds to building high-quality, well-balanced and for private equity in particular, has complexity to fund manager selection, portfolios on behalf of our clients. led to many of the most successful GPs but we believe this is a prudent and raising more capital relative to the size of appropriate approach that gives us By the end of 2017, we successfully their previous funds. insight into GPs’ investment skills and raised more than $1bn for primary fund a clear picture of how performance investments as part of multi-strategy In 2017, we saw this trend continue and, as has been achieved. managed accounts. We attracted a prudent investors, we are cognizant that number of new investors, in addition to this can carry the risk of GPs becoming We are encouraged to note, however, that commitments from our existing investor less disciplined in their investment private equity fund managers have, by base, and we expect momentum to selections. We therefore continued to and large, remained disciplined at this continue in 2018. apply our rigorous due diligence process, point of the cycle: while fundraising totals which provides a deep analysis of GP have been high for the past few years, the Our primary fund investment business track records and the strength of their volume and value of buyout transactions made good progress on deploying capital organizations, to select high-quality fund globally have remained far below those of in 2017, consistent with our strategy of managers with strong potential for the years leading up to the financial crisis. investing across economic cycles and future success. achieving good vintage year diversification. Complex situations By the end of the year, we had committed In 2017, we were also mindful of further As a highly experienced investor, €0.5bn across 24 partnerships with a 2017 increases in company valuations – a AlpInvest is able to take a prominent role vintage year. All our investment programs feature of markets globally, although in more complex situations. In 2017, our were on, or slightly ahead of, plan. somewhat more pronounced in the Primaries team saw increasing numbers United States. As a result, we placed of fund restructurings, which can In addition, we significantly strengthened a slightly greater emphasis on Europe present challenges for some resource- our Primary Fund Investment team and Asia in our portfolio construction. constrained LPs in a fund. Restructurings in 2017. We welcomed Ruulke Bagijn, In addition, our focus on sourcing mid- sometimes provide LPs with a choice who has a 20-year track record of market fund investment opportunities between liquidation or continuation of equity, infrastructure, and private equity mitigates, to a degree, the high price their existing exposure to investments, investments, as co-Head of our Primary environment, as entry multiples in with the potential for further value

10 OVERVIEW AND INVESTMENTS 03-15 AND INVESTMENTS OVERVIEW

creation for those wishing to remain as Looking ahead investors. These situations require LPs to In 2018, we will continue our efforts to undertake complex analysis and to have attract new capital to our primary fund the capacity to reach effective decisions. investments platform, while also seeking The fund advisory committee plays to carefully deploy capital raised to date an important role representing LPs’ to produce solid results for our investors. interests in fund restructurings. During We anticipate a slight increase in our 2017, AlpInvest was an active member of investment pace on last year’s total as the advisory committee in a number of our pipeline of opportunities continues fund restructurings to ensure LPs’ best to grow. We observe, for example, that a interests were reflected in the outcomes. number of high-quality fund managers are considering bringing forward their Market expansion fundraising processes to meet investor The year also saw the launch of new demand and attract capital ahead of an strategies by some high-quality GPs, anticipated shift in the macroeconomic which have capitalized on the growing environment in the near to medium term. private equity market to develop and expand their business. These, combined with a number of spin-outs of new firms from existing players, present new opportunities for our primary fund investment program and we continue to watch developments here closely.

In addition, we continued to see growth in the opportunity set for private equity funds. Private equity has become an increasingly important funding source for companies that may have previously sought capital through the public markets, with many now looking toward private markets for funding. We believe this will continue to result in strong deal flow for private equity funds.

ALPINVEST ANNUAL REVIEW 2017 11 SECONDARY INVESTMENTS

In 2017, our secondaries investment secondaries market rose markedly, with secondaries investment market, and business delivered strong returns $50bn of transactions completed, which global buyout markets, which averaged an to investors, reached a successful is significantly above the $37bn in average entry EV of 12x EBITDA, with 5.5x EBITDA final close on our sixth secondaries annual transaction volume from 2014 to leverage multiples. We believe this is a investment program, and continued to 20162. This is in part due to the increasing prudent approach to building a portfolio of commit to attractive niche opportunities maturity of the private equity market, investments that will remain resilient to away from the highly competitive areas with a high volume of tail-end secondary future changes in the economic cycle. of the market, including to an award- transactions closed last year as GPs winning, landmark European deal. with funds reaching the end of their lives Our strategy disposed of older vintage positions to Our secondaries investment business Last year saw the successful final close of provide their LPs with liquidity. However, focuses on four key attributes that we our sixth secondaries investment program, it is also the result of large pools of believe provide the most attractive ASP VI, raising a total $6.5bn1 in capital, capital that have been raised over recent return-generating potential. First, we consisting of $3.3bn in commitments years that are now targeting secondaries select high-quality GPs, usually sourced to our commingled vehicle, AlpInvest opportunities. through our global pool of relationships. Secondaries Fund VI, and $3.2bn1 for Second, we invest only in situations investment through customized, separately Prudent approach in a competitive market where we fully understand the underlying managed accounts. We were particularly The competitive market is, in our view, portfolio companies and can identify clear pleased to welcome more than 80 new leading to high multiples being paid. remaining value creation potential so investors to the program, providing us In such an environment, AlpInvest’s that our investments continue to grow in with a highly diversified investor base and strategy of targeting sponsor-centric value over time. Third, we primarily buy validating the strength of our team and and more mid-market investments has positions in funds that are three to six investment strategy. the potential to generate significant years into their lives, as we believe these value for our investors. We remained allow us to capture realizations of some We also returned €1.7bn of capital to our disciplined investors in 2017 because of of the best-performing companies early investors in 2017 – the highest amount in our differentiated approach to the market, in our investment, while also benefiting our 18-year history – of which more than which is underpinned by information- from the upside of the remaining portfolio. €1.1bn were realized gains. This is a solid sharing across our three lines of business. And finally, we seek out opportunities with result that reflects the good performance Our teams work collaboratively to leverage strong cash-on-cash return potential. of the investments we have made over the the more than 300 GP relationships we years and represents strong cash-on- have across AlpInvest, providing us with Our investments in 2017 cash returns for our investors. distinctive insights as to where we can In 2017, we continued to focus on sponsor- offer GPs solutions through secondary centric secondary investments, where Our investment pace was in line with our transactions. we can provide tailored solutions to the annual target range of $1bn to $1.5bn as GPs we back. These situations require we deployed just over $1bn during 2017. This approach enabled our Secondaries proactive sourcing and substantial due This is lower than our total commitments team to complete nine transactions in diligence, and are often complex, enabling for 2016, reflecting our steady and 2017, secured at lower multiples than us to be able to secure opportunities at cautious approach to the market at a time were generally seen in the wider market. lower multiples than is the case in many of significantly elevated valuations and These investments were made at an traditional secondary investments. We high levels of competition in some parts average entry enterprise value (‘EV’) of 8.5x committed €550m to this type of deal, of the secondaries segment. EBITDA, with leverage at 2.2x EBITDA. across three transactions with an average In 2017, activity in the private equity This is significantly less than the overall EV of 7x EBITDA and leverage of 2.5x EBITDA.

1 Includes amounts which require investor consent to be invested 12 2 Estimates based on AlpInvest research and analysis including deal flow information provided by large secondaries intermediaries from 2014 to 2017. OVERVIEW AND INVESTMENTS 03-15 AND INVESTMENTS OVERVIEW

One of these investments was a landmark We were also able to source and Firm foundations transaction for Europe. Leveraging complete three secondary investments The success of our fundraising enabled our GP network, we supported valued at €260m in the energy sector us to invest further in our secondaries Investindustrial, a blue-chip mid-market in 2017. We identified specialist team in 2017. We made four promotions firm that operates in Spain and Italy, to energy secondaries investments as at the end of 2017, including appointing roll five of its existing, long-standing an opportunity a few years ago as it Julian Rampelmann as Managing investments into a new fund. The deal became apparent that lower oil prices Director in the New York-based provided optionality to the older fund’s would create a dislocation in the market Secondary Investments team. We will investors, which could either realize their and provide portfolios at attractive continue to strengthen our team over the investment or choose to back the new pricing. This continues to be an area of coming year, including making a number fund and benefit from further future interest for AlpInvest, where we focus of new hires, as we seek to deliver on the value creation. on upstream production and midstream promises we have made to our investors. assets. Our investments were made in The portfolio is centered on a high-quality funds based on valuations in September Outlook for 2018 Spanish theme park, PortAventura. 2017 – a time when oil prices were As we move through 2018, we remain Investindustrial had made a significant around a third lower than in the first cautious in our outlook and conservative investment in the business, the return quarter of 2018. in our approach to the market. The year on which will flow through over the so far has seen continued high pricing coming years. Using our experience Last year saw a number of opportunities and competition in the private equity of successfully executing a similar to acquire secondary positions in Asia- market as a whole and in secondaries investment with U.S. mid-market firm based funds, a theme that emerged investments in particular. We will focus Lee Equity Partners, AlpInvest took following the market correction of 2016. on sponsor-centric deals and keep a a lead role in structuring the deal In 2017, we made three such secondary close eye on energy fund developments, and underwrote the transaction. investments worth €130m. These were while taking an opportunistic approach The investment has some highly completed at an average entry EV of 10.5x to LP positions in high-quality funds attractive features that provide a strong EBITDA, which is attractive compared to where we have a sourcing advantage. alignment of interest, including a roll- the strong growth fundamentals of the With a successful fundraising completed, over of and performance underlying portfolio companies that we believe we are in a strong position to ratchets. The significance of the deal and we acquired. capitalize on opportunities that will arise our innovative approach to providing a as the economic cycle turns over the solution to Investindustrial received coming period. recognition in 2017, when the deal was awarded Secondaries Investment of the Year in Europe by Private Equity International.

