Royal Borough of Kensington and Chelsea Pension Fund June 30, 2019 Quarterly Report Confidential Quarterly Report-Q2'19 Table of Contents Market Update 2 Summary 5 Diversification 6 Partnership Fund Program Executive Summary 9 Performance and Portfolio Highlights 10 Detailed Schedule of Investments 18 Notes and Footnotes 32 Adams Street Partners has provided this report (the “Report”) to the recipient on a confidential basis for purposes of monitoring the recipient’s Adams Street Partners investments. This Report contains highly confidential information, including trade secret information, that is proprietary to Adams Street Partners and/or underlying funds and/or portfolio investments. In accepting the Report, the recipient agrees that it will (i) not copy, reproduce or distribute the Report, in whole or in part, to any person or party (including any employee of the recipient other than an employee or other representative directly involved in evaluating the recipient’s investments with, or monitored by, Adams Street Partners) without the prior written consent of Adams Street Partners, (ii) keep permanently confidential all information not already public contained herein, and (iii) use the Report solely for the purpose set forth above. Numbers in this report are based on Adams Street Partners’ calculations and have not been reviewed or approved by the relevant general partners. Royal Borough of Kensington and Chelsea Pension Fund 1 Confidential Quarterly Report-Q2'19 Market Update During the three months ended June 30, most equity markets globally continued to process should also be able to verify and validate controls in place that can mitigate a surge, resulting in a six-month performance start to the year that fully offset the weak operational environment. Post investment, a heightened awareness of the challenging fourth quarter of 2018. This is despite slowing economic growth across operational risk of a manager provides a roadmap for monitoring and managing the many developed and emerging markets, as unsettled trade and tariff discussions risk during the investment period. continue to weigh on certain sectors and regions. Private equity markets overall performed well in the second quarter of 2019, as valuations across subclasses and Adams Street strongly believes in the importance of ODD as a value-add component sectors continue to rise and exit markets remain robust. For example, according to of the overall investment process and therefore implemented a structured ODD Pitchbook, venture-backed IPO activity on US exchanges climbed to 39 transactions program across our investment strategies. This process includes a Risk Rating in the second quarter, up from 12 in the three months prior and 23 in the fourth methodology to objectively assess the operational risk of fund managers. Utilizing a quarter of 2018. On the buyout side, fundamental strength in underlying businesses quantitative rating methodology allows Adams Street to implement a risk-based bodes well for both existing equity investors and creditors. Through our direct and approach to post-investment monitoring, as well as benchmark the managers with fund investing activities, Adams Street remains diligent in our search for small and which we invest across factors such as subclass, AUM, geography, and mid-sized growing companies employing lower than average debt levels that we organizational size. Furthermore, given the breadth and depth of our relationships believe should perform well regardless of macro-economic tailwind or headwind. with fund managers, Adams Street is viewed as a collaborative and trusted partner in educating managers regarding operational best practices. As a result, Adams Street The Importance of ODD believes our fund managers are well positioned to develop and/or maintain best-in- class operational capabilities and avoid detrimental operational-related issues. Operational due diligence (“ODD”) across the alternative asset management industry has grown increasingly important to investors since the global financial crisis. Introducing Our New Logo Originally, the focus was primarily in hedge funds, but over the last 5 years, ODD specific to private equity (“PE”) has matured. A combination of growth in the asset class and regulatory scrutiny elevated investors’ senses and highlighted a need for more robust oversight within the asset class to ensure that PE managers are held to the same standards as other alternative investment managers (e.g. hedge funds). Operational Due Diligence Framework Adams Street Partners is proud to announce the launch of our new company logo as The importance of evaluating all types of risk (investment, portfolio construction, part of our ongoing brand evolution. Adams Street has been investing for more than operational, etc.) should be a priority when reviewing a PE manager. While generating 47 years and during that time our firm and our business has grown and evolved. We alpha is the ultimate goal, an investor needs to evaluate operational risk in an effort to are refreshing our brand to ensure that everyone – clients, employees, partners – ensure performance is optimized. Integrating ODD into the overall due diligence understands who we are today and what sets us apart from our competitors. effort is an important step toward ensuring that every investment is thoroughly vetted before a commitment is made. The ODD personnel and process should After careful consideration, we chose a new logo that we believe captures our generally be independent of the investment teams and performed in parallel with the mission of Leading with Foresight. Both “leading” and “foresight” are strongly future investment due diligence. This helps ensure that input from the ODD process is focused — putting the emphasis on what’s to come for us and our clients. incorporated into the investment recommendation. While each investor has their own risk tolerance, a formalized and consistent process provides a foundation for making Additional brand updates are in progress including redesigned statements and a new an informed decision on those risks they deem critical. This independent review client portal. Thanks as always for the trust you place in Adams Street Partners. Royal