ANNUAL REVIEW 2018

AlpInvest is a long-standing investor in private equity primary funds, secondaries and co-investments, leveraging our scale, reach and experience for the benefit of our diverse investor base.

Our specialist global teams work collaboratively, sharing relationships and information across the AlpInvest platform to source and select high-quality investment opportunities. We pursue a disciplined, discerning and consistent investment strategy. We offer investors a broad range of solutions to their private equity investment needs, including global private equity programs across all main investment strategies, as well as complementary private equity programs focusing on specific strategies and/or regions. Our 75 investment professionals are dedicated to applying their collective skills, insights, knowledge and experience to maximize value for our investors.

OVERVIEW AND INVESTMENTS TEAM AND GOVERNANCE FINANCIAL PERFORMANCE 5 Our business 19 Governance 32 Investment performance 6 Strategic review 20 Managing Directors 34 Primary fund investments overview 8 Market and investment review 24 Responsible investing 36 Secondary Investments overview 10 Primary Fund Investments 26 Human resources 37 Equity Co-investments overview 12 Secondary Investments 27 Remuneration policy 39 Mezzanine Co-investments overview 14 Co-investments 28 Risk management 40 Important information

ALPINVEST ANNUAL REVIEW 2018 1

OVERVIEW / INVESTMENTS 04-15 /INVESTMENTS OVERVIEW

OVERVIEW AND INVESTMENTS

04 2018 review 05 Our business 06 Strategic review 08 Market and investment review 10 Primary Fund Investments 12 Secondary Investments 14 Co-investments 2018 OVERVIEW

Assets under Management COMMITMENTS RECEIVED FROM INVESTORS1 (as per December 31, 2018) Since fi rm’s inception 190 €37.8bn Number of investors at BY ALPINVEST STRATEGY December 31, 2018 2018 Total investments1 €74.5bn 161 €3,418m Total commitments Number of employees, of whom 75 are investment professionals 2018 Total realizations1 >310 €7,420m Number of general partner relationships 5 BY INVESTOR TYPE Number of offi ces across 90.7% three continents Pension funds2 9.3% Insurance companies and others

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 ALPINVEST ANNUAL REVIEW 2018 OUR BUSINESS 04-15 /INVESTMENTS OVERVIEW

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 2018 has strengthened our foundations, from which we can source highly promising investment opportunities and continue to develop our business.

AlpInvest is a leading global private equity AlpInvest has over 310 general partner for two sophisticated pension funds that investor with close to €38bn of assets under (GP) relationships globally across our three founded the firm two decades ago into management and a track record spanning business areas. Our teams share insights an organization that manages bespoke nearly two decades. We focus on three core and information, a collaborative culture that and commingled programs on behalf strategies – fund investments, secondary is complemented by investment in the latest of many of the world’s most respected investments and co-investments (including technologies, giving AlpInvest professionals private equity investors. We have achieved mezzanine) – to generate strong returns a highly detailed picture of fund manager this through our solid investment track for our clients through bespoke separately and portfolio company performance. This record, consistent investment approach managed accounts and commingled funds. enables us to identify opportunities ahead and high-quality investor services. We As a leading global private equity investor, of many other investors and provides robust continue to invest in our people and systems we have an on-the-ground presence across due diligence capabilities that underpin our to ensure we provide exceptional levels of three continents. Using our distinctive and highly selective approach to investing. transparency and deliver on our promises comprehensive view on the private equity to investors both now and in the future. market, we offer our investors access to Our differentiated and proactive sourcing high-quality multi-manager and direct capability means that we can offer our In 2011, we became part of one of the best- investment programs globally. separate account clients bespoke strategies known and largest alternative investment in an increasingly mature private equity managers, The Carlyle Group. This has Global coverage, senior teams market. We have designed our operations allowed AlpInvest to benefit from access As of December 31, 2018, AlpInvest has and built our capabilities to source and to the firm’s distribution platform, its high- 161 employees, including 75 investment access promising investment opportunities, quality investor relations professionals professionals and 20 Manging Directors, many of which are found in parts of the and its expertise in developing innovative many of whom have worked together market that are off the beaten track products and strategies that meet the for well over a decade. Based in Europe, or difficult to access. Our experienced changing needs of our clients. However, North America and Asia, our dedicated teams have a deep understanding of their our investment decisions remain, and will and experienced teams, with a high level of respective markets. In combination with continue to remain, fully independent of seniority, provide seamless global coverage our strong relationships and information our parent. The two organizations are of private equity investment opportunities. captured from all corners of the private subject to appropriate and rigorous equity landscape, this enables them information barriers. AlpInvest is committed to building a diverse to uncover value and avoid highly work environment and shaping an inclusive competitive situations. AlpInvest has strong foundations on which culture for its staff, which we believe are we can further build our business. We have essential to making good investment Investor focus high-calibre teams in place across all our decisions and generating attractive results Since inception, AlpInvest has provided business lines and we continue to invest in for our investors. customized solutions to investors, working technology to support their activities. The closely with clients to help them meet their strength of our relationships and depth of Our philosophy objectives through comprehensive global expertise across private equity markets Our guiding philosophy is to build robust programs and specialized strategies. We puts us in an excellent position to continue portfolios of investments for our clients also complement these tailored solutions building robust portfolios of investments that are well diversified by private equity with a selection of commingled funds, with the potential to deliver solid returns to segment, investment style and vintage year. enabling a broader set of investors to our investors. We seek to further grow the We believe that by taking this approach, we access our investment capability. AlpInvest business by developing innovative can generate attractive risk-adjusted returns new products and services to offer clients for our investors across the economic cycle, Over the past five years, we have grown our an even broader choice of investment as demonstrated by our investment track investor base considerably and we now have options and help them meet their objectives. record. We achieve this through leveraging 190 investors, broadly diversified across our strong global relationships and through types and geographies. AlpInvest has our proactive sourcing and disciplined successfully made the transition from being investment approach. the private equity investment manager

ALPINVEST ANNUAL REVIEW 2018 5 STRATEGIC REVIEW

AlpInvest’s business continued to perform strongly through 2018, even against a more volatile economic backdrop, as distributions remained robust and the firm saw significant new commitments from existing and new investors across all our business lines. We believe this is a testament to our portfolio construction capabilities and to our dedication to further developing the Paul de Klerk business by providing high-quality service and Chairman, CFO/COO ensuring we continue to attract the best talent.

It is my pleasure to report that 2018 was in late 2018 as all assets in our portfolio another successful year for AlpInvest. are subject to mark-to-market valuation Our careful and considered approach to methodologies. building robust portfolios of investments generated good returns for our investors, Commitment totals rise and we raised further capital from The year also saw excellent capital-raising new investors and consolidated our totals for AlpInvest. Our track record of position with existing ones. In addition, solid performance through economic we launched an important new initiative cycles, combined with the continued aimed at bolstering our talent further strong appetite for private equity among through the development of our Diversity institutional investors – many of which and Inclusion Framework. continue to increase their allocations to the asset class – meant that we attracted Distributions made by AlpInvest in 2018 €2.6bn of new commitments in 2018. We totalled €7.4bn – a strong result in a are particularly pleased to report a close market where private equity exit totals to 100% recommitment rate with existing reduced for the year and one that reflects investors in 2018 – a clear validation of our the quality of investments we have made investment capability – and to welcome in previous years across all our strategies. five new ones to our client base. For the year to the end of December 2018, we reported a net return across all our Over the past few years, AlpInvest business lines of 15.7% when including has placed a significant emphasis on exchange rate adjustments, and 12.8% diversifying its investor base to create a when excluding them. While only slightly sustainable platform for future growth. At down on the previous year, these returns the end of 2013, AlpInvest had 40 investors reflect a significant fall in stock markets and by the end of 2018, that number has

6 ALPINVEST ANNUAL REVIEW 2018 OVERVIEW / INVESTMENTS 04-15 7 ALPINVEST ANNUAL REVIEW 2018 REVIEW ANNUAL ALPINVEST position at another organization, will step down from the Board on May 28, thank We Lauren2019. for her support in building our business over the past years and wish her continued success. significantly during that time, thanks theto hardwork and professionalism of all our staff and the support of our investors. I would like extend to my deepest gratitude all to the colleagues and clients I have had the pleasureof working with while at AlpInvest. I will remain involved with AlpInvest as a non-executive Board member and will support Carlyle in other areas of the organization as needed. I look forward seeingto the further development of the firm in the yearsto come. Ruulke Bagijn, the new Head of Carlyle Investment Solutions, and Erica Herberg, the new CFO of Carlyle Investment Solutions, are expected to join the AlpInvest Board in the next few months, subject regulatory to approval. As of that point in time, Ruulke will chair the Board and Erica will assume the role of AlpInvest’s Chief Financial Officer. Lauren Dillard, who has accepted a In recent years, AlpInvest has invested significant amounts in a state-of-the- art ITsystem designed provide to our investors with a world-class service. During we expect 2019, invest to further in technology capture to new opportunities optimize to our operations as automation and robotics tools continue develop. to The AlpInvest platform is highly scalable, which allows us deploy to technological innovation to deal with increased complexity across areas such as investor reporting while similar-sized a maintaining team. And I finally,will in Julybe stepping2019, back from my role as Chairman of the AlpInvest Board and CFO and COO of AlpInvest, after highly 19 satisfying years at the firm. The business has grown

>> Director and Head of our Asian the business in 2018 after three of capital. market a particular focus. This we year, are delighted welcome to a new Managing Director AlpInvest, to Yasuyuki Kanda, who has strong experience of working Japanese investors. with AlpInvest expects raise to further capital from investors both through in 2019, our bespoke separately managed account commingled and mandates funds. We will look at ways further to develop our capabilities for retail investors capture to increasing demandfrom this source growth in China, Germany and Italy. We expect volatility last to through and 2019 we will therefore focus on pursuing our core investment philosophy of building robust portfolios with the potential to perform well through economic cycles. willWe also focus on further rolling out Diversityour Framework Inclusion and across the business ensure to we continue attractto and retain the brightest and best talent. In addition, we will further build out our capability in Asia, with the Japanese In 2019, we willIn 2019, continue build to on During solid foundations. AlpInvest’s 2018, the global economy lost some of the momentum gained over the previous two years certain as macroeconomic and geopolitical risks emerged, including the straining trade of relations betweenthe U.S. and China and Europe, the increased uncertainty around Brexit and slower years Neuberger at Berman Asia. in THE YEAR AHEAD start we made two of 2019, significant Murdeshwar Sid with promotions, becomingManaging Director our in Co-investments team and Joseph Director Managing becoming O’Connor in our Primary Fund Investments team. In addition, we further built out our Asian team. were We pleased welcome to AmitSachdeva back AlpInvest to as Managing Co-investments team in Hong Kong. He re-joined