ALPINVEST ANNUAL REVIEW 2017 13 CO-INVESTMENTS1

Last year, our co-investment 2.8x, attesting to the strong performance few co-investors are able to execute in business achieved a particularly of the companies we chose to invest in. these more complex transactions. strong fundraising result, continued to build a solid portfolio of high-quality Selectively active The depth and breadth of opportunities investments, and generated significant In 2017, we deployed over €550m in available to AlpInvest meant that we distributions to investors. aggregate in private equity and mezzanine could continue to be very selective in the co-investments, in line with our target investments we made – an advantage In 2017, our co-investment business Investment pace. This represented an that comes into particular focus at a completed a highly successful increase over 2016. We achieved this time of elevated valuations. In our equity fundraising effort for its seventh co- result through strong deal flow originated co-investment strategy, we completed investment program, attracting $3bn by our team, who reviewed close to 200 21 deals in 2017, including many middle- of committed and reserved capital, a opportunities. The value of co-investments market transactions in which the GP had a total that is materially above the original we reviewed was $8.4bn, which represents specific sourcing angle and a clear view of target of $2bn. The fundraising resulted a significant increase on the $7.5bn in 2016. value creation potential. in a significant diversification of the co-investment platform’s investor base Our strong deal flow is driven by our Our selection of investments in 2017 was to more than 70 investors globally, with platform advantages and our efforts guided by our view that most economies investor types ranging from family over many years to nurture relationships are in the later stages of recovery. offices to large pension funds. with GPs, which enables us to source Accordingly, we maintained a cautious investments in the attractive, but difficult- stance, placing an emphasis on businesses The success of our fundraising reflects, to-access, middle-market segment. operating in defensive sectors and on in part, the increased appetite among AlpInvest’s global and integrated situations in which GPs had explicitly institutional investors for co-investment approach to fund investments, secondary modeled into their investment thesis a generally, with many recognizing the investments, and equity co-investment and softening of market conditions. We believe need for a highly skilled and dedicated mezzanine opportunities gives our teams this prudent approach creates a portfolio approach to the strategy. It is also a informational advantages and enables of investments that can withstand a future validation of the strong performance us to leverage GP relationships across downturn and mitigates the risk of multiple our team has generated over more than our strategies on a worldwide basis. This deflation in the event of anticipated 18 years through our highly selective is overlaid with our strategy of targeting monetary policy tightening. approach to deal selection and deals in which we act as a co-sponsor, co- portfolio construction. underwriting the equity tranche alongside lead GPs in live deal situations. The trust The year also saw continued strong we have built with our large GP network distributions, with a total of €1.5bn over many years enables us to source, returned to our investors, which is slightly on a consistent basis, a high number of higher than last year. This is a strong co-sponsor opportunities. The co-sponsor outcome, especially in the context of a segment is a less competitive area of the more normalized exit environment in 2017 market than syndicated transactions, as total exit proceeds in the overall private where GPs sign a deal and offer LPs the equity market were materially lower than opportunity to invest thereafter. Globally, in 2016. The average gross money multiple of fully exited co-investments from our co- investment portfolio in 2017 was more than

1 This discussion on co-investments is limited to AlpInvest’s equity and mezzanine co-investments programs, which invest in opportunities sourced by AlpInvest from its own relationships with GPs. It does not reflect (i) other co-investments made in respect of opportunities arising out of an investor’s own separate private equity relationships and 14 invitations or (ii) co-investments made as part of any state-focused investment program. Please see ‘Important Information’ for additional details. OVERVIEW AND INVESTMENTS 03-15 AND INVESTMENTS OVERVIEW

The mezzanine investment environment Outlook for 2018 remained broadly similar last year to With a substantial pool of capital available that in 2016. High levels of liquidity in to deploy, our priority in 2018 is to seek debt markets meant that investments out attractive investment opportunities with an attractive risk-return profile were on behalf of our client base that will be thin on the ground. Nevertheless, we resilient to changing economic conditions. completed six mezzanine investments We continue to be mindful of current high in 2017, in line with our anticipated asset prices when selecting investments investment pace. This was partly the and we are maintaining a cautious stance result of a shift in approach among as we anticipate that economies may many GPs in 2017 as they became soften during the life of the deals that we more proactive in steering their debt complete today. And while there is a high syndication, reflecting a desire to be likelihood of monetary policy tightening in selective about which parties to invite some economies over the coming period, to the table. As a trusted, valued, and we would expect this to lead to more predictable source of , opportunities in the mezzanine space AlpInvest clearly benefited from than have been evident in the past this trend. few years.

Investing in our team Overall, our aim over the next 12 months Our successful fundraising provided us and beyond is to provide a high-quality with the opportunity to invest further service to our investors. We will in our team, ensuring that we can continue to carefully construct robust continue to attract and retain world-class and defensive portfolios of investments talent. In 2017, we promoted five of our that will deliver strong returns to our professionals across our United States, clients regardless of broader European and Asian offices, with Todd economic developments. Ruggini becoming a Managing Director in New York. The capital raised also helps us to develop our team further to ensure we can deliver on our promises to investors. In 2018, we expect to grow our team with four additional professionals.

ALPINVEST ANNUAL REVIEW 2017 15 TEAM AND GOVERNANCE

17 Governance 18 Managing Directors 24 Responsible investing 26 Human resources 27 Remuneration policy

16 TEAM AND GOVERNANCE 16-30 GOVERNANCE

At AlpInvest, robust governance is a fundamental part of who we are and how we operate. It determines the way we act within the firm, with investors, and with shareholders.

We pride ourselves on being trusted AlpInvest carries out its investment The Investment Committee partners to our stakeholders, and operations independently of Carlyle and The Investment Committee, which meets strong governance breeds this trust. its affiliated entities. Carlyle maintains on a near-weekly basis, is responsible Throughout the firm, we maintain a a one-way information barrier between for making the final investment decisions disciplined approach to operational and Investment Solutions (which includes for our business. It is chaired by Chris investment decision-making, and this AlpInvest), on the one hand, and the other Perriello, Managing Director of AlpInvest. shapes our culture, our processes, business segments of Carlyle, on the Other members of the Investment and our returns. other. This information barrier restricts Committee are AlpInvest Managing the flow of non-public, commercially Directors Ruulke Bagijn, Neal Costello, The underlying philosophy behind sensitive Investment Solutions Richard Dunne, Michael Hacker, Erik AlpInvest’s systems and strategy is information from Investment Solutions Thyssen, and Maarten Vervoort. a belief in the need for firm, effective to the other Carlyle business segments, management, and internal discipline other than for certain regulatory, The Operating Committee to boost performance and enhance reporting, and similar purposes. This is a The Operating Committee focuses on investment returns. crucial component of our agreement with the day-to-day management, strategy, Carlyle, and both parties recognize its and policies concerning client-related Since August 1, 2013, AlpInvest has vital importance. activities, including providing advice been wholly owned by The Carlyle on investment objectives and terms Group and forms part of Carlyle’s The Board and conditions, investment strategy Investment Solutions business segment The Board is responsible for determining monitoring, and related regulatory and (‘Investment Solutions’). Investment the AlpInvest strategy and developing the compliance matters. Paul de Klerk, Chief Solutions helps clients meet their business. It comprises four Directors. Financial and Chief Operating Officer objectives through tailored portfolio Paul de Klerk, AlpInvest’s Chief Financial and Managing Director of AlpInvest, construction and implementation. and Chief Operating Officer, is the chairs the Operating Committee. Other The Investment Solutions platform Chairman of the Board. Other members members are Lauren Dillard, Head seeks to give investors access to large of the Board are Glenn Youngkin, Co- of Carlyle Investment Solutions, and and complex alternative investment Chief Executive Officer of The Carlyle AlpInvest Managing Directors Rob de strategies – private equity and real Group and a member of Carlyle’s Board Jong, Eric Hanno, George Westerkamp, estate – on a global basis. of Directors, Lauren Dillard, a Carlyle Wouter Moerel, and Wendy Zhu. Managing Director and Head of Carlyle Investment Solutions, and Wouter Moerel, Managing Director of AlpInvest, who joined the Board in July 2017, replacing Erik Thyssen, Managing Director of AlpInvest.