. 1 Includes Co-Investments only from AlpInvest’s equity Co-InvestmentsAlpInvest from its program, own relationships which invests with in opportunities GPs. It does not reflectarising sourced (i) out other of an by investor’sco-investments own separate made in privaterespect equityof opportunities relationships state-focusedany investment program. Please additional details. ‘Important see for Information’ and invitations or (ii) co-investments made as part of

1 our talented staff and seek recognize to the important contribution that our existing professionals make the to firm. At the Staff developments Staff wantWe provide to rewarding careers for and the framework should further support our efforts on developing a high- performance, diverse workforce. further believe during We 2019. this is a significant development. AlpInvest has always striven be to an inclusive employer, investment decisions generating and attractive results for our investors. In 2018 we launched a new Diversity and Inclusion Framework, which we seek build to out diverse work environment shaping and an inclusive culture for its staff, which we believe are essential making to good Diversity and inclusion and Diversity AlpInvest is committed building to a investments, €1.4bn in secondaries opportunities and €0.5bn in equity and mezzanine co-investments activity. made We total investments of over €3.4bn in 2018, which was consistent with our anticipated pace. This included of €1.5bn in primary fund steady in 2018, even as some parts of the private equity market, including fundraising totals, recorded lower In line with AlpInvest’s core philosophy of continuing invest to across economic cycles, our investment pace remained investors in AlpInvest strategies. AlpInvest in investors steady pace Investment high-quality service all to our clients. areWe particularly pleased that our founder clients have remained significant types globally. have We strengthened our Investor Relations team and systems considerably over the past few years ensureto we can continue provide to a to providingto commingled and bespoke separately managed account investment services a wide to variety of investor a private equity firm investing on behalf of two Dutch clients – APG and PGGM – when it was founded nearly 20 years ago, grown 190. to AlpInvest has evidently made a substantial transition from being MARKET AND INVESTMENT REVIEW

After years of steady global growth, there was a desynchronization of economic performance in 2018, as the U.S. recovered from a weak start, while Europe and China faced a more difficult environment as the year progressed. We have observed a significant flattening of the yield curve and a rise in volatility in public markets, and maintain a close watch on future economic developments as we Wouter Moerel remain committed to building portfolios of Managing Director investments on behalf of our investors with the potential to perform through economic cycles.

The economic backdrop deteriorated In addition, heightened trade tensions during the course of 2018 as the broad between the U.S. and China and the synchronization of growth witnessed in European Union created considerable 2017, which was expected to persist last uncertainty, which contributed to a year, stuttered. The first quarter of 2018 slowdown in global economic growth to 3.6% saw some weakness in the U.S. economy, in 2018 from 3.8% in the previous year. yet the market recovered through the remainder of the year, buoyed by a The private equity market reduction in taxes and increased interest Despite these economic headwinds, global rates set by the U.S. Federal Reserve. M&A values rose significantly in 2018 to $4.1trn from $3.6trn in 2017 – already a By contrast, Europe and China saw healthy year for deals – as company appetite disappointing growth. Eurozone GDP for dealmaking remained high. growth fell to 1.8% from 2.4% in 2017, as a contraction in Germany’s economic output Nevertheless, we noted a fall in global in Q3 and challenging conditions in Italy and buyout activity last year. Our figures show Greece, plus the uncertainty surrounding that the value of buyouts was $259bn, a the UK’s exit from the European Union, decline from $315bn in 2017. It may be the dragged on the region’s economic case that this lower private equity activity in performance. China, meanwhile, continued part reflects the more challenging economic to see more muted growth, with a 6.6% environment seen last year. However, the expansion in GDP – the country’s slowest fact that M&A volume has continued to rate of growth for 28 years. increase while buyout volume has declined suggests that GPs remained disciplined in the face of continued elevated valuations.

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This is encouraging as it demonstrates We believe it is vital to continue investing as a precursor to a more difficult economic that private equity fund managers are through the cycle, including in higher price environment. At the same time, public approaching the market with caution and environments, as capital committed is markets have already recovered from the largely avoiding overpaying for assets. In called on over a number of years: it is not falls seen in late 2018, which suggests an the previous cycle, we saw a significant possible to time the markets in private element of mispricing in the markets. increase in the value and volume of deals equity fund investing. completed in 2005-2007, just before the While we are not anticipating a recession financial crisis. The benefit of hindsight In our Secondaries business, the continued in 2019, we do expect conditions to be shows that some of these deals were high pricing of LP positions led us to challenging. In the U.S., where growth completed at too high a price to generate emphasise, as we have done over the has so far been strong, the boost to the attractive returns. In this current cycle, past few years, GP-centric transactions economy provided by the tax reforms GPs are taking a more measured approach, where we can add value, while also passed in late 2017 are expected to run which is reflected in a continued increase in building out our portfolio with energy fund out of road by the end of this year. The fact unfunded commitments. secondary positions to take advantage that the Federal Reserve pressed pause of the dislocation that persists in the in early 2019 on its policy of gradually Private equity exits, however, were stronger energy markets. Where we invested in LP increasing interest rates points to future in 2018 than in 2017, with realizations positions, we focused on select mid-market economic weakness in the U.S. and beyond, totalling $351bn, up from $337bn. GPs opportunities with exposure to defensive and we anticipate further complexity in were clearly able to capitalize on the strong sectors that are resilient to future 2020 as U.S. elections take place. Global M&A market, with buyers ready to pay high downturns. GDP growth is forecast by the International prices for good-quality assets. Monetary Fund to slow to 3.3% in 2019, And in Co-investments, we were able to pointing to risks including an escalation The year also saw some softness in mitigate high valuations by sourcing a in trade tensions, slower growth in key fundraising totals relative to previous years. record level of investment opportunities European economies and China, and the In the period since the financial crisis, during 2018. This allowed us to maintain uncertainty around Brexit. private equity fundraising has remained our investment pace but be highly selective buoyant as appetite among institutional and pick deals from a deep pool of Over time, we would expect the elevated investors has continued to increase and opportunities. We focused on investments asset price environment to ease as distributions have remained high. However, where there was a clear sourcing angle by softness in the economy starts to be we believe that this does not mark a turning the lead GP. In this context, we completed priced into valuations. As in the past, point for private equity fundraising, but multiple deals in which the lead GP this is likely to happen over an extended rather, it reflects the inherent lumpiness in combined two companies with clear period as sellers often take time to adjust the market. In 2017, there were significant synergies allowing them to drive down the to a different pricing landscape. While fundraisings by some large funds and entry multiple on a synergy-adjusted basis. we expect this to have an impact on exit the outlook for 2019 looks more akin to In addition, we added a number of middle- volumes, it will be a positive development 2017 than 2018. The fact is that LPs are market deals to the portfolio where the for investments, which can be made at continuing to increase their allocations to lead GP could demonstrate a strong angle, more attractive valuations. alternative investment strategies and to based on its relationship with the vendor private equity in particular. and deep sector experience, to execute the We may fine-tune some of our investment investment thesis. strategies to capitalize on different Our approach to the market economic conditions as they emerge, The persistence of the high asset price 2019 AND BEYOND >> including seeking out dislocations in the environment meant that our Primary Fund market and taking advantage of a need for Investment business continued its focus on As the year progresses, market volatility liquidity among some LPs should public sourcing and committing to high-quality is expected to continue normalizing from markets fall. However, our approach of GPs that remain disciplined through the unusually low levels in 2016 and 2017. Last building robust, carefully constructed cycle. We retain a market-neutral stance, year saw some increase in this, with the portfolios and maintaining a steady with our allocations mandated under our VIX Index recording some of the highest investment pace on behalf of our investors separately managed account agreements. volatility spikes since the crisis at certain through the economic cycle will remain our However, our global presence and capability points of the year, although it remained overarching philosophy. Our experience as enables us to select GPs from a wide and below the long-term average overall. We long-term investors over the past 20 years deep pool of opportunities, backing those have also seen a profound flattening of the has shown that this consistency has the with the potential to perform strongly and yield curve, as long-term debt instruments potential for continued good performance a proven ability to create value in portfolio offered lower yields than short-term debt, through good and more challenging times. companies even in more difficult times. albeit temporarily. This is widely recognized

ALPINVEST ANNUAL REVIEW 2018 9 PRIMARY FUND INVESTMENTS

AlpInvest’s primary fund investments continued to GPs had to restrict some LPs’ allocations to their funds when demand perform strongly in 2018. We continued to raise outstripped those funds’ hard-cap new capital and pursued a careful and considered targets. Nevertheless, in most instances, we were able to secure our desired approach to commitments, at a time when many of allocations with funds through 2018. This is the result of our strong focus the highest-quality fund managers were on relationship-building with new and oversubscribed, to build robust portfolios for our existing GPs, the high-quality client base we serve and AlpInvest’s reputation for clients with the potential to generate strong results consistency and longevity in the private through economic cycles. equity market. This high level of competition for access to high-quality GPs has, however, In 2018, AlpInvest’s Primary Funds €640m. This is a greater amount than created some imbalance in the terms business generated strong returns for in 2017, despite increased competition offered by these managers. In 2018, we our investor base, with distributions for allocations among some of private observed increased fund size step-ups, broadly in line with those seen over equity’s best-performing managers with some managers raising 1.5 to 2 the past two years. We are particularly and a fall in private equity fundraising times the amount of capital they secured pleased with the high proportion of totals more generally through the year. for their predecessor funds. In a more realized gains that we could distribute These commitments mainly consisted normal environment, we would expect to our investors alongside the return of re-ups with high-quality GPs, many of management fee percentages to decline of capital. This reflects the high asset which were oversubscribed, although we to reflect economies of scale. However, prices prevalent in the market, but our were also able to secure commitments competition for allocations among LPs solid performance is equally a validation with GPs to which we had not previously meant that many GPs retained their of our consistent approach of careful and committed. existing fee structures. We also noted rigorous selection of fund managers and that a number of European managers are our ability to access high-quality GPs. We invested in our team in 2018 and now adopting US-style waterfalls that made two senior promotions, including provide more attractive carried-interest AlpInvest offers investors access to fund Joe O’Connor to Managing Director. We arrangement for GPs. In addition, investments through bespoke separately now have 20 investment professionals fundraising cycles have shortened, with managed accounts and we continued and seek to build out our team further many managers pre-empting a potential to attract significant amounts of new during 2019. future downturn to raise capital while capital from our clients in 2018. During demand among LPs is high. the year, we secured mandates from Competitive market several high-quality investors, many Increased appetite for private equity At AlpInvest, our response to this of which chose to recommit to us. In among institutional investors is shift in favour of GPs is to remain 2018, we raised €1bn in commitments clearly creating a highly competitive highly selective in those we back. The for primary fund investments. Our environment for LPs and access to the competitive environment for access investment pace for the year was in line best-performing managers became to high-quality managers means we with our expectations, with commitments even more of an issue last year than in recognize that we are not always in to funds with a 2018 vintage year totalling previous years. Many oversubscribed a position to change the terms on

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offer. Instead, we remain focused on have experienced before and have long for our clients to gain exposure to funds ensuring, through our rigorous due anticipated and prepared for through that are currently access-constrained. diligence and selection processes, our portfolio construction. that we continue to back the managers We expect to continue committing that we believe can provide the Yet any correction in the markets capital at a steady pace through any strongest returns. should also be seen in a positive light. volatility that emerges in 2019. When this happens, we expect to see Asset prices remain high less competition in the GP fundraising As an investor with a 20-year track In a continuation of a trend we have market and a reversion to more record, we have invested through observed over the past two years, asset balanced GP-LP relationships, as well cycles and understand the importance prices remained high through 2018, even as a cooling of asset prices. These of vintage year diversifi cation and as stock market volatility increased, a developments, when they happen, the long-term view. Private equity number of key global economies showed are likely to offer conditions with the has long investment horizons that, signs of slowing growth and the U.S. potential to generate strong returns. when carefully managed, can mitigate Federal Reserve raised interest rates, Should the cycle turn during 2019, for volatility. We will remain disciplined, albeit not by as much as anticipated. example, we are well-positioned to selective and highly systematic in our acquire early secondaries positions in approach to the market, regardless of This clearly affects the prices paid by situations where LPs in funds that are what 2019 has in store. GPs at entry. Our strategy of investing in between 10% and 20% invested are high-quality GPs that remain disciplined seeking liquidity. This was a successful at such points in the cycle, together with strategy for AlpInvest during 2008 and our capability of investing across global 2009 and may provide an opportunity markets, is designed to mitigate such risks. We emphasize that it is important to remain invested, even in today’s high-price environment, as successful market timing is largely unattainable because private equity funds call capital over several years at different stages of the business cycle.

LOOKING AHEAD >>

We expect to see further volatility in 2019 as the potential for an event to trigger a downturn is increasing. Whatever that event may be, the fact that government, household and corporate debt levels are high raises the risk of the effects of the downturn becoming relatively widespread. This will clearly have some impact on capital already invested, a development that we

ALPINVEST ANNUAL REVIEW 2018 11 SECONDARY INVESTMENTS

AlpInvest’s secondary investment business leveraging the relationships we have with our 190-strong investor base and with more generated strong returns for our clients in 2018 than 310 GPs across all our business lines. as we continued to make solid distributions and AlpInvest’s collaborative approach committed steady levels of capital in a disciplined across our investment teams offers us insights into situations where we can manner in situations sourced away from the offer GPs solutions through secondary broader, highly competitive secondaries market. transactions. This gives us an edge in GP-centric deals, a segment of the market we have emphasized over the past few In 2018, we distributed a total of nearly secondary investments was 9.0x EBITDA, years as the overall secondaries market €1.6bn to investors in our secondaries with average net debt of 3.0x EBITDA. has become increasingly competitive and strategy, of which more than €950m was This is significantly lower than the market where we can often secure opportunities realized gains. This is a strong result that average EV for buyout funds of 10.6x at lower multiples than is possible on validates our cautious and differentiated EBITDA, with leverage of 5.8x EBITDA. We more traditional secondary investments. In approach to investment and our ability to believe this is a prudent approach as we 2018, we completed six GP-centric deals, originate proprietary opportunities outside remained cautious about the prospects of with many of these transactions the result of the intermediated and competitive many economies globally, in particular as of direct conversations with GPs and/or traditional secondaries market. Our European and Chinese markets recorded LPs and where we could provide tailored strategy has generated solid returns across lower GDP growth through the year. solutions to what can often be highly our fully invested secondaries accounts, Acquiring positions at the right valuation complex situations. which are now in the upper quartile. and with a conservative view on leverage helps to mitigate the risk of a downcycle Our transaction last year with Southern Competition in the private equity during our holding period. Capital, a South-East Asia mid-market secondaries market continued to intensify buyout GP, is a classic example of our in 2018, leading to average pricing at Proactive sourcing approach. We directly sourced this record-high levels, with many LP positions Our proactive sourcing capability is investment through our platform and trading at a premium to net asset value. essential to our ability to select the negotiated directly with the GP. The In spite of this, we committed €1.6bn of highest-quality opportunities and secure transaction enabled the GP to transfer capital across 12 secondaries transactions attractive pricing, as we are often able three existing investments into a new during the year while still maintaining to secure deals outside of competitive fund as well as to restructure some of the a disciplined stance on pricing. This is situations. During 2018, we reviewed 250 related co-investment vehicles. It provided a greater amount than in 2017 and our investment opportunities, of which 30 met optionality to existing investors either to investment pace is now firmly on track. By our criteria for due diligence. With 12 of realize their investments or continue their the end of 2018, we had committed nearly these completed as investments, our hit investment via the new fund and benefit half of our sixth secondaries program. rate is just over a third of those that went from further value creation. through due diligence. In addition, of the We secured these investments at lower 250 investments we reviewed, 40% were The portfolio consists of three defensive multiples than were generally seen in the originated through our own networks and assets, including a telecom tower business, wider market. The weighted average entry eight of the 12 completed transactions a chain of general practitioner and enterprise value (EV) multiple for our 2018 were proprietary deals. We achieve this by radiologist clinics, and a manufacturing

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company specialized in the global on more defensive industries, such as future downturn. As a result, in 2019, we medical space. We acquired the portfolio healthcare, consumer staples, technology will be exploring ways of developing our at 11.4x EBITDA with leverage of 3.5x and telecoms that offer long-term stability involvement in this part of the market EBITDA, with significant growth in the to investors and are less susceptible to without the use of what we consider underlying companies. Leveraging our downturns. to be excessive leverage. To assist us experience, the investment is structured with this, we are delighted to welcome to provide a strong alignment of interest, OUTLOOK FOR 2019 >> back Vjerana Spajic, who is re-joining including a rollover of carried interest and AlpInvest this year as a Vice President performance ratchets.1 We believe our approach of building in our secondaries team after spending portfolios consisting of high-quality four years focussing on preferred equity Energy & LP portfolio opportunities GPs – often sourced through our global solutions in the secondaries market. In 2018, we also continued to see pool of relationships – our preference for significant value in energy-specific funds, situations where we can add value, our We expect to continue to build out an area we identified a few years ago disciplined pricing and our focus over the our team through 2019. Now with 26 as offering significant opportunity for past year on funds that invest in defensive investment professionals globally, many secondary transactions. We completed sectors have built a firm foundation for of whom have been with AlpInvest for two transactions in this sector, solid return generation, even as we start many years, we are well positioned to committing a total of €184m. By the end to see signs of the cycle turning. continue to invest on a balanced basis and of the year, we had investments in 14 LP at a steady pace, seeking out the most interests across six high-quality energy Towards the end of 2018, we saw promising investment opportunities that funds, where we expect to generate long- heightened volatility in public markets emerge across the economic cycle. term value from the dislocation in pricing and an inversion of the yield curve. that persists in this part of the market. These are often precursors to more With commodity prices further increasing difficult economic conditions and we through 2018, we laid the groundwork will be watching for further signs of for further deals beyond the upstream a deterioration in the outlook as 2019 production assets where we had focused progresses. Until markets change, we our efforts to date. We believe that, will continue our focus on relative-value with a rebound in US energy markets in investing by targeting less-cyclical 2018, demand for midstream assets will sectors, on GP-centric deals and on increase as we go through 2019. selective LP positions.

Our investments in LP fund positions Nevertheless, as the cycle turns, our were highly selective, particularly given long experience in the secondaries the high pricing we see in this part of market has shown us that LP portfolio the market. In 2019, we made five such transactions become more attractive as investments where we found attractive investors seek liquidity in more difficult opportunities primarily in mid-market times. When this happens, we expect to funds, where pricing tends to be lower become more active in this part of the than in larger funds. These positions were market. Nevertheless, we recognize that acquired at between 8x and 10x EBITDA. leverage looks set to remain a feature We actively sought out funds with a focus of LP portfolio transactions even in any

1 Case studies are intended to provide examples of the types of transactions AlpInvest pursues and do not represent all investments made by AlpInvest or the outcomes achieved. Investment rationales and other considerations are based on AlpInvest’s internal analysis and views as of the date of the investment commitment and will not be updated. References to a particular investment should not be considered as 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.

ALPINVEST ANNUAL REVIEW 2018 13 CO-INVESTMENTS

Our co-investments business had a strong year in This enabled us to be highly selective in the deals we chose to underwrite and 2018. We sourced a record level of investment support in context of a challenging deal opportunities, which allowed us to maintain our environment. In 2018, we selected just 8% of the number of deals we saw for ACP investment pace while being highly selective. VII, while maintaining a steady investment pace. We could have invested significantly Distributions to our investors continued to be more capital, but we believe our rigorous strong as well, taking advantage of the good exit approach to sourcing and our disciplined deployment will offer our investors strong environment we saw during the year. potential for good performance through the economic cycle.

Last year was a robust period for the liquidity in debt markets , where we saw Overall, we made 16 investments in 2018 for distributions from our equity co-investment a high level of refinancing activity. ACP VII and have built a highly diversified and mezzanine deals as we were able to portfolio with over 30 investments in total capitalize on a strong appetite for Investments in 2018 across multiple geographies, sectors high-quality businesses around the world. In our Co-investments business, we and lead GPs. We selected these deals High liquidity and a continued strength in distinguish between our Co-Investment based on robust screening that identified M&A, capital markets and debt markets Programs, which are focused on opportunities that we believe have the most were in evidence through much of the year, opportunities from AlpInvest’s GP network attractive characteristics in today’s market. although Q4 was particularly active on the one hand, and on the other, a discreet In particular, we sought out deals where for realizations. number of separately managed accounts there was evidence of a strong sourcing where we support institutional investors angle by the GP in order to mitigate high Overall, we returned €1.2bn to our with sourcing and executing co-investments price levels seen in the market. For investors from both our equity co- from their own respective GP relationships. example, we have done multiple deals investment and mezzanine programs, In 2017, we raised our latest Program, whereby the lead GP combined two including a high proportion of realized AlpInvest Co-Investment Program VII (ACP companies with clear synergies allowing gains. The pooled gross money multiple of VII), which reached approximately $3bn in them to drive down the entry multiple on an realized co-investments from our equity aggregate. During 2018, we continued to adjusted basis. In addition, we focused on co-investment portfolio in 2018 was 2.1x, make progress in investing capital out of companies in defensive sectors, especially attesting to the strong performance of ACP VII in line with our investment strategy. in healthcare and software, as these are the companies we chose to invest in. We invested €510m in new equity the businesses that we expect will be These distributions were realized in both co-investments from ACP VII, with close to most resilient in the event of a softer more mature funds and recent funds. We 35% of the program committed by the year end. macroeconomic environment. were also able to crystallize returns in more recent funds by completing some We sourced a record level of more than The market environment in 2018 exits earlier than anticipated as the lead $10bn of potential equity opportunity There has been a continued strong sponsors we co-invested with found buyers for ACP VII in almost 200 investment appetite for equity co-investments from ready to pay attractive valuations and opportunities during 2018, which we the private equity investor community. lenders willing to advance debt to good achieved primarily by leveraging AlpInvest’s While this drove further competition companies. Returns from our mezzanine strong relationships with over 310 GPs for co-investments through 2018, investments were positively impacted by around the world. it eased somewhat as the supply of