AlpInvest also has two committees that are involved in the day-to-day operations of the firm: the Investment Committee and the Operating Committee.

ALPINVEST ANNUAL REVIEW 2017 02/0317 MANAGING DIRECTORS

01 03 05

02 04 06

01 Paul de Klerk 03 Ruulke Bagijn 05 Neal Costello Paul is the Chief Financial Officer and Ruulke is a Managing Director and Neal is a Managing Director in the Chief Operating Officer of AlpInvest co-Head of AlpInvest’s Primary Fund Secondary Investments team and Partners and the Chairman of the Investments team. She is a member focuses on transactions in Europe. Board. He co-founded AlpInvest, of the Investment Committee. He is a member of the Investment chairs the Operating Committee, and Ruulke joined AlpInvest in 2017 from Committee. Neal rejoined AlpInvest is responsible for the investment AXA Investment Managers – Real Partners in 2015 from Canada portfolio valuation and review Assets, where she was the Global Pension Plan Investment Board. He process. Before joining AlpInvest, Head of Real Assets Private Equity originally joined AlpInvest in 2003 in Paul was responsible for one of the and a member of its Management the New York office and led the firm’s largest corporate banking units at Board. Prior to that, she was Co- secondary efforts in Asia through ABN AMRO in the . CIO Investment Management and 2013. Previously, Neal was with CIO Private Markets at PGGM, and CIBC World Markets’ Mergers 02 Victor Backstrom1 previously held several senior roles & Acquisitions Investment Victor is a Managing Director at ABN AMRO. Banking division. responsible for Investment Solutions Sales in Europe, based in London. He 04 Peter Cornelius 06 Rob de Jong joined the firm from Brummer and Peter is a Managing Director and Rob is a Managing Director and co- Partners, where he was a Director AlpInvest’s Chief Economist Head of AlpInvest’s Co-Investments working with European investor responsible for analyzing the team, with a focus on Europe. He is a relations, based in Stockholm and economic and financial environment member of the Operating Committee. London. Prior to that, Victor worked for private equity markets and Rob joined AlpInvest in 2001 from at Man Investments and Accenture. examining the implications for PricewaterhouseCoopers, where AlpInvest’s strategic asset allocation. he was a Senior Consultant for Peter joined the firm in 2005 from Corporate & Operations Strategy, Royal Dutch Shell, where he was responsible for advising and assisting Group Chief Economist. He is the multinationals and governmental author of International Investments organizations on developing in Private Equity (Elsevier, 2011), and corporate and business strategies. co-author of Mastering Illiquidity (Wiley, 2013).

18 1 Victor Backstrom is employed by CECP Advisors LLP, a Carlyle-affiliated advisor based in the United Kingdom. TEAM AND GOVERNANCE 16-30

07 09 11

08 10 12

07 Richard Dunne 09 Michael Hacker 11 Wouter Moerel Rich is a Managing Director Michael is a Managing Director in Wouter is a Managing Director and and co-Head of AlpInvest’s Co- the Secondary Investments team, co-Head of AlpInvest’s Secondary Investments team, with a focus on with a focus on the North American Investments team. He is a member transactions in North America. market. He is a member of the of the AlpInvest Partners Board He is a member of the Investment Investment Committee. He joined and of the Operating Committee. Committee. Rich joined AlpInvest AlpInvest Partners in 2007 from Wouter joined AlpInvest in 2005 from in 2004 and has 15 years of related UBS Investment Bank, where he The Carlyle Group, where he was a investment experience. Prior to was an Associate Director in the Principal responsible for investments joining AlpInvest, he worked in the Private Funds Group responsible in the telecoms and media sectors. division of for providing secondary markets He represents AlpInvest on multiple Global Markets. advisory services. advisory boards.

08 Sean Gallary 10 Eric Hanno 12 Christophe Nicolas Sean is a Managing Director in Eric is a Managing Director and co- Christophe is a Managing Director in the AlpInvest Partnership Funds Head of AlpInvest’s Primary Fund AlpInvest’s Secondary Investments team based in New York. He joined Investments team, with a focus team and focuses on transactions AlpInvest from Tunbridge Partners, on the Americas. He is a member in Europe and the Middle East. He which he co-founded, and where he of the Operating Committee. Eric joined AlpInvest in 2012 from Morgan was Portfolio Manager, as well as a rejoined AlpInvest Partners in 2015 Stanley, where he co-headed the member of the Board of Directors from , where he firm’s secondaries team from the and Investment Committee. Before led its U.S. buyout and distressed London office. founding Tunbridge Partners, primary activities and served on the Sean worked at ORIX USA Asset Investment Committee. Previously, Management, Eric was an Associate at AlpInvest Finance (‘AMF’), and Sandler O’Neill Partners and he started his career & Partners. at .

ALPINVEST ANNUAL REVIEW 2017 19 MANAGING DIRECTORS

13 15 17

14 16 18

13 Chris Perriello 15 Todd Ruggini 17 Roberto Torrini Chris is a Managing Director and Todd is a Managing Director in the Roberto is a Managing Director in co-Head of AlpInvest’s Secondary Co-Investments team, focusing AlpInvest Partners’ Co-Investments Investments team, with a focus on on U.S. transactions. He joined team and focuses on equity transactions in the Americas. He AlpInvest Partners in 2008 from transactions in Europe. He joined is the Chairman of the Investment Alta Communications, where he AlpInvest Partners in 2013 from Committee. He joined AlpInvest in was an Associate working on private Advent International, where he was 2007 from , where he equity transactions in the media and a Director responsible for executing was a Principal focused on fund communications sector. Previously, and managing private equity investing. Chris represents AlpInvest he was an Analyst in the Investment deals on the Italian and wider on multiple advisory boards. Banking division of JPMorgan Chase. European markets.

14 Julian Rampelmann 16 Erik Thyssen 18 Sander van Maanen Julian is a Managing Director in the Erik is a Managing Director in Sander heads the Hong Kong Secondary Investments team, with a AlpInvest’s Co-Investments team, office and is a Managing Director focus on U.S. transactions. He joined focusing on equity transactions in AlpInvest’s Co-Investments AlpInvest Partners in 2011 from in Europe. He is a member of the team, where he focuses on equity in London, where he Investment Committee. Erik co- transactions in Asia and Australia. focused on mid-market consumer founded AlpInvest and has more He joined the firm in 2001 from and services growth investments. than 25 years’ experience in financial Boston Consulting Group, where Prior to completing his MBA, Julian services. He joined the firm from he was a Project Leader on worked in the AlpInvest Secondary Fortis Bank Nederland, where he assignments for the boards of Investment team in Amsterdam. was an Executive Board member multinational firms. responsible for commercial banking.

20 TEAM AND GOVERNANCE 16-30

19 21

20

19 Maarten Vervoort 21 Wendy Zhu Maarten is a Managing Director Wendy is a Managing Director in the in AlpInvest’s Primary Fund Primary Fund Investments team Investments team and is a member and focuses on the Asian markets. of the Investment Committee. She is a member of the Operating Maarten has been with AlpInvest Committee. She joined AlpInvest Partners from the outset. He joined Partners in 2007 from Macquarie from PricewaterhouseCoopers, Funds Management, where she where he was a Senior Management was Senior Vice President of Asia- Consultant in the corporate strategy Pacific regional private equity fund area. He represents AlpInvest on investments and co-investments. multiple advisory boards. Wendy represents AlpInvest on various advisory boards. 20 George Westerkamp George is a Managing Director in the Investment Solutions team at AlpInvest and a member of the Operating Committee. From 2000 to 2010, he was a Partner in the Co-Investments team, where he focused on buyout transactions in Europe. From 2000 to 2012, he was a member of the Investment Committee. George joined AlpInvest from its predecessor, Parnib, where he executed middle-market buyout transactions in the Netherlands.