14 ALPINVEST ANNUAL REVIEW 2018 OVERVIEW / INVESTMENTS 04-15 /INVESTMENTS OVERVIEW

co-investments continued to rise as GPs the companies and lead GPs over our LOOKING AHEAD >> increasingly favoured offering their larger history. Both were European deals that deals for co-investment rather than opting met our return profile and conformed to As we move through 2019, we will continue to complete club transactions with our robust underwriting standards. to invest carefully in what may become a other GPs. more challenging market environment. Solid platform, senior team Over the past few years, we have very In addition, we have noted that while AlpInvest’s co-investment business deliberately built a portfolio of investments investors recognize the benefits of continued to invest in the team in 2018. that we believe will also perform well in co-investing, many also found that the Most notably, Sid Murdeshwar was a softer macroeconomic environment. strategy can be challenging to execute promoted to Managing Director, effective Throughout the year, we will continue effectively fully in-house. Many are now on January 1, 2019. We were also pleased to focus on the themes of defensive opting to invest either via dedicated that Amit Sachdeva rejoined AlpInvest business models and deals where GPs co-investment commingled funds or last year to head our Asia co-investments have a strong sourcing angle. We will also through separately managed accounts. At business. We now have seven Managing remain committed to continue building AlpInvest, having completed over 240 Directors in the co-investment business, diversification into our portfolio – the co-investment deals globally, we were well including several with long-standing largest investment in ACP VII represents positioned to find the best opportunities in experience with AlpInvest, representing just 5% of total capital and most deals are the market through 2018 as GPs actively a high level of seniority and stability in significantly smaller in size. sought our involvement. This is the result the team. of the reputation we have built over We anticipate that by the end of 2019, we more than 18 years for being a trusted We expect to invest further in our team will have committed over two-thirds of partner with the capacity to underwrite this year and have already made two new ACP VII, assuming a continuation of our transactions, invest meaningful amounts hires in 2019. We seek to build strong current investment pace. of capital and add value. teams with diverse backgrounds as we are confident that this will contribute to Besides our equity co-investment better performance over time. program, we we also have a separate capacity to provide mezzanine funding to high-quality companies. Over the past few years, the mezzanine market has faced challenges as strong liquidity in debt markets and the growth of private debt funds have provided plentiful capital at a lower cost than is viable through traditional mezzanine structures. This continued through 2018, even as we saw an inversion in the yield curve in the U.S., as the weight of capital raised by private debt funds continued to fuel credit markets. We completed two mezzanine transactions in 2018, which were carefully selected on the basis that we knew the situations well through interactions with

ALPINVEST ANNUAL REVIEW 2018 15

TEAMAND GOVERNANCE 19-30

TEAM AND GOVERNANCE

19 Governance 20 Managing Directors 24 Responsible investing 26 Human resources 27 Remuneration policy 28 Risk management

GOVERNANCE TEAMAND GOVERNANCE 19-30

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 reporting, and similar purposes. This is THE INVESTMENT COMMITTEE partners to our stakeholders, and a crucial component of our relationship The Investment Committee, which meets strong governance breeds this trust. with Carlyle. on a near-weekly basis, is responsible Throughout the firm, we maintain a for making the final investment decisions disciplined approach to operational and THE BOARD for our business. It is chaired by Chris investment decision-making, and this The Board is responsible for determining Perriello, Managing Director of AlpInvest. shapes our culture, our processes, and the AlpInvest strategy and developing the Other members of the Investment our returns. business. It comprises four Directors. Committee are AlpInvest Managing Paul de Klerk, AlpInvest’s Chief Financial Directors Ruulke Bagijn, Neal Costello, The underlying philosophy behind and Chief Operating Officer, is the Richard Dunne, Michael Hacker, Erik AlpInvest’s systems and strategy is Chairman of the Board. Other members Thyssen, and Maarten Vervoort. a belief in the need for firm, effective of the Board are Glenn Youngkin, management, and internal discipline Co-Chief Executive Officer of The Carlyle THE OPERATING COMMITTEE to boost performance and enhance Group and a member of Carlyle’s Board The Operating Committee focuses on investment returns. of Directors, Lauren Dillard, former the day-to-day management, strategy, Head of the Carlyle Investment Solutions and policies concerning client-related Since August 2013, AlpInvest has been segment, and Wouter Moerel, Managing activities, including providing advice wholly-owned by The Carlyle Group Director of AlpInvest. on investment objectives and terms and forms part of Carlyle’s Investment and conditions, investment strategy Solutions business segment (‘Investment Subject to regulatory approval, Ruulke monitoring, and related regulatory and Solutions’). Investment Solutions Bagijn and Erica Herberg will join the compliance matters. Effective May 28, helps clients meet their objectives AlpInvest Board. Such approval is 2019, Erica Herberg will be appointed through tailored portfolio construction expected in the next few months. At Chair of the Operating Committee. At and implementation. The Investment such time, Ms. Bagijn will also assume that point in time Paul de Klerk will step Solutions platform seeks to give the position of Chair of the Board, down from the Operating Committee investors access to large and complex Ms. Herberg will also assume the role of and become a Senior Advisor. Other alternative investment strategies – AlpInvest’s Chief Financial Officer, and members are Rob de Jong, Eric Hanno, private equity and real estate – on a Mr. de Klerk will relinquish the position of George Westerkamp, Wouter Moerel, and global basis. Chairman and AlpInvest’s Chief Financial Wendy Zhu. and Chief Operating Officer, and he will AlpInvest carries out its investment become a non-executive Board member. operations independently of Carlyle and Lauren Dillard will step down from the its affiliated entities. Carlyle maintains Board effective as of May 28, 2019. a one-way information barrier between Investment Solutions (which includes AlpInvest also has two committees that AlpInvest), on the one hand, and the other are involved in the day-to-day operations business segments of Carlyle, on the of the firm: the Investment Committee other. This information barrier restricts and the Operating Committee. the flow of non-public, commercially sensitive Investment Solutions information from Investment Solutions to the other Carlyle business segments, other than for certain regulatory,

ALPINVEST ANNUAL REVIEW 2018 19 MANAGING DIRECTORS

01 03 05

02 04 06

01 Ruulke Bagijn 03 Victor Backstrom2 05 Neal Costello Ruulke is a Managing Director, Head Victor is a Managing Director Neal is a Managing Director on the of Carlyle Investment Solutions1 and responsible for Investment Solutions Secondary Investments team and Co-Head of AlpInvest’s Primary Fund Sales in Europe, based in London. He focuses on transactions in Europe. Investments team. She is a member joined the fi rm from Brummer and He is a member of the Investment of the Investment Committee. Ruulke Partners, where he was a Director Committee. Neal rejoined AlpInvest joined AlpInvest in 2017 from AXA working with European investor Partners in 2015 from Canada Investment Managers – Real relations, based in Stockholm and Pension Plan Investment Board. He Assets, where she was the Global London. Prior to that, Victor worked originally joined AlpInvest in 2003 Head of Real Assets Private Equity at Man Investments and Accenture. in the New York offi ce and led the and a member of its Management fi rm’s secondary efforts in Asia Board. Prior to that, she was through 2013. Previously, Neal was Co-CIO Investment Management and with CIBC World Markets’ Mergers CIO Private Markets at PGGM, and & Acquisitions Investment Banking previously held several senior roles division. at ABN AMRO.

02 Paul de Klerk 04 Peter Cornelius 06 Rob de Jong Paul is a Managing Director and the Peter is a Managing Director Rob is a Managing Director and Chief Financial Offi cer and Chief and AlpInvest’s Chief Economist, Co-Head of AlpInvest’s Co-Investments Operating Offi cer of AlpInvest, and responsible for analyzing the team, with a focus on Europe. He he also serves as the Chairman economic and fi nancial environment is a member of the Operating of AlpInvest’s Board of Directors. for private equity markets and Committee. Rob joined AlpInvest in He co-founded AlpInvest, chairs examining the implications for 2001 from PricewaterhouseCoopers, the Operating Committee, and is AlpInvest’s strategic asset allocation. where he was a Senior Consultant responsible for the investment Peter joined the fi rm in 2005 from for Corporate & Operations portfolio valuation and review Royal Dutch Shell, where he was Strategy, responsible for advising process. Before joining AlpInvest, Group Chief Economist. He is the and assisting multinationals and Paul was responsible for one of the author of International Investments governmental organizations on largest corporate banking units at in Private Equity (Elsevier, 2011), and developing corporate and business ABN AMRO in the Netherlands. co-author of Mastering Illiquidity strategies. (Wiley, 2013).

1 Effective May 7, 2019. 2 Victor Backstrom is employed by CECP Advisors LLP, a Carlyle-affi liate registered with the Financial Conduct Authority in the United Kingdom.

20 ALPINVEST ANNUAL REVIEW 2018 TEAMAND GOVERNANCE 19-30

07 09 11

08 10 12

07 Richard Dunne 09 Eric Hanno 11 Wouter Moerel Rich is a Managing Director Eric is a Managing Director and Wouter is a Managing Director and and Co-Head of AlpInvest’s Co-Head of AlpInvest’s Primary Co-Head of AlpInvest’s Secondary Co-Investments team, with a focus Fund Investments team, with a focus Investments team. He is a member on transactions in North America. on the Americas. He is a member of the AlpInvest Partners Board He is a member of the Investment of the Operating Committee. Eric and of the Operating Committee. Committee. Rich joined AlpInvest rejoined AlpInvest Partners in 2015 Wouter joined AlpInvest in 2005 in 2004 and has 15 years of related from Partners Group, where he from The Carlyle Group, where investment experience. Prior to led its U.S. buyout and distressed he was a Principal responsible joining AlpInvest, he worked in the primary activities and served on its for investments in the telecoms Investment Banking division of investment committee. Previously, and media sectors. He represents Citigroup Global Markets. Eric was an Associate at AlpInvest AlpInvest on multiple advisory Partners and he started his career boards. at Goldman Sachs.