ALPINVEST ANNUAL REVIEW 2017 21 22 TEAM AND GOVERNANCE 16-30 23 ALPINVEST ANNUAL REVIEW 2017 REVIEW ALPINVEST ANNUAL RESPONSIBLE INVESTING

AlpInvest’s aim is to remain at the We believe that increased standardization Improving picture forefront of private equity responsible of the evaluation and reporting of ESG In 2016, we updated our evaluation tool, investment practices and thinking. In factors can accelerate further adoption which helps our teams assess how far line with this, in 2017, we completed of, and improvements to, responsible advanced GPs are in their processes and the roll-out of our updated responsible investment practices in the private equity management of ESG issues. During 2017, investment due diligence questionnaire, industry. Our commitment to this is we continued to see good progress among participated in industry-wide initiatives, demonstrated by our continued support the GPs in our portfolio, with a rising and continued our ongoing analysis of for PRI initiatives. In 2017, for example, we number of firms now rated as ‘advanced’ the progress made on environmental, provided input into the PRI’s latest project or ‘intermediate’ ESG practitioners. We social, and governance (ESG) reporting on industry reporting guidance. are increasingly seeing firms outside and practice by GPs in our portfolio. Europe and in the mid-market adopting AlpInvest seeks to play a leading role ESG policies and integrating them fully Responsible investing is part of AlpInvest’s in advancing responsible investment into their investment processes. Our core philosophy. Already a signatory to standards through the sharing of best analysis also suggests that responsible the Principles for Responsible Investment practice. In 2017, AlpInvest’s Responsible investment practices are becoming (‘PRI’) since 2009, AlpInvest is among the Investment Officer, Maaike van der standard in many of Europe’s private frontrunners of private equity industry Schoot, assumed the role of Chair of equity houses. practice on responsible investment. Our ’s Responsible Investment approach is one of continual development Roundtable, an initiative our firm has Our evaluation process is reinforced by our of our own processes and support for the been involved with since its inception ongoing monitoring of GP performance adoption of high standards of responsible in 2013. In this capacity, AlpInvest on ESG measures. When we invest with investment practices among the private continues to take a lead in discussions a GP, we request that managers commit equity funds in which we invest. We that will move the private equity industry to responsible investment practices and maintain an active dialogue with our forward, while helping to set the agenda disclosure. This reporting enables our investors and the wider industry to for change. We also provided training in teams to continue discussions throughout encourage enhanced practice, reporting, the Netherlands and across Europe on the life of the fund, it can help to highlight and transparency. responsible investment themes, offering areas that may require our support, and an opportunity to share our knowledge it allows us to encourage improvements Last year marked a milestone in this and experience with both GPs and in responsible investment practices and respect, as we fully rolled out our updated institutional investors. transparency. Throughout our investment, responsible investment due diligence we maintain an active dialogue with questionnaire. Now aligned with the PRI’s In addition, we spoke on responsible GPs and our investors, with a focus on LP responsible investment due diligence investment issues at a number of key promoting transparency. questionnaire initiative, we use this across private equity conferences globally. all our new primary fund investments and Such events can offer a window on levels in secondary investments where primary of engagement with these issues and we commitments form part of the transaction. were highly encouraged to note a steady This is an important step toward improvement during 2017, particularly in standardizing the information investors the U.S., where ESG seems to increasingly require on responsible investment from receive attention among many GPs, fund managers before commitments especially in the mid-market. are made and can provide a platform for further discussions during the fund’s life.

Wider contributions

24 TEAM AND GOVERNANCE 16-30

Priorities for 2018 We are also focusing on ensuring that In 2018, we aim to build on the progress some of the key themes that emerged made so far and continue contributing in 2017 are appropriately incorporated to raising responsible investment into our investment and monitoring standards in the private equity industry. processes. For example, we have seen We remain committed to developing our heightened attention for climate change own processes and we will be working and sustainable finance from the European to improve the responsible investment Union and other regulators, industry’s reporting framework to our investors to increased efforts to promote diversity help them meet their own responsible in the private equity workplace, and the investment obligations, in particular as we rising importance of the management of receive enhanced disclosure from our GPs. cyber-security and data privacy issues.

ALPINVEST ANNUAL REVIEW 2017 25 HUMAN RESOURCES

Our people are integral to our firm’s Experience is also an essential component As an equal opportunities employer, we success, generating returns for our of successful investment management: are committed to promoting diversity, in investors and their beneficiaries. We there is no substitute for having lived all respects, throughout the firm. We work endeavor to inspire, support, and motivate through, and invested across, an entire to preserve, and improve on, the gender our employees through our development market cycle, as most of our senior balance and diverse range of nationalities programs and reward systems. team members have done. and cultures represented across our workforce. We believe that our values of mutual We invest substantial time in, and devote respect, professionalism, and integrity considerable attention to, the professional We strive to build a supportive and encourage long-term commitment to our development of our staff, including both respectful environment, where people feel firm. Our senior staff1 have, on average, formal and on-the-job training, at all motivated and fulfilled in their work. We been with us for almost eight years. levels of the organization. We also engage are committed to achieving this objective. in appraisal processes at least once a This stability contributes to a consistent year on a formal basis. Informally, we approach to investment execution, to encourage continuous feedback. the benefit of our investors and GPs.

2017 OVERVIEW2 AMSTERDAM GENDER 23 82 65% 35% Investment Total Male Female professionals employees 150Total number of employees HONG KONG NATIONALITY 10 13 59 50 Investment Total Dutch U.S. / Canadian professionals employees 8Average years at AlpInvest1 NEW YORK / INDIANAPOLIS / SAN FRANCISCO 16 25 Other Europeans / Rest of the Russian World 1 Managing Directors and Principals 36 55 2 As of December 31, 2017 Investment Total 1 26 Diversification does not eliminate the risk of loss. professionals employees RENUMERATION POLICY TEAM AND GOVERNANCE 16-30 AlpInvest’s remuneration policy is designed to align the interests of staff and investors

We seek to incentivize our employees Additionally, a number of managers When all invested capital has been to deliver to the best of their abilities are awarded restricted Carlyle units, repaid, all expenses have been covered, and foster a culture in which they feel a typically annually. Both schemes have and investment returns have exceeded genuine commitment to the firm. Most a vesting period as an additional the hurdle rate, additional returns are of our senior managers have been with retention incentive. shared between AlpInvest and our AlpInvest for many years, providing investors. The way in which this capital continuity and promoting a collegial Our remuneration policy has been honed is distributed is pre-defined with our environment. This is important, given over more than a decade. We believe that investors in each mandate. the long-term nature of private it encourages and rewards genuine effort equity investments. in a way that delivers sustained, long- The distribution of proceeds between term performance for the benefit of all investors and AlpInvest is illustrated We aim to remunerate our professional our investors. by the bar chart below. The first bar and support staff fairly, appropriately, represents the total amount of and objectively. The remuneration for Our carried interest program investments, costs, and management Managing Directors, Principals, and Carried interest programs are designed fees. The second bar shows the total Vice Presidents consists of a fixed to promote long-term alignment between proceeds generated by these investments and a variable component, which can staff and investors, as eligible employees (including the sale of investments). The comprise a discretionary bonus and/ receive a share of the returns that third and fourth bars illustrate how these or carried interest. Equity or equity- investors themselves have received. proceeds are proportionally distributed linked instruments typically make up However, employees are only rewarded between investors and AlpInvest. at least 50% of the variable tranches, if investors have received back all of encouraging a long-term commitment to their capital plus a pre-agreed return, the firm. Since 2011, we have expected all known as the hurdle rate. All costs and senior investment professionals to make management fees must also be repaid a significant personal investment in our before rewards are distributed private equity program alongside to employees. our investors.

The decision to grant a discretionary Distribution of proceeds bonus, and the size of that bonus, is based on each employee’s annual appraisal, Carried interest Return above which takes into account financial hurdle rate and non-financial criteria. We use independent, external guidance to help Preferred return structure bonuses for employees and provide specific targets for employees at the beginning of each year. Variable Cost and fees components of staff remuneration are only paid out if AlpInvest itself meets specific financial milestones. Investments

In 2013, AlpInvest’s management sold its stake in the firm to our majority shareholder, Carlyle. In return, those Total investments, Total proceeds after Distributed to Distributed to managers became Carlyle unit holders. costs, and sale of all investors AlpInvest Partners management fees investments