12 Sid Murdeshwar 08 Michael Hacker 10 Yasuyuki Kanda Sid is a Managing Director on the Michael is a Managing Director on Yasu is a Managing Director in the Co-Investment team, where he the Secondary Investments team, Investment Solutions team and is responsible for transactions in with a focus on the North American focuses on Japan. He joined the fi rm North America. He joined AlpInvest market. He is a member of the from McKinsey and Company. Prior Partners in 2012 from Wafra Investment Committee. He joined to that, Yasu worked at Tokio Marine Partners, where he was a Vice AlpInvest Partners in 2007 from Asset Management, fi rstly as the President in the private equity group UBS Investment Bank, where he head of research of their U.S. entity, based in New York. was an Associate Director in the covering alternative investments for Private Funds Group, responsible Japanese institutional investors, and for providing secondary markets thereafter as the CEO of their London advisory services. entity. He has also worked at AIFAM Inc, and Mizuho Financial Group.

ALPINVEST ANNUAL REVIEW 2018 21 MANAGING DIRECTORS (CONT’D)

13 15 17

14 16 18

13 Christophe Nicolas 15 Chris Perriello 17 Todd Ruggini Christophe is a Managing Director on Chris is a Managing Director and Todd is a Managing Director on the AlpInvest’s Secondary Investments Co-Head of AlpInvest’s Secondary Co-Investments team, focusing on team and focuses on transactions Investments team, with a focus on U.S. transactions. He joined AlpInvest in Europe and the Middle East. He transactions in the Americas. He in 2008 from Alta Communications, joined AlpInvest in 2012 from Morgan is the Chairman of the Investment where he was an Associate working Stanley, where he co-headed the Committee. He joined AlpInvest in on private equity transactions in the fi rm’s secondaries team from the 2007 from Paul Capital, where he media and communications sector. London offi ce. was a Principal focused on fund Previously, he was an Analyst in investing. Chris represents AlpInvest the Investment Banking division of on multiple advisory boards. JPMorgan Chase.

14 Joseph O’Connor 16 Julian Rampelmann 18 Amit Sachdeva Joe is a Managing Director on the Julian is a Managing Director on Amit is a Managing Director on the Primary Fund Investments team the Secondary Investments team, Co-Investments team and leads focusing on U.S. transactions. with a focus on U.S. transactions. AlpInvest’s efforts in the Asia-Pacifi c He joined AlpInvest in 2008 from He rejoined AlpInvest in 2011 from region, where he focuses on equity Cambridge Associates, where he was Warburg Pincus in London, where he transactions in Asia and Australia. a Senior Associate in the U.S. private focused on mid-market consumer Amit rejoined AlpInvest in 2018 after equity research team. and services growth investments. about three years at Neuberger Prior to his time at Warburg, Julian Berman in Asia. Previously, he was was an Associate on the Secondary with JPMorgan based in New York Investments team based in and started his working career as a Amsterdam. supply chain management consultant in the U.S. at i2 Technologies and LogicTools.

22 ALPINVEST ANNUAL REVIEW 2018 TEAMAND GOVERNANCE 19-30

19 21 23

20 22

19 Erik Thyssen 21 Maarten Vervoort 23 Wendy Zhu Erik is a Managing Director on Maarten is a Managing Director Wendy is a Managing Director on AlpInvest’s Co-Investments team, on AlpInvest’s Primary Fund the Primary Fund Investments team focusing on equity transactions Investments team and is a member and focuses on the Asian markets. in Europe. He is a member of of the Investment Committee. She also devotes part of her time to the Investment Committee. Erik Maarten has been with AlpInvest sourcing and executing Secondary co-founded AlpInvest and has from the outset. He joined from investments. Wendy is a member of more than 25 years’ experience in PricewaterhouseCoopers, where the Operating Committee. She joined fi nancial services. He joined the he was a Senior Management AlpInvest in 2007 from Macquarie fi rm from Fortis Bank Nederland, Consultant in the corporate strategy Funds Management, where she where he was an Executive area. He represents AlpInvest on was Senior Vice President of Asia- Board member responsible for multiple advisory boards. Pacifi c regional private equity fund commercial banking. investments and co-investments. Wendy represents AlpInvest on various advisory boards.

20 Roberto Torrini 22 George Westerkamp Roberto is a Managing Director on George is a Managing Director and AlpInvest Partners’ Co-Investments head of the Investment Solutions team and focuses on equity team at AlpInvest and a member transactions in Europe. He joined of the Operating Committee. From AlpInvest in 2013 from Advent 2000 to 2010, he was a Partner on International, where he was a the Co-Investments team, where he Director responsible for executing focused on buyout transactions in and managing private equity deals Europe. From 2000 to 2012, he was in the Italian and wider European a member of AlpInvest’s Investment markets. Committee. George joined AlpInvest from its predecessor, Parnib, where he executed middle-market buyout transactions in the Netherlands.

ALPINVEST ANNUAL REVIEW 2018 23 RESPONSIBLE INVESTING

Responsible investing has always been at the heart of Our approach This framework complements our ongoing AlpInvest’s philosophy. We remain committed to the work in responsible investment, including continual development of our own processes and to the consolidation of our updated due diligence questionnaire, which we rolled supporting GPs in further improving their own out during 2017. Aligned with the PRI’s LP responsible investment questionnaire, we approaches and monitoring practices. As a result, use this across all our new primary fund through 2018, AlpInvest developed and launched a investments and in secondary investments where primary investments form part of Diversity and Inclusion Framework, and we continued the transaction. The aim of this initiative is to help to standardize the information to promote good environmental, social and governance LPs require on responsible investment (ESG) practice across the business through our from fund managers before commitments are made and it can provide a platform for existing processes and involvement in external further discussions during the fund’s life. responsible investment initiatives. To help our teams to assess how far advanced GPs are in their processes and As early signatories to the Principles for Institutional Limited Partners Association management of ESG issues, we developed Responsible Investments (PRI) in 2009, we (ILPA) and intend to add questions to our our own evaluation tool. In addition, have continued to build on our processes due diligence questionnaire for GPs so AlpInvest seeks from GPs in which it that we formalized a decade ago. At the we can track developments over time and invests a commitment to responsible forefront of practices and thinking in report back to our clients. investment practices and disclosure. responsible investing, we recognize that Overall, our deal teams remain closely we have an important role to play in setting AlpInvest has always sought to be an involved across our portfolio, so that high standards for our own organization inclusive employer, yet we recognize that responsible investment is embedded and ensuring that the private equity funds by making a commitment to measure our throughout our organization. we invest with put in place and maintain progress, we can improve further. careful and considered ESG investment The framework will help to ensure that we Our multifaceted approach allows us practices. We achieve this through an are casting the net as widely as possible to continually assess progress in ESG ongoing and active dialogue with our own when it comes to recruiting new talent policies and practices among the GPs in investors and with the wider industry and that staff can reach their full our portfolio. Using a scoring system, we to encourage best practice in portfolio potential within our firm. This initiative track and monitor GPs’ performances on management, reporting and transparency. is important for us and the LPs and GPs ESG measures on an ongoing basis. This we partner with, not just because it is the highlights areas where fund managers may Diversity and inclusion right thing to do, but also because we be lagging and enables us to offer support In late 2018, AlpInvest launched a Diversity believe that by building diverse teams, for further development of their responsible and Inclusion Framework that will be we create the right environment for investment approaches or follow up on applied across our organization. As part continued strong performance. Many any negative responsible investment of this framework, we will also start research studies have demonstrated, developments where required. While there monitoring GP progress in this area. To this for example, that more diverse teams has been steady progress over the past end, we plan to use the guidance from the reach better decisions. decade, we are pleased to report that, over

24 ALPINVEST ANNUAL REVIEW 2018 TEAMAND GOVERNANCE 19-30

the past two years in particular, there has Encouraging best practice PRIORITIES FOR 2019 >> been a significant step up in the number As part of our commitment to responsible of GPs in our portfolio that are rated as investment, we aim to promote good Over the coming year, we will focus on ‘intermediate’ or ‘advanced’ practice well beyond our organization rolling out our Diversity and Inclusion ESG practitioners. and those in which we invest. AlpInvest Framework in our own organization has long been active across a number and will step up our engagement with This is highly encouraging as it suggests of industry-wide initiatives. AlpInvest’s GPs in this area, while also continuing that GPs are increasingly integrating ESG Responsible Investment Officer, Maaike to contribute to improving ESG practice policies into their investment processes. van der Schoot, was appointed Chair of across the private equity industry. In addition, while European GPs have Invest Europe’s Responsible Investment clearly taken a lead on responsible Roundtable in 2017, a role she continued Our ongoing dialogue with LPs allows investment practices, we are encouraged through 2018. us to identify issues that are becoming to note that those in other markets are increasingly important to them. During increasingly making good progress across As Chair, she helped to launch Invest 2018, alongside a rising interest in impact our portfolio. This development is also Europe’s new Guide to ESG Due Diligence investment strategies, the need for acknowledged externally: a recent survey for Private Equity GPs and their Portfolio increased consideration around climate by PwC on responsible investing in private Companies, which provides detailed change became even more apparent and equity found, for example, that 81% of information to help members adopt best many LPs now see this as a pressing issue. respondents now report on ESG issues at practice and will be particularly useful for In line with this, we will examine how we board level at least once a year and 91% smaller fund managers, many of which can best develop and incorporate climate have now developed or are developing a may lack the resources required to build change measures into our responsible responsible investment policy1. their own frameworks. The roundtable, investment processes to ensure we are supported by AlpInvest, also started work able to provide our investors with the Nevertheless, there is still some way to go during 2018 on climate change issues and transparency they require. before responsible investment practices reporting. In addition, Ms. van der Schoot are fully embedded in all GPs’ processes. helped Invest Europe to deliver a course for We believe that the further standardization members on responsible investment. of information on ESG issues required by LPs will help in this regard. The PRI LP due Other AlpInvest team members further diligence questionnaire, published in 2015, contributed to external responsible is becoming a well-used tool to achieve investment initiatives in 2018. AlpInvest this and has provided a good starting point Managing Director Ruulke Bagijn for discussion between LPs and GPs. participated in a responsible investment With regards to ongoing monitoring of conference in London and helped to responsible investment practices, we note establish the Dutch chapter of Level 20, an that there remains some divergence in the organization that aims to improve gender information required by different LPs. This diversity in the private equity industry. is why we continue to share our approach Garrett Hall, an AlpInvest Principal, is a to responsible investment and ESG policies member of ILPA’s inclusion and diversity with LPs and engage with them on broader committee and was closely involved in developments as we work towards best the development of ILPA’s due diligence practice standards across the private guidance on inclusion and diversity. equity ecosystem.