ALPINVEST ANNUAL REVIEW 2017 27 RISK MANAGEMENT

Risk management is fundamental to External risks Business risk our business. We insist on the highest As an investor in developed and emerging AlpInvest is dependent on funding standards of integrity and employ a markets, our investments are affected from its investors, which are primarily rigorous control framework across by macroeconomic and geopolitical reputable pension funds and other all business lines, geographies, and developments, as well as changes in reputable institutional investors. Investors professional functions. government policy and regulations. To can change their strategies regarding help mitigate such circumstances, we allocations to the private equity asset AlpInvest is committed to the delivery of aim to diversify our investment portfolio class, or decide to engage competing attractive returns. We believe that these across geographies, industries, and firms to manage their assets. A mitigating are best achieved by applying the highest investment stages . We also conduct factor is that investment management standards of risk management throughout extensive research before entering new agreements with our investors typically the firm in our values, code of conduct, markets, and monitor our portfolio on a offer continuity to AlpInvest for a and personnel management. All of our regular basis. prolonged period of time. Further, we Managing Directors adopt a hands-on seek to provide robust reporting and approach to operational control and Strategic risks open channels of communication with discipline, monitoring performance, risk, The Board is responsible for setting the investors to ensure that we are responsive quality, and operations as part of their daily firm’s strategy. Our strategy takes into to their investment needs and portfolio responsibilities. Management reports and account market and sector developments, considerations as they may change over review procedures bring all aspects of the as well as internal and external risk time. In addition, we continuously seek business under management supervision, factors. Our initial assumptions, however, to diversify and expand our investor while detailed policies and procedures are may be impacted by new events, which base. There is also the risk that senior in place to help manage risks, encourage could affect the firm’s performance or management expertise may be lost. In consistency, and enable standardization financial position. To help address this order to create a long-term alignment with across the firm. risk, we monitor external trends and AlpInvest, remuneration is based on long- forecasts while consistently reviewing term incentive arrangements. Risk assessment and mitigation strategies our assumptions and tracking the are discussed with our Board. Our external performance of our investments. Investment decisions and internal auditors provide further Our ability to source and execute quality assurance by performing regular and ad Reputational risks investments depends on a number of hoc audits, including regular testing of the Our firm and funds may be negatively factors. We need to attract, develop, and design and operating effectiveness of the affected or disrupted by several factors, retain professionals with the requisite internal control environment. such as unenforceable contracts, lawsuits, investment experience and optimize the adverse judgments, fraud, and negative sharing of information and benefits from Some of the key risks we face and how publicity. To help reduce the likelihood of synergies across our investment teams. we strive to manage them are described these events, we rigorously assess the In addition, we undertake thorough below. Such risks are not intended to companies and GPs in which we invest assessments of each investment describe all risks that AlpInvest faces to identify unethical practices during the opportunity using our collective knowledge or the risks applicable to our investors, due diligence process or later through and experience. For that reason, AlpInvest such as the risk of loss of an investor’s interaction with portfolio companies and carefully assesses each fund manager’s entire investment. These investment risks GPs. Investing guidelines are stipulated in skills and track record before making an are separately disclosed to investors at all of our mandates. investment commitment. From the initial the time they commit to an investment investment assessment to the finalization mandate with the firm. of the transaction, AlpInvest employs a methodical process involving the Managing Directors and investment teams.

28 1 Diversification does not eliminate the risk of loss. TEAM AND GOVERNANCE 16-30

Liquidity risks Private equity and mezzanine investments are generally illiquid and require a long-term commitment of capital with no certainty of return. Interests in private equity funds are also often subject to legal and other restrictions on resale, or otherwise may be less liquid than other types of securities, such as publicly traded securities. AlpInvest informs investors of forthcoming liquidity requirements on a timely basis. Our mandate terms are designed to help ensure that we have access at all times to sufficient liquidity to fund our investments. Cash management procedures include cash flow forecasting and liquidity monitoring.

Operational risks Investment performance Asset allocation is discussed regularly AlpInvest is exposed to a range of The performance of our portfolios and compliance reports are reviewed operational risks that can arise depends on a range of factors, including quarterly to ensure that allocations fall from inadequate or failed systems, the quality of the initial investment within these guidelines. processes, and people, as well as decision and the ability of the fund external factors that may affect them. manager or portfolio company to drive Market risk These include risks around human performance and achieve its business As an advisory firm, AlpInvest has limited resources, legal and regulatory issues, objectives. As part of our portfolio exposure to financial assets. Cash is tax, information technology system management program, we review typically held in short-term deposits with failures, business disruption, and our investments regularly and employ reputable banks, while our management internal control weaknesses. a rigorous process to manage our company has limited exposure to adverse relationships with fund managers movements in interest rates and foreign Operational risk management is and portfolio companies. exchange rates. We typically seek to hedge underpinned by clearly defined roles, foreign currency exposure when providing segregation of duties, delegated Investment concentration funds to our main operating subsidiaries. authorities, and monitoring at all levels. AlpInvest invests across a range of AlpInvest relies on a number of third- economic sectors and jurisdictions. Our Credit risk party service providers to support our investment policy is designed to create AlpInvest is dependent on funding from its operations, including IT, insurance, a diversified portfolio across market investors. Mandates are in place between payroll, broker services, custodian segments, geographies, industries, the parties that define the minimum services, fund administration, depositary deal sizes, and vintage years. We have amounts our investors commit to AlpInvest services, regulatory reporting services, investment guidelines in place to help for investment purposes. These are subject and pensions. We work with reputable address concentration risk, including to certain limitations and are monitored firms and have service-level contracts limits on the interest percentage held through compliance procedures. with a number of these parties. in any one fund or portfolio company.

ALPINVEST ANNUAL REVIEW 2017 29 RISK MANAGEMENT (CONT’D)

Our investment management process is conflict with the interests of AlpInvest to, the price at which the investment subject to an annual ISAE 3402 Type II or other clients. In the case of all real or was acquired, current and projected audit to attest to the design and operating perceived conflicts of interest, AlpInvest’s operating performance, trading values effectiveness of our internal controls. determination as to whether an actual on public exchanges for comparable conflict of interest exists, which factors securities, and financing terms currently Legal, tax, and regulatory risks are relevant, and the resolution of available. To determine the fair value of The regulatory environment for private any such conflicts, will be made using our investments in private equity funds, investment funds and their sponsors AlpInvest’s best judgment, but at its the valuations provided by the GPs were continues to evolve. Increased scrutiny sole discretion. In resolving conflicts, used in combination with our own initial and newly proposed legislation applicable AlpInvest may consider various factors, due diligence and ongoing portfolio to private investment funds and their including the interests of the applicable management. Due to the time lag between sponsors may also impose significant client with respect to the immediate issue receiving the reporting of the GPs’ administrative burdens on AlpInvest and/or with respect to the client’s longer- information and AlpInvest’s reporting date, and may divert time and attention from term courses of dealing as well as the adjustments to valuations may be made, portfolio management activities. For effect of such conflict or such resolution if necessary. For example, the value of example, in order to comply with the on AlpInvest and its affiliates. AlpInvest an investment may be adjusted for actual Alternative Investment Fund Managers has also adopted policies and procedures cash flows that occurred from the date Directive, AlpInvest holds a license as an to address certain identifiable of the reported valuations to the financial alternative fund manager with the Dutch potential conflicts. statement date. Authority for the Financial Markets. AlpInvest has a team of legal and Valuation standards The AlpInvest commitment compliance professionals dedicated In 2017, we determined the fair value AlpInvest endeavors to uphold the highest to monitoring the legal, tax, and of our direct and co-investments standards and mitigate risk in a timely regulatory landscape to ensure (equity and mezzanine) based on and consistent fashion. We are committed AlpInvest is in compliance with the International Private Equity and to strong and robust governance across applicable requirements. Valuation Guidelines the firm and our experience and expertise (Edition December 2015, endorsed by help us to deliver on this goal. Conflicts of interest Invest Europe), or where required in AlpInvest and certain of its related entities accordance with Accounting Standards engage in a broad range of activities, Codification Topic 820 as prescribed including investment activities for their by U.S. Generally Accepted Accounting own account, and providing transaction- Principles (‘GAAP’). This requires related, investment advisory, management, management’s judgment and takes and other services to its clients. In the into consideration the specific nature, ordinary course of conducting its facts, and circumstances of each activities, the interests of a client may investment, including, but not limited

30 FINANCIAL PERFORMANCE 31-40FINANCIAL

FINANCIAL PERFORMANCE

28 Risk management 32 Investment performance 34 Fund Investments overview 36 Secondary Investments overview 37 Equity Co-Investments overview 38 Equity Co-Investments Portfolio overview 39 Mezzanine Co-Investments overview 40 Important information

ALPINVEST ANNUAL REVIEW 2017 31 INVESTMENT PERFORMANCE1

AlpInvest achieved strong financial Gross and net returns for the total of our We believe the performance of our performance again in 2017, continuing a fully committed Main Funds (across all funds underlines the rewarding, long- history of consistently delivering robust strategies combined) remained in line with term nature of private equity investing. returns to our investors since our 2016 levels and our net IRR (‘internal rate Looking to the future, the capital that firm’s inception. of return’) since our inception 18 years has already been committed to us by ago was approximately 12% (see page our investors allows us to seek new, AlpInvest was pleased with the 40 for more detailed information on IRR attractive investment opportunities and performance of its funds in 2017. Through methodology). In Fund Investments, the net we believe we are well positioned to the end of 2017, we received €71.7bn IRR from our latest fully committed fund, continue to deliver strong returns over of commitments from our investors. Main Fund V, improved to 12% as of year- the coming years. We have maintained a Our as per end versus 8% as of the end of 2016, mainly disciplined approach to investing, taking December 31, 2017 were €37.0bn in due to the J-curve effect (see below). advantage of prospects presented within total, of which €20.7bn was for Fund Our Secondary Investments Main Fund our chosen markets while being mindful Investments, €9.3bn for Secondary V achieved a net IRR of 20%, an increase of the challenges arising from the Investments and €6.9bn for Equity and of about 1% over the prior year-end. The macroeconomic environment. Mezzanine Co-Investments. Co-Investment Main Fund VI ended 2017 with a net IRR of 22%, an increase of 1 Past performance is not indicative of future results or a guarantee of future returns. Return metrics are subject to approximately 7% over the prior year-end. change as a fund or investment portfolio matures.

J-curve SMOOTH ACTUAL Reuters %

0

1 YEARS 10

The J-curve in private equity is used to a mechanism called the internal rate illustrate the historical tendency of private of return, or IRR. This calculates the equity funds to deliver negative returns underlying returns, taking into account in early years and investment gains in money invested, money returned, and later years. Initially, investment returns unrealized investments. After three to five are negative because management years, the interim IRR should provide a fees are drawn from committed capital meaningful guide to the ultimate returns to and underperforming investments are be expected from a specific fund, although identified and written down at an early the period is generally longer for early- stage. In later years, as companies are stage funds. For the AlpInvest mandates, sold, ideally for more than the purchase the IRR generally becomes meaningful price, cash starts to flow to the LPs. approximately five years after the start of Private equity measures returns using the mandate. 32 FINANCIAL PERFORMANCE 31-40FINANCIAL

1 As of December 31, 2017. Past performance is not Life-to-date IRRs1 indicative of future results or a guarantee of future returns. Return metrics are subject to change as a 2 fund or investment portfolio matures. Please see Fully committed funds Vintage Fund size Gross Net the additional disclosures on page 40 for further year (€m) IRR IRR important information regarding AlpInvest’s track record. Main Fund I - Fund Investments 2000 5,175 12% 11% 2 ‘Fully committed funds’ are past the expiration date of the commitment period as defined in the respective Main Fund II - Fund Investments 2003 4,545 10% 9% agreement. 3 Returns are not considered meaningful for Main Fund Main Fund III - Fund Investments 2005 11,500 10% 9% VI – Secondary Investments and Main Fund VII – Co- Main Fund IV - Fund Investments 2009 4,877 16% 16% Investments, as the commitment period for these funds commenced in 2017. Main Fund V - Fund Investments 2012 5,080 13% 12% 4 Total capital committed to AlpInvest includes €7.0bn of investor mandates that are managed on behalf of Main Fund VI - Fund Investments 2015 1,106 NM NM investors by AlpInvest Partners B.V. (or its controlled affiliates), but for which the investment decisions Main Fund I - Secondary Investments 2002 519 57% 53% were made by parties other than AlpInvest or its Main Fund II - Secondary Investments 2003 998 27% 26% affiliates (€6.7bn was committed before the end of 2002 and €0.2bn before AlpInvest began managing Main Fund III - Secondary Investments 2006 2,250 11% 10% such investments in 2013). Main Fund IV - Secondary Investments 2010 1,859 20% 19% Main Fund V - Secondary Investments 2011 4,273 22% 20% Main Fund II - Co-Investments 2003 1,090 44% 42% Main Fund III - Co-Investments 2006 2,760 5% 5% Main Fund IV - Co-Investments 2010 1,475 24% 22% Main Fund V - Co-Investments 2012 1,122 34% 31% Main Fund VI - Co-Investments 2014 1,115 25% 22% Main Fund II - Mezzanine Investments 2004 700 8% 7% Main Fund III - Mezzanine Investments 2006 2,000 10% 9% All Other Funds Various 14% 11% Total fully committed funds 13% 12%

Funds in the commitment period Vintage Fund size Gross Net year (€m) IRR3 IRR3

Main Fund VI - Secondary Investments 2017 4,263 NM NM Main Fund VII - Co-Investments 2017 2,443 NM NM All Other Funds Various 21% 17% Total funds in the commitment period 22% 14% Total AlpInvest 13% 12%

Total capital commitments received by AlpInvest4 (€bn)

71.7 67.0 63.0 60.2 56.8 52.3 48.9 47.6 44.4 39.4

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

ALPINVEST ANNUAL REVIEW 2017 33 FUND INVESTMENTS OVERVIEW1

2017 fund portfolio activity 2017 new fund commitments2 The Fund Investments team made new commitments to 24 funds with a 2017 Name Segment Relationship4 vintage year (or earlier) for our investors. APEF 7 EU Mid-Market Existing Of these, 21 are to funds where a prior BC European Capital X Global LBO Existing primary fund commitment had been made Boyu Capital Fund III NTM3 Existing with the GP. The other three represent a Centerfield Capital Partners IV Mezzanine Existing new relationship. CITIC Capital China Partners III NTM3 Existing CVC Capital Partners VII Global LBO Existing During 2017, nine commitments were DBAG Fund VII EU Mid-Market Existing made to funds that are expected to have a 2018 (or later) vintage. Those nine funds DBAG Fund VII Top-Up Fund EU Mid-Market Existing are therefore not included in this year’s PME III-B EU Mid-Market New Annual Review overview. FountainVest China Capital Partners Fund III NTM3 Existing GTCR Fund XII US Mid-Market Existing In 2017, a total of €1.9bn of capital was Halifax Capital Partners IV US Mid-Market New called to fund investments in private Kinderhook Capital Fund V US Mid-Market Existing equity and mezzanine funds. KKR Americas Fund XII Global LBO Existing Meritech Capital Partners V Side Car Venture Existing During the year, AlpInvest received €4.9bn Pamlico Capital IV US Mid-Market Existing of proceeds from investments. Within Quad-C Partners IX US Mid-Market New this figure: 3% came from the 2000–2002 Quadrant Private Equity No. 6 NTM3 Existing mandate; nearly 8% from the 2003–2005 3 mandate; almost 43% from the 2006–2008 Sunrise Capital III NTM Existing mandate; 29% from the 2009–2011 Vaaka Partners Buyout Fund III EU Mid-Market Existing mandate; 11% from the 2012–2014 Yukon Capital Partners III Mezzanine Existing mandate; and 15% from other mandates.

1 Including mezzanine and clean tech fund investments

2 Commitments to funds with a 2017 vintage year (or earlier) for AlpInvest. For illustrative purposes only. References to a particular investment should not be considered a recommendation of any security or investment. There can be no assurance that AlpInvest will be able to invest in similar opportunities in the future. Additionally, AlpInvest committed to three other funds with a 2017 vintage that are not listed by name for confidentiality reasons. 3 Non-traditional markets, which include commitments to mid-market funds outside of Western Europe and the United States. 4 Existing includes funds where a prior primary fund commitment has been made with the GP by AlpInvest.

34 FINANCIAL PERFORMANCE 31-40FINANCIAL

Fund Investments portfolio overview As per December 31, 2017

Vintage years Investment Mandate Capital Capital Invested focus amount committed2 invested2 as % of (€m) (€m) (€m) committed3

2000–20021 Buyout and 10,853 9,998 9,411 100% venture capital 2003–2005 Buyout and 4,545 4,508 4,521 104% venture capital 2006–2008 Buyout and 11,500 11,323 11,604 103% venture capital 2009–2011 Buyout and 4,877 4,766 4,839 98% venture capital 2012–2014 Buyout and 5,080 4,961 3,962 74% venture capital 2015 Buyout and 1,106 1,081 421 39% venture capital 2016 Buyout and 368 343 47 14% venture capital 2017 Buyout and 352 133 0 0% venture capital 2007–2012 Clean 658 613 617 93% technology 2000–2017 Mezzanine 1,354 1,224 1,350 109% funds 2003–2017 Buyout and 1,256 445 172 39% venture capital – other mandates Total 41,949 39,395 36,945 95%

1 The Fund Investment Mandate 2000–2002 includes pre-vintage year 2000 commitments made by our investors and AlpInvest predecessors. 2 At historical foreign exchange rates. 3 Based on foreign exchange rate as per December 31, 2017.

Fund commitments overview4 As per December 31, 2017

Segment % of capital GPs5 Funds committed

Global large buyout 32% 23 74 European mid-market 15% 57 107 U.S. mid-market 21% 78 133 Non-traditional markets6 12% 74 136 Venture capital 10% 64 141 Clean technology 2% 14 16 Mezzanine 4% 17 27 Other7 4% 12 14 Total 100% 339 648

4 Underlying fund vintage years 2000–2017. 5 As a GP can have funds in more than one category, the total is larger than mentioned in the text above. 6 Non-traditional markets, which include commitments to mid-market funds outside of Western Europe and the United States. 7 This segment comprises non-control distressed debt and (primary and secondary) funds-of-funds.