1 PwC Private Equity Responsible Investment Survey 2019.

ALPINVEST ANNUAL REVIEW 2018 25 HUMAN RESOURCES

Our people are integral to our firm’s success, good investment decisions and generating attractive results for our investors. In generating returns for our investors and their 2018, we launched a new Diversity and beneficiaries. We endeavor to inspire, support, and Inclusion Framework, which we seek to build out further during 2019. motivate our employees through our development We invest substantial time in, and devote programs and reward systems. considerable attention to, the professional development of our staff, including both We believe that our values of mutual Experience is also an essential formal and on-the-job training, at all respect, professionalism, and integrity component of successful investment levels of the organization. We also engage encourage long-term commitment to our management: there is no substitute for in formal appraisal processes at least firm. Our senior staff1 have, on average, having lived through, and invested across, once a year. Informally, we encourage been with us for almost eight years. an entire market cycle, as most of our continuous feedback. senior team members have done. This stability contributes to a consistent AlpInvest strives to build a supportive approach to investment execution, to the AlpInvest is committed to building a and respectful environment, where benefit of our investors and GPs. diverse work environment and shaping people feel motivated and fulfilled in their an inclusive culture for its staff, factors work. We are committed to achieving which we believe are essential to making this objective. 2018 OVERVIEW2 AMSTERDAM / LONDON GENDER 30 93 63% 37% Investment Total Male Female professionals employees

161Total number of employees HONG KONG / TOKYO NATIONALITY 10 14 65 50 Investment Total Dutch U.S. / Canadian professionals employees

7Average years at AlpInvest1 NEW YORK / INDIANAPOLIS / SAN FRANCISCO 24 22 Other European / Rest of the 35 54 Russian World Investment Total 1 Managing Directors and Principals 2 As of December 31, 2018 professionals employees

26 ALPINVEST ANNUAL REVIEW 2018 REMUNERATION POLICY TEAMAND GOVERNANCE 19-30

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

ALPINVEST ANNUAL REVIEW 2018 27 RISK MANAGEMENT

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

28 ALPINVEST ANNUAL REVIEW 2018 TEAMAND GOVERNANCE 19-30

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, the use of credit facilities, and liquidity monitoring.

Operational risks AlpInvest is exposed to a range of operational risks that can arise from inadequate or failed systems, processes, and people, as well as external factors that may affect them. These include risks around human resources, legal manager or portfolio company to drive reputable banks, while our management and regulatory issues, tax, information performance and achieve its business company has limited exposure to adverse technology system failures, business objectives. As part of our portfolio movements in interest rates and foreign disruption, and internal control management program, we review our exchange rates. We typically seek to hedge weaknesses. investments regularly and employ foreign currency exposure when providing a rigorous process to manage our funds to our main operating subsidiaries. Operational risk management is relationships with fund managers and underpinned by clearly defined roles, portfolio companies. Credit risk segregation of duties, delegated AlpInvest is dependent on funding from authorities, and monitoring at all levels. Investment concentration its investors. Mandates are in place AlpInvest relies on a number of third- AlpInvest invests across a range of between the parties that define the party service providers to support our economic sectors and jurisdictions. Our minimum amounts our investors commit operations, including IT, insurance, investment policy is designed to create to AlpInvest for investment purposes. payroll, broker services, custodian a diversified portfolio across market These are subject to certain limitations services, fund administration, depositary segments, geographies, industries, and are monitored through various services, regulatory reporting services, deal sizes, and vintage years. We have compliance procedures. and pensions. We work with reputable investment guidelines in place to help firms and have service-level contracts address concentration risk, including Liquidity risks with a number of these parties. limits on the interest percentage held Private equity and mezzanine in any one fund or portfolio company. investments are generally illiquid and Our investment management process is Asset allocation is routinely discussed require a long-term commitment of subject to an annual ISAE 3402 Type II and compliance reports are reviewed capital with no certainty of return. audit to attest to the design and operating quarterly to ensure that allocations fall Interests in private equity funds are effectiveness of our internal controls. within these guidelines. also often subject to legal and other restrictions on resale, or otherwise Legal, tax, and regulatory risks Market risk may be less liquid than other types The regulatory environment for private As an advisory firm, AlpInvest has limited of securities, such as publicly traded investment funds and their sponsors exposure to financial assets. Cash is securities. AlpInvest informs investors continues to evolve. Increased scrutiny typically held in short-term deposits with of forthcoming liquidity requirements and newly proposed legislation

ALPINVEST ANNUAL REVIEW 2018 29 RISK MANAGEMENT (CONT’D)

applicable to private investment funds and the interests of the applicable client with GPs’ information and AlpInvest’s reporting their sponsors may also impose significant respect to the immediate issue and/or date, adjustments to valuations may be administrative burdens on AlpInvest with respect to the client’s longer-term made, if necessary. For example, the and may divert time and attention from courses of dealing as well as the effect value of an investment may be adjusted portfolio management activities. AlpInvest of such conflict or such resolution on for actual cash flows that occurred from has a team of legal and compliance AlpInvest and its affiliates. AlpInvest has the date of the reported valuations to the professionals dedicated to monitoring also adopted policies and procedures financial statement date. the legal, tax, and regulatory landscape to address certain identifiable potential to ensure the firm is in compliance conflicts. The December 2018 update to the with applicable requirements. Further, International Private Equity and Venture AlpInvest has adopted policies and Valuation standards Capital Guidelines have been incorporated procedures that are designed to ensure In 2018, we determined the fair value of into AlpInvest’s valuation guidelines for compliance with various regulatory our direct and co-investments (equity and 2019. The impact is expected to be minimal. regimes applicable to the firm and mezzanine) based on the International its business, such as the Alternative Private Equity and Venture Capital THE ALPINVEST COMMITMENT >> Investment Fund Managers Directive and Valuation Guidelines (Edition December the General Data Protection Regulation. 2015, endorsed by Invest Europe), or AlpInvest endeavors to uphold the highest where required in accordance with standards and mitigate risk in a timely Conflicts of interest Accounting Standards Codification Topic and consistent fashion. We are committed AlpInvest and certain of its related 820 as prescribed by U.S. Generally to strong and robust governance across entities engage in a broad range of Accepted Accounting Principles (‘GAAP’). the firm and our experience and expertise activities, including investment activities This requires management’s judgment help us to deliver on this goal. for their own account, and providing and takes into consideration the specific transaction-related, investment advisory, nature, facts, and circumstances of each management, and other services to investment, including, but not limited its clients. In the ordinary course of to, the price at which the investment conducting its activities, the interests of was acquired, current and projected a client may conflict with the interests of operating performance, trading values AlpInvest or other clients. In the case of on public exchanges for comparable all real or perceived conflicts of interest, securities, and financing terms currently AlpInvest’s determination as to whether available. To determine the fair value of an actual conflict of interest exists, which our investments in private equity funds, factors are relevant, and the resolution the valuations provided by the GPs were of any such conflicts, will be made using used in combination with our own initial AlpInvest’s best judgment, but at its sole due diligence and ongoing portfolio discretion. In resolving conflicts, AlpInvest management. Due to the time lag may consider various factors, including between receiving the reporting of the

30 ALPINVEST ANNUAL REVIEW 2018 FINANCIAL PERFORMANCE 32-40

Secondary investments overview Equity co-investments overview Mezzanine co-investments overview Important information Investment performance Primary fund investments overview FINANCIAL FINANCIAL PERFORMANCE 36 37 39 40 32 34 INVESTMENT PERFORMANCE1

AlpInvest achieved strong financial performance which was in line with the prior year-end. The Co-Investment Main Fund VI ended again in 2018, continuing a history of consistently 2018 with a net IRR of 25%, an increase of delivering robust returns to our investors since the approximately 3% over the prior year-end. firm’s inception. We believe the performance of our funds underlines the rewarding, AlpInvest was pleased with the strategies combined) remained in line with long-term nature of private equity performance of its funds and other client 2017 levels and our net IRR (‘internal rate investing. Looking to the future, the accounts in 2018. Through the end of 2018, of return’) since our inception 19 years capital that has already been committed we received €74.5bn of commitments ago was approximately 12% (see page to us by our investors allows us to seek from our investors. Our assets under 42 for more detailed information on IRR new, attractive investment opportunities management as per December 31, 2018 methodology). In Fund Investments, the and we believe we are well positioned to were €37.8bn in total, of which €20.9bn net IRR from our latest fully committed continue to deliver strong returns over was for Fund Investments, €9.9bn for fund, Main Fund VI, was 16% and the net the coming years. We have maintained Secondary Investments and €6.9bn for IRR from our Main Fund V, improved to 14% a disciplined approach to investing, Equity and Mezzanine Co-Investments. as of year-end versus 12% as of the end taking advantage of prospects presented of 2017, mainly due to the J-curve effect within our chosen markets while being Gross and net returns for the total of our (see below). Our Secondary Investments mindful of the challenges arising from the fully committed Main Funds (across all Main Fund V achieved a net IRR of 20%, macroeconomic environment.

J-curve SMOOTH ACTUAL Returns % Returns

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 1 Past performance is not indicative of future results or a price, cash starts to flow to the LPs. approximately five years after the start of guarantee of future returns. Return metrics are subject to change as a fund or investment portfolio matures. Private equity measures returns using the mandate.

32 ALPINVEST ANNUAL REVIEW 2018 FINANCIAL PERFORMANCE 32-40PERFORMANCE FINANCIAL

Life-to-date IRRs1

Fully committed funds2 Vintage Fund size Gross Net year (€m) IRR IRR

Main Fund I - Fund Investments 2000 5,175 12% 11% Main Fund II - Fund Investments 2003 4,545 10% 10% Main Fund III - Fund Investments 2005 11,500 10% 10% Main Fund IV - Fund Investments 2009 4,877 17% 17% Main Fund V - Fund Investments 2012 5,080 15% 14% Main Fund VI - Fund Investments 2015 1,106 18% 16% Main Fund I - Secondary Investments 2002 519 58% 54% Main Fund II - Secondary Investments 2003 998 27% 26% Main Fund III - Secondary Investments 2006 2,250 11% 10% Main Fund IV - Secondary Investments 2010 1,859 19% 18% 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% 4% Main Fund IV - Co-Investments 2010 1,475 24% 22% Main Fund V - Co-Investments 2012 1,122 28% 26% Main Fund VI - Co-Investments 2014 1,115 27% 25% Main Fund II - Mezzanine Investments 2004 700 8% 7% Main Fund III - Mezzanine Investments 2006 2,000 10% 9% All other funds Various 14% 10% 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 5,184 NM NM Main Fund VII - Co-Investments 2017 2,485 NM NM All other funds Various 16% 14% Total funds in the commitment period 10% 7% Total AlpInvest 13% 12%

Total capital commitments received by AlpInvest4 (€bn)

70 74.5 1 As of December 31, 2018. Past performance is not 71.7 indicative of future results or a guarantee of future 60 67.0 returns. Return metrics are subject to change as a 63.0 fund or investment portfolio matures. Please see the 50 60.2 additional disclosures on page 42 for further important 56.8 52.3 information regarding AlpInvest’s track record. 48.9 2 ‘Fully committed funds’ are past the expiration date 40 47.6 of the commitment period as defined in the respective 44.4 limited partnership agreement. 3 Returns are not considered meaningful for Main Fund30 VI – Secondary Investments and Main Fund VII – Co-Investments, as the commitment period for these funds commenced in 2017. 20 4 Total capital committed to AlpInvest includes €7.0bn of investor mandates that are managed on behalf of 10 investors by AlpInvest Partners B.V., but for which the investment decisions were made by parties other than AlpInvest or its affiliates (€6.7bn was committed 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 before the end of 2002 and €0.2bn before AlpInvest began managing such investments in 2013).