ALPINVEST ANNUAL REVIEW 2017 35 SECONDARY INVESTMENTS OVERVIEW1

2017 portfolio activity Secondary Investments portfolio overview AlpInvest Secondary Investments As per December 31, 2017 committed €949m across nine transactions in 2017, compared with Vintage years Investment Mandate Capital Capital Invested focus amount committed2 invested2 as % of €1,322m across nine transactions in 2016. (€m) (€m) (€m) committed3 For the 12 months ending December 31, 2017, AlpInvest Secondary Investments 2000–2002 Buyout 519 519 512 100% received proceeds from 117 transactions 2003–2005 Buyout 998 994 951 96% out of 129, totaling €1,696m compared 2006–2008 Buyout 2,250 2,147 2,061 95% with €1,313m received in 2016. 2009–2011 Buyout 1,859 1,806 1,782 97% 2012–2015 Buyout 4,273 4,142 3,743 90% 1 Includes mezzanine secondary investments. 2016–2019 Buyout 4,263 941 700 79% 2002–2017 Mezzanine funds 447 417 427 99% 2003–2017 Other buyout 573 325 275 85% Total 15,183 11,292 10,451 92%

2 At historical foreign exchange rates. 3 Based on foreign exchange rate as per December 31, 2017.

36 EQUITY CO-INVESTMENTS PERFORMANCE 31-40FINANCIAL OVERVIEW1

2017 portfolio activity In 2017, AlpInvest invested €526m in equity co-investments. This included €501m in 21 new investments and €25m of investments in existing portfolio companies. Total realizations in 2017 for our equity co-investment portfolio were €1,423m.

2017 new equity co-investments2

Name Sector Geography Date of completion Description

Air Methods Healthcare U.S. Apr-17 Provider of air medical transportation and air tourism services Allegro Information technology Eastern Jan-17 Online marketplace provider Europe Allied Pinnacle Consumer staples Australia/New Mar-17 Provider of bakery ingredients and finished frozen bakery Zealand goods Cadence Aerospace Industrials U.S. Oct-17 Manufacturer of components, subassemblies, and assemblies for the aerospace industry Cornerstone Materials U.S. Nov-17 Producer of intermediate chemicals for industrial and Chemical Company consumer end market applications Hyundai Card Financials Asia Feb-17 Credit card provider in Korea IPCOM Industrials Belgium Dec-17 Value-add distributor and converter of building and technical insulation products MDSL Information technology U.S. Jul-17 Telecom expense and market data software and services provider Polynt-Reichhold Materials Italy May-17 Manufacturer of chemical products Profi Rom Food Consumer staples Eastern Feb-17 Owner of convenience supermarket chain in Romania Europe PSC Hydrochem Industrials U.S. Oct-17 Industrial cleaning platform serving the refinery, petrochemical, and utilities industries RGI Information technology Italy Dec-17 Developer and distributor of software products and technological services for the insurance sector SGB-SMIT Industrials Germany Aug-17 Independent pure-play designer and manufacturer of electrical transformers Smile Doctors Healthcare U.S. Oct-17 Regional provider of orthodontics services Telecon Telecommunication Canada Jul-17 Telecommunication network service provider in Canada services Timico Information technology U.K. May-17 Provider of managed information technology, voice, and connectivity services to small and medium enterprises WME-IMG Consumer U.S. Aug-17 Global sports, media, and entertainment content platform discretionary

1 Including clean tech co-investments. This overview on equity Co-Investments is limited to AlpInvest’s equity Co-Investments program, which invests in opportunities sourced by AlpInvest from its own relationships with GPs. It does not reflect (i) other co-investments made in respect of opportunities arising out of an investor’s own separate private equity relationships and invitations or (ii) co-investments made as part of any state-focused investment program. Please see ‘Important Information’ for additional details. 2 For illustrative purposes only. References to a particular investment should not be considered a recommendation of any security or investment. There can be no assurance that AlpInvest will be able to invest in similar opportunities in the future. Additionally, AlpInvest committed to four other co-investments that are not listed for confidentiality reasons. ALPINVEST ANNUAL REVIEW 2017 37 EQUITY CO-INVESTMENTS OVERVIEW1

Equity co-investments portfolio overview As per December 31, 2017

Vintage years Investment focus Mandate amount Capital invested3 (€m) (€m)

2000–20022 Buyout & venture capital 800 759 co-investments 2003–2005 Buyout co-investments 1,090 925 2006–2008 Buyout co-investments 2,760 2,443 2009–2010 Buyout co-investments 1,475 1,246 2011–2013 Buyout co-investments 1,122 967 2014–2015 Buyout co-investments 1,115 950 2016-2019 Buyout co-investments 2,443 294 2010–2012 Clean technology 23 21 2002–2017 Buyout co-investments – 363 274 other mandates Total 11,189 7,878

1 This overview on equity Co-Investments is limited to AlpInvest’s equity Co-Investments program, which invests in opportunities sourced by AlpInvest from its own relationships with GPs. It does not reflect (i) other co-investments made in respect of opportunities arising out of an investor’s own separate private equity relationships and invitations or (ii) co-investments made as part of any state-focused investment program. Please see ‘Important Information’ for additional details. 2 The Co-Investment Mandate 2000–2002 includes the investments made by the former Alpinvest N.V. (mainly pre-vintage year 2000). The Co-Investment Mandate 2000–2002 includes Buyout, Life Sciences and Technology investments. Life Sciences and Technology investments were discontinued in late 2003. 3 At historical foreign exchange rates.

Portfolio diversification4 Sectors4 AlpInvest seeks to invest in a broad range of sectors and geographies, creating Real estate 1% significant diversification in our portfolio. Utilities 2% 20% Consumer discretionary From a geographical perspective5, Telecommunication 3% over 42% of our investments are in services 11% Consumer staples Europe6, over 47% in North America, Materials 4% 4% Energy and over 10% in the rest of the world. 8% Financials The sector breakdown of our equity Information 15% technology co-investments since 2000 can be 13% Healthcare found to the right. Industrials 19%

4 Diversification does not eliminate the risk of loss. 5 Includes all equity co-investments made by AlpInvest since 2000 (except for Life Science and Technology investments made as part of Mandate 2000–2002). 6 Europe excludes emerging Europe (included in rest of the world).

38 MEZZANINE CO-INVESTMENTS PERFORMANCE 31-40FINANCIAL OVERVIEW1

2017 portfolio activity 2017 new mezzanine co-investments2 In 2017, AlpInvest invested €45m in mezzanine co-investments. This included Name Sector Geography Date of completion Description €43m in six new investments and €2m Dickinson Fleet Industrials U.S. Mar-17 Provider of commercial vehicle in one investment for an existing Services fleet maintenance services portfolio company. Dubois Materials U.S. Mar-17 Manufacturer of specialty Chemicals chemicals for manufacturing, AlpInvest had €106m of cash inflows in industrial, and fleet 2017 from the outstanding mezzanine maintenance industries portfolio, of which €20m was interest Endries Industrials U.S. May-17 Distributor of fasteners and income and €86m from realizations. other mechanical components Paradigm Healthcare U.S. Dec-17 Provider of catastrophic Outcomes and complex medical case management for the workers’ compensation industry Syncsort Information U.S. Oct-17 Provider of infrastructure technology software across data integration, data qualification, and replication / protection services

1 This overview on mezzanine co-investments is limited to AlpInvest’s mezzanine co-investments program, which invests in opportunities sourced by AlpInvest from its own relationships with GPs. It does not reflect (i) other co-investments made in respect of opportunities arising out of an investor’s own separate private equity relationships and invitations or (ii) co- investments made as part of any state-focused investment program. Please see “Important Information” for additional details.

2 Additionally, AlpInvest made one other mezzanine co-investment in 2017 that is not listed by name for confidentiality reasons.

Mezzanine co-investments portfolio overview As per December 31, 2017

Vintage years Investment focus Mandate amount Capital invested4 (€m) (€m)

2000–20023 Mezzanine co-investments 33 33 2002–2004 Mezzanine co-investments 148 81 2005–2006 Mezzanine co-investments 297 287 2007–2011 Mezzanine co-investments 1,200 850 2012–2014 Mezzanine co-investments 158 145 2014–2017 Mezzanine co-investments 169 139 Total 2,005 1,535

3 Mandate 2000–2002 is a legacy portfolio managed for our investors. 4 At historical foreign exchange rates. Portfolio diversification5 AlpInvest seeks to invest in a broad range Sectors6 of sectors and geographies, creating significant diversification in our portfolio. From a geographical perspective6, 34% of our investments are in Europe7, 59% 28% Consumer in North America, and 7% in the rest of Materials 7% discretionary the world. The sector breakdown of our Infomation 15% 4% Consumer staples technology mezzanine co-investments can be found 1% Energy to the right. Industrials 28% 6% Financials

5 Diversification does not eliminate the risk of loss. 10% Healthcare 6 Reflects all mezzanine mandates. 7 Europe excludes emerging Europe (included in rest of the world).