ALPINVEST ANNUAL REVIEW 2018 33 PRIMARY FUND INVESTMENTS OVERVIEW1

2018 fund portfolio activity 2018 new fund commitments2 AlpInvest made new commitments to 25 4 funds with a 2018 vintage year (or earlier) Name Segment Relationship for our investors. Of these, 22 were to funds Advantech Capital II NTM3 Existing where a prior primary fund commitment Affinity Asia Pacific Fund V NTM3 Existing had been made with the GP. The other three Apollo Investment Fund IX5 Global large buyout Existing represent new relationships. CapVis Equity V EU Mid-Market Existing Charlesbank Equity Fund IX US Mid-Market Existing During 2018, 17 commitments were made Equistone Partners Europe Fund VI EU Mid-Market Existing to funds that are expected to have a 2019 (or Gilde Equity Management Benelux IV EU Mid-Market Existing later) vintage. Those 17 funds are therefore Graphite Capital Partners IX EU Mid-Market Existing not included in this year’s Annual Review overview. Index Ventures Growth IV Venture capital Existing Index Ventures IX Venture capital Existing In 2018, a total of €1.5bn of capital was Inflexion Buyout Fund V EU Mid-Market Existing called to fund investments in private equity Inflexion Partnership Capital Fund II EU Mid-Market Existing and mezzanine funds. Lee Equity Partners Fund III US Mid-Market New Linden Capital Partners IV US Mid-Market Existing During the year, AlpInvest received €4.6bn Littlejohn Fund VI US Mid-Market Existing of proceeds from investments. Within this Miura Fund III EU Mid-Market Existing figure, 2.2% came from the 2000–2002 One Equity Partners VII US Mid-Market New mandate, 4.4% from the 2003–2005 PAI Europe VII EU Mid-Market Existing mandate, 40.3% from the 2006–2008 Redview Capital II NTM3 Existing mandate, 29.3% from the 2009–2011 Sentinel Junior Capital I US Mid-Market Existing mandate, 17.7% from the 2012–2014 5 mandate, 2.3% from the 2015 mandate, and Silver Lake Partners V Global large buyout Existing 3.9% from other mandates. Symphony Technology Group V US Mid-Market Existing Thompson Street Capital Partners V US Mid-Market New Trivest VI US Mid-Market Existing Webster Capital IV US Mid-Market Existing

1 Including mezzanine and clean tech fund investments 2 Commitments to funds with a 2018 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. 3 Non-traditional markets include markets outside of Western Europe and the U.S. to the extent not covered by global large buyout. 4 Existing includes funds where a prior primary fund commitment has been made with the GP by AlpInvest. 5 Denotes commitments that were made solely from secondaries mandates.

34 ALPINVEST ANNUAL REVIEW 2018 FINANCIAL PERFORMANCE 32-40PERFORMANCE FINANCIAL

Primary Fund Investments portfolio overview As per December 31, 2018

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

2000–20021 Buyout and 10,853 9,998 9,412 100% venture capital 2003–2005 Buyout and 4,545 4,508 4,525 104% venture capital 2006–2008 Buyout and 11,500 11,323 11,650 103% venture capital 2009–2011 Buyout and 4,877 4,766 5,063 102% venture capital 2012–2014 Buyout and 5,080 4,961 4,668 87% venture capital 2015 Buyout and 1,106 1,081 695 66% venture capital 2016 Buyout and 368 357 127 37% venture capital 2017 Buyout and 361 350 33 9% venture capital 2018 Buyout and 378 317 10 3% venture capital 2007–2012 Clean 658 613 640 96% technology 2000–2017 Mezzanine 1,354 1,243 1,367 108% funds 2003–2018 Buyout and 1,676 743 199 27% venture capital – other mandates Total 42,756 40,260 38,389 96%

Fund commitments overview4 As per December 31, 2018

Segment % of capital GPs5 Funds committed

Global large buyout 32% 23 76 1 The Fund Investment Mandate 2000–2002 includes pre-vintage year 2000 commitments made by our European mid-market 16% 57 115 investors and AlpInvest predecessors. U.S. mid-market 22% 80 142 2 At historical foreign exchange rates. 3 Based on foreign exchange rate as per December 31, Non-traditional markets6 12% 74 139 2018. 4 Underlying fund vintage years 2000–2018. Venture capital 10% 64 143 5 As a GP can have funds in more than one category, the total is larger than mentioned in the text above. Clean technology 2% 14 16 6 Non-traditional markets include markets outside of Mezzanine 4% 15 24 Western Europe and the U.S. to the extent not covered by global large buyout. Other7 4% 12 14 7 This segment comprises non-control distressed debt and (primary and secondary) funds-of-funds. Total 100% 339 669

ALPINVEST ANNUAL REVIEW 2018 35 SECONDARY INVESTMENTS OVERVIEW1

2018 portfolio activity Secondary Investments portfolio overview AlpInvest committed €1.6bn across 12 As per December 31, 2018 Secondary Investment transactions in 2018, compared with €0.9bn across nine Vintage Investment Mandate Capital Capital Invested years focus amount committed2 invested2 as % of transactions in 2017. (€m) (€m) (€m) committed3

For the 12 months ending December 31, 2000–2002 Buyout 519 519 512 100% 2018, AlpInvest received proceeds from 2003–2005 Buyout 998 994 951 96% 110 out of 140 Secondary Investments, 2006–2008 Buyout 2,250 2,147 2,087 96% totaling €1.6bn compared with €1.7bn 2009–2011 Buyout 1,859 1,806 1,787 98% received in 2017. 2012–2015 Buyout 4,273 4,142 3,917 94% 2016–2019 Buyout 5,184 2,472 1,815 76% 2002–2017 Mezzanine funds 429 417 432 100% 2003–2018 Other buyout 660 400 343 86% Total 16,173 12,898 11,844 92%

1 Includes mezzanine secondary investments. 2 At historical foreign exchange rates. 3 Based on foreign exchange rate as per December 31, 2018.

36 ALPINVEST ANNUAL REVIEW 2018 1 EQUITY CO-INVESTMENTS OVERVIEW 32-40PERFORMANCE FINANCIAL

2018 portfolio activity In 2018, AlpInvest invested €533m in equity co-investments. This included €510m in 16 new investments and €23m of investments in existing portfolio companies. Total realizations in 2018 for our equity co-investment portfolio were €1.1bn.

2018 new equity co-investments2

Name Sector Geography Date of completion Description

Asmodée Consumer France Oct 2018 International publisher and distributor of board, card and discretionary digital games Asurion Consumer U.S. Aug 2018 Handset protection and customer support services provider discretionary to wireless carriers Delphi Behavioral Healthcare U.S. May 2018 Provider of drug and alcohol addiction treatment services Group Envision Healthcare Healthcare U.S. Oct 2018 Provider of outsourced physician services and operator of ambulatory surgical centers Edelman Financial Financials U.S. Jul 2018 Independent financial planning advisor for retail and Engines employer-sponsored wealth management Framery Industrials Finland Mar 2018 Soundproof office workspace manufacturer Netsmart Information technology U.S. Dec 2018 Provider of electronic health record and related healthcare IT software Recordati Healthcare Italy Dec 2018 Provider of pharmaceuticals RedCard Healthcare U.S. Feb 2018 Technology-enabled outsourced provider of healthcare communications and payments Systems Control Industrials U.S. May 2018 Manufacturer of customized control panels and electrical substation equipment enclosures Tortoise Capital Financials U.S. Jan 2018 Asset manager specializing in master limited partnerships Advisors and energy infrastructure investments Verifone Information technology U.S. Aug 2018 Provider of hardware terminals and services for payment

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 2018 37 EQUITY CO-INVESTMENTS OVERVIEW1

Equity co-investments portfolio overview As per December 31, 2018

Vintage Investment focus Mandate amount Capital invested3 years (€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 1,251 2011–2013 Buyout co-investments 1,122 968 2014–2015 Buyout co-investments 1,115 959 2016-2019 Buyout co-investments 2,485 780 2010–2012 Clean technology 23 21 2002–2018 Buyout co-investments – 478 294 other mandates Total 11,347 8,399

Portfolio diversification4 Sectors4 AlpInvest seeks to invest in a broad range Communication 6% 16% Consumer of sectors and geographies, creating services discretionary significant diversification in our portfolio. 10% Consumer staples From a geographical perspective 5, 40.7% Utilities 2% of our investments are in Europe6, 49.1% 4% Energy in North America and 10.2% in the rest of Real estate 1% the world. The sector breakdown of our 9% Financials equity co-investments since 2000 can be found to the right. Materials 4% 15% Healthcare

Information 15% technology 19% Industrials

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. 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 ALPINVEST ANNUAL REVIEW 2018 1 MEZZANINE CO-INVESTMENTS OVERVIEW 32-40PERFORMANCE FINANCIAL

2018 portfolio activity 2018 new mezzanine co-investments2 In 2018, AlpInvest invested €11.9m in mezzanine co-investments. This included Name Sector Geography Date of completion Description €11.8m in two new investments and Opteven Group Industrials France Oct 2018 Provider of mechanical €0.1m in one investment for an existing breakdown insurance and portfolio company. roadside assistance services

AlpInvest had €149m of cash inflows in 2018 from the outstanding mezzanine portfolio, of which €12m was interest

income and €137m from realizations.

Mezzanine co-investments portfolio overview As per December 31, 2018

Vintage Investment focus Mandate amount Capital invested4 years (€m) (€m) 1 This overview on mezzanine co-investments is limited to AlpInvest’s Mezzanine Co-Investments program, which 2000–20023 Mezzanine co-investments 33 33 invests in opportunities sourced by AlpInvest from its own relationships with GPs. It does not reflect (i), other 2002–2004 Mezzanine co-investments 148 81 co-investments made in respect of opportunities arising out of an investor’s own separate private equity relationships 2005–2006 Mezzanine co-investments 297 287 and invitations or (ii), co-investments made as part of any state-focused investment program. Please see “Important 2007–2011 Mezzanine co-investments 1,200 850 Information” for additional details. 2012–2014 Mezzanine co-investments 158 145 2 Additionally, AlpInvest made one other mezzanine co-investment in 2018 that is not listed by name for 2014–2017 Mezzanine co-investments 188 149 confidentiality reasons. 3 Mandate 2000–2002 is a legacy portfolio managed for our Total 2,024 1,545 investors. 4 At historical foreign exchange rates.