ALPINVEST ANNUAL REVIEW 2017 39 IMPORTANT INFORMATION

This document has been prepared by and is being investments and projected performance are based on separate account investor’s own proprietary private issued and distributed in the Netherlands by AlpInvest assumptions that AlpInvest believes are reasonable equity investment portfolio and GP relationships as Partners B.V. (together with its controlled affiliates, under the circumstances, the actual realized returns well as co-investments made as part of state-focused ‘AlpInvest’). This is AlpInvest’s ninth Annual Review on AlpInvest’s investments will depend on, among investment programs. Unless otherwise noted, the and its purpose is to increase the understanding of other factors, future operating results, the value of the activity of these mandates is not reflected in the AlpInvest and to improve communication with our assets and market conditions at the time of disposition, discussion of, or any other information in respect of, stakeholders. THIS DOCUMENT IS NOT INTENDED any related transaction costs, and the timing and AlpInvest’s equity Co-Investment business (nor is it FOR AND MAY NOT BE PUBLICLY DISSEMINATED TO manner of sale, all of which may differ from the reflected in any Main Fund as defined below). ‘U.S. PERSONS’ (AS DEFINED UNDER REGULATION assumptions on which the valuations and projections S OF THE U.S. SECURITIES ACT OF 1933, AS used herein are based. Accordingly, the actual realized As used herein, ‘Main Funds’ are each comprised AMENDED), WHICH INCLUDES U.S. RESIDENTS AND return on any such investments may differ materially of (i) an anchor mandate(s) (i.e., generally the ENTITIES ORGANIZED UNDER THE LAWS OF THE from the results indicated herein. Furthermore, largest account(s) within a strategy’s investment UNITED STATES. investors may contact AlpInvest representatives to program) and (ii) AlpInvest’s other advisory client discuss the procedures and methodologies used to mandates with investment periods that fall within the The Walker Guidelines, as published by the British calculate the investment returns and other information relevant investment periods under the mandate of Private Equity and Venture Capital Association (‘BVCA’), provided herein. Investors should consider the content the anchor mandate(s) (but do not overlap with more are one of the prominent initiatives on increased of this document in conjunction with investment fund than one such investment period). Mezzanine Main disclosure and it is our intention to follow these quarterly reports, financial statements and other Funds include mezzanine investments across all guidelines as a basis for our report. We are advocates disclosures regarding the valuations and performance strategies (i.e., Primary Funds, Secondaries, and of transparency and believe that the private equity of the specific investments discussed herein. Co-Investments). industry will benefit from more open communication with all stakeholders. We have tried to be as open as Certain information contained in this presentation The performance information of all ‘Other Funds’ possible in this Annual Review. However, some areas constitutes ‘forward-looking statements’ that are includes Main Fund VII - Fund Investments, Main Fund remain subject to legal confidentiality clauses between inherently unreliable, and actual events or results may VIII - Fund Investments, Main Fund I - Co-Investments, AlpInvest, our investors, or the parties we invest in and differ materially from those reflected or contemplated Main Fund I - Mezzanine Investments, Main Fund invest with. Some types of information could also be herein. None of AlpInvest or any of its representatives IV - Mezzanine Investments, Main Fund V - Mezzanine commercially sensitive. As a result, we are not able makes any assurance as to the accuracy of those Investments, all ‘clean technology’ private equity to disclose publicly all of the information predictions or forward-looking statements. AlpInvest investments, all strategic co-investment mandates that we provide to our investors. expressly disclaims any obligation or undertaking to invest in co-investment opportunities arising out of an update or revise any such forward-looking statements. investor’s own separate private equity relationships and This document is not intended to be (and may not be The views and opinions are those of AlpInvest as of invitations, any state-focused investment mandates, relied on in any manner as) legal, tax, investment, the date hereof and are subject to change based on and all other investors whose investments are not accounting or other advice or as an offer to sell or prevailing market and economic conditions and will reflected in a Main Fund. Main Funds and Other Funds a solicitation of an offer to buy any securities of any not be updated or supplemented. are referred to collectively as ‘Funds’. investment product or any investment advisory service, including any limited partnership or comparable Certain information contained herein has been obtained Performance information herein is not calculated limited liability equity interests in any fund, managed from third-party sources. Although AlpInvest believes in accordance with Global Investment Performance account, or other similar investment vehicle or product such sources to be reliable, AlpInvest makes no Standards (GIPS). Performance information is since sponsored by AlpInvest (each, a ‘Product’). Any such representation as to its accuracy or completeness. inception of the applicable investment strategy or the offer or solicitation may only be made pursuant to inception of a specific Fund (as the case may be), such Product’s final confidential private placement AlpInvest is part of The Carlyle Group (‘Carlyle’). An unless otherwise noted. memorandum and/or the related subscription information barrier has been erected between AlpInvest documents, which will be furnished to qualified and the rest of Carlyle that restricts certain information The gross annualized internal rates of return (‘IRR’) investors on a confidential basis at their request for from being shared, including information regarding provided herein are calculated based on actual their consideration in connection with such offering. AlpInvest portfolio investment decisions. All investment investment cash flows up to and including December This document may contain proprietary, trade-secret, programs managed by AlpInvest are intended to operate 31, 2017 and the December 31, 2017 fair market value confidential, and commercially sensitive information. in accordance with the information barrier protocols (‘FMV’) of the relevant Fund. Gross IRRs and multiples and supplemental compliance procedures specific to of capital invested do not reflect management fees References to any portfolio investment are intended Carlyle’s Investment Solutions business segment of or performance fees (carried interest) charged by to illustrate the application of AlpInvest’s investment which AlpInvest is a part. AlpInvest or any other Fund-level expenses that are process only and should not be used as the basis borne by investors in the Fund, which will reduce for making any decision about purchasing, holding AlpInvest Partners B.V. is included in the public register returns and in the aggregate are expected to be or selling any securities. Nothing herein should be kept by the Dutch Authority for the Financial Markets substantial. The FMVs of Funds that make Primary interpreted or used in any manner as investment (Autoriteit financiële markten), in accordance with Fund Investments or Secondary Investments advice or a recommendation of any security or section 1:107 of the Dutch Act on Financial Supervision are based on the latest available valuations of the investment strategy. The information provided about (Wet op het financieel toezicht), as holder of a license underlying limited partnership interests (in most cases any portfolio investments is intended to be illustrative, to manage alternative investment funds under license as of September 30, 2017), as provided by their general and is not intended to be used as an indication of the number 15001833. partners. The FMVs for Funds that make equity and current or future performance of AlpInvest’s mezzanine co-investments are based on AlpInvest’s portfolio investments. The amount of AlpInvest’s assets under management internal valuations. (‘AUM’) is calculated on the basis of the latest available There is no assurance that a Product’s investment valuations of all portfolio investments for which Net IRR provided herein is based on the gross objective will be achieved or that investors will receive AlpInvest provides continuous and regular supervisory calculation and is net of management fees and a return on their capital. The recipient must consult its or management services adjusted for interim cash flows performance fees charged by AlpInvest as well as own legal, accounting and tax advisors as to the legal, up to the relevant reporting date, plus unfunded capital Fund-level expenses. To eliminate the effect of currency business, tax, and related matters concerning the subscriptions to underlying portfolio investments, rate changes, all non- Euro cash flows and fair market information contained in this document in order to make plus the amount of uncommitted capital available for values have been converted to Euro using the foreign an independent determination and consequences of a investment under the existing mandates of AlpInvest’s exchange rate as of December 31, 2017. No cash flow potential investment in a Product, including various investors with investment periods that have not expired. projections have been used to calculate any of the tax consequences. performance numbers provided herein. To AlpInvest’s Except as otherwise noted, information herein regarding knowledge, there are no established standards for The performance of any portfolio investments discussed AlpInvest’s equity and mezzanine Co-Investment the calculation of IRRs for private equity portfolios. in this document is not necessarily indicative of the business is limited to its historical Co-Investment The use of another methodology would be expected to performance of any other of AlpInvest’s portfolio program which seeks to co-invest in private equity and result in a different, and possibly lower, IRR. Investors investments, and you should not assume that mezzanine transactions (as applicable) sourced by should be aware of the significant differences between investments in the future will be profitable or will AlpInvest from its proprietary relationships with GPs. private equity and public markets regarding their equal the performance of past portfolio investments. AlpInvest also makes Co-Investments for a number of portfolio/index constituents and specific risk/ In addition, while AlpInvest’s valuations of unrealized separate account mandates that are sourced from such return characteristics.

40

CONTACT

Amsterdam AlpInvest Partners B.V. Jachthavenweg 118 1081 KJ Amsterdam The Netherlands Phone: +31 20 540 7575 Fax: +31 20 540 7500

New York AlpInvest US Holdings, LLC 299 Park Avenue 35th Floor New York, NY 10171 United States of America Phone: +1 212 332 6240 Fax: +1 212 332 6241

Hong Kong AlpInvest Partners Ltd 701 Champion Tower 3 Garden Road Hong Kong Phone: +852 2878 7099 Fax: +852 2878 7009

Indianapolis AlpInvest US Holdings, LLC 201 North Illinois Street Suite 1530 Indianapolis, IN 46204 United States of America Phone: +1 317 361 4436

San Francisco AlpInvest US Holdings, LLC 71 Stevenson Street, Suite 1430 San Francisco, CA 94105 United States of America Phone: +1 415 318 3933 Fax: +1 415 814 7557