Portfolio diversification5 Sectors6 AlpInvest seeks to invest in a broad range Communication 2% 26% Consumer of sectors and geographies, creating services discretionary significant diversification in our portfolio. 4% Consumer staples From a geographical perspective, 34.2% Materials 7% of our investments are in Europe, 58.8% 1% Energy in North America and 7.0% in the rest of Infomation 15% the world6. The sector breakdown of our technology 6% Financials mezzanine co-investments can be found to the right. Industrials 28% 10% Healthcare

5 Diversification does not eliminate the risk of loss. 6 Reflects all mezzanine mandates; Europe excludes emerging Europe (which is included in rest of the world).

ALPINVEST ANNUAL REVIEW 2018 39 IMPORTANT INFORMATION

This document has been prepared by and is being on AlpInvest’s investments will depend on, among other not reflected in the discussion of, or any other information in issued and distributed in the Netherlands by AlpInvest factors, future operating results, the value of the assets respect of, AlpInvest’s equity Co-Investment business (nor Partners B.V. (together with its controlled affiliates, and market conditions at the time of disposition, any is it reflected in any Main Fund as defined below). ‘AlpInvest’). This is AlpInvest’s ninth Annual Review related transaction costs, and the timing and manner and its purpose is to increase the understanding of of sale, all of which may differ from the assumptions on As used herein, ‘Main Funds’ are each comprised of (i) an AlpInvest and to improve communication with our which the valuations and projections used herein are anchor mandate(s) (i.e., generally the largest account(s) stakeholders. THIS DOCUMENT IS NOT INTENDED based. Accordingly, the actual realized return on any within a strategy’s investment program) and (ii) AlpInvest’s FOR AND MAY NOT BE PUBLICLY DISSEMINATED TO such investments may differ materially from the results other advisory client mandates with investment periods ‘U.S. PERSONS’ (AS DEFINED UNDER REGULATION indicated herein. Furthermore, investors may contact that fall within the relevant investment periods under the S OF THE U.S. SECURITIES ACT OF 1933, AS AlpInvest representatives to discuss the procedures and mandate of the anchor mandate(s) (but do not overlap with AMENDED), WHICH INCLUDES U.S. RESIDENTS AND methodologies used to calculate the investment returns more than one such investment period). Mezzanine Main ENTITIES ORGANIZED UNDER THE LAWS OF THE and other information provided herein. Investors should Funds include mezzanine investments across all strategies UNITED STATES. consider the content of this document in conjunction with (i.e., Primary Funds, Secondaries, and Co-Investments). investment fund quarterly reports, financial statements The Walker Guidelines, as published by the British Private and other disclosures regarding the valuations and The performance information of all ‘Other Funds’ includes Equity and Venture Capital Association (‘BVCA’), are one performance of the specific investments discussed herein. Main Fund VII - Fund Investments, Main Fund VIII - Fund of the prominent initiatives on increased disclosure and Investments, Main Fund I - Co-Investments, Main Fund it is our intention to follow these guidelines as a basis for Certain information contained in this presentation I - Mezzanine Investments, Main Fund IV - Mezzanine our report. We are advocates of transparency and believe constitutes ‘forward-looking statements’ that are Investments, Main Fund V - Mezzanine Investments, all that the private equity industry will benefit from more inherently unreliable, and actual events or results may ‘clean technology’ private equity investments, all strategic open communication with all stakeholders. We have tried differ materially from those reflected or contemplated co-investment mandates that invest in co-investment to be as open as possible in this Annual Review. However, herein. None of AlpInvest or any of its representatives opportunities arising out of an investor’s own separate some areas remain subject to legal confidentiality clauses makes any assurance as to the accuracy of those private equity relationships and invitations, any state- between AlpInvest, our investors, or the parties we invest predictions or forward-looking statements. AlpInvest focused investment mandates, and all other investors whose in and invest with. Some types of information could also be expressly disclaims any obligation or undertaking to investments are not reflected in a Main Fund. Main Funds commercially sensitive. As a result, we are not able update or revise any such forward-looking statements. and Other Funds are referred to collectively as ‘Funds’. to disclose publicly all of the information we provide to The views and opinions are those of AlpInvest as of the our investors. date hereof and are subject to change based on prevailing Performance information herein is not calculated in market and economic conditions and will not be updated accordance with Global Investment Performance Standards This document is not intended to be (and may not be relied or supplemented. (GIPS). Performance information is since inception of the on in any manner as) legal, tax, investment, accounting applicable investment strategy or the inception of a specific or other advice or as an offer to sell or a solicitation of an Certain information contained herein has been obtained Fund (as the case may be), offer to buy any securities of any investment product or from third-party sources. Although AlpInvest believes unless otherwise noted. any investment advisory service, including any limited such sources to be reliable, AlpInvest makes no partnership or comparable limited liability equity representation as to its accuracy or completeness. The gross annualized internal rates of return (‘IRR’) interests in any fund, managed account, or other similar provided herein are calculated based on actual investment investment vehicle or product sponsored by AlpInvest AlpInvest is part of The Carlyle Group (‘Carlyle’). An cash flows up to and including December 31, 2018 and the (each, a ‘Product’). Any such offer or solicitation may only information barrier has been erected between AlpInvest December 31, 2018 fair market value (‘FMV’) of the relevant be made pursuant to such Product’s final confidential and the rest of Carlyle that restricts certain information Fund. Gross IRRs and multiples of capital invested do not private placement memorandum and/or the related from being shared, including information regarding reflect management fees or performance fees (carried subscription documents, which will be furnished to AlpInvest portfolio investment decisions. All investment interest) charged by AlpInvest or any other Fund-level qualified investors on a confidential basis at their request programs managed by AlpInvest are intended to operate expenses that are borne by investors in the Fund, which for their consideration in connection with such offering. in accordance with the information barrier protocols will reduce returns and in the aggregate are expected to This document may contain proprietary, trade-secret, and supplemental compliance procedures specific to be substantial. The FMVs of Funds that make Primary confidential, and commercially sensitive information. Carlyle’s Investment Solutions business segment of which Fund Investments or Secondary Investments are based AlpInvest is a part. on the latest available valuations of the underlying limited References to any portfolio investment are intended partnership interests (in most cases as of September 30, to illustrate the application of AlpInvest’s investment AlpInvest Partners B.V. is included in the public register 2018), as provided by their general partners. The FMVs for process only and should not be used as the basis for kept by the Dutch Authority for the Financial Markets Funds that make equity and mezzanine co-investments are making any decision about purchasing, holding or selling (Autoriteit financiële markten), in accordance with section based on AlpInvest’s internal valuations. any securities. Nothing herein should be interpreted 1:107 of the Dutch Act on Financial Supervision (Wet op or used in any manner as investment advice or a het financieel toezicht), as holder of a license to manage Net IRR provided herein is based on the gross calculation recommendation of any security or investment strategy. alternative investment funds under license number and is net of management fees and performance fees The information provided about any portfolio investments 15001833. charged by AlpInvest as well as Fund-level expenses. To is intended to be illustrative, and is not intended to be used eliminate the effect of currency rate changes, all non-Euro as an indication of the current or future performance of The amount of AlpInvest’s assets under management cash flows and fair market values have been converted to AlpInvest’s portfolio investments. (‘AUM’) is calculated on the basis of the latest available Euro using the foreign exchange rate as of December 31, valuations of all portfolio investments for which 2018. No cash flow projections have been used to calculate There is no assurance that a Product’s investment AlpInvest provides continuous and regular supervisory any of the performance numbers provided herein. To objective will be achieved or that investors will receive or management services adjusted for interim cash AlpInvest’s knowledge, there are no established standards a return on their capital. The recipient must consult its flows up to the relevant reporting date, plus unfunded for the calculation of IRRs for private equity portfolios. The own legal, accounting and tax advisors as to the legal, capital subscriptions to underlying portfolio investments, use of another methodology would be expected to result business, tax, and related matters concerning the plus the amount of uncommitted capital available for in a different, and possibly lower, IRR. Investors should information contained in this document in order to make investment under the existing mandates of AlpInvest’s be aware of the significant differences between private an independent determination and consequences of a investors with investment periods that have not expired. equity and public markets regarding their portfolio/index potential investment in a Product, including various constituents and specific risk/return characteristics. tax consequences. Except as otherwise noted, information herein regarding AlpInvest’s equity and mezzanine Co-Investment business Realized gross performance information for The performance of any portfolio investments discussed is limited to its historical Co-Investment program which Co-Investments is based on realized portfolio investments, in this document is not necessarily indicative of the seeks to co-invest in private equity and mezzanine which consists of (i) fully realized investments (including performance of any other of AlpInvest’s portfolio transactions (as applicable) sourced by AlpInvest from both full exits and write-offs) and (ii) investments with investments, and you should not assume that its proprietary relationships with GPs. AlpInvest also realizations of at least 5% of invested capital for which investments in the future will be profitable or will makes Co-Investments for a number of separate account more than 75% of Total Value has already been realized. equal the performance of past portfolio investments. mandates that are sourced from such separate account Additionally, any remaining unrealized FMV of a realized In addition, while AlpInvest’s valuations of unrealized investor’s own proprietary private equity investment portfolio investment is included in the realized gross investments and projected performance are based on portfolio and GP relationships as well as co-investments performance calculation. assumptions that AlpInvest believes are reasonable made as part of state-focused investment programs. under the circumstances, the actual realized returns Unless otherwise noted, the activity of these mandates is

40 ALPINVEST ANNUAL REVIEW 2018

Amsterdam New York Hong Kong Indianapolis San Francisco AlpInvest Partners B.V. AlpInvest US Holdings, LLC AlpInvest Partners Ltd AlpInvest US Holdings, LLC AlpInvest US Holdings, LLC Jachthavenweg 118 299 Park Avenue 701 Champion Tower 201 North Illinois Street 71 Stevenson Street 1081 KJ Amsterdam 35th Floor 3 Garden Road Suite 1530 Suite 1430 The Netherlands New York, NY 10171 Hong Kong Indianapolis, IN 46204 San Francisco, CA 94105 Phone: +31 20 540 7575 United States of America Phone: +852 2878 7099 United States of America United States of America Fax: +31 20 540 7500 Phone: +1 212 332 6240 Fax: +852 2878 7009 Phone: +1 317 361 4436 Phone: +1 415 318 3933 Fax: +1 212 332 6241 Fax: +1 415 814 7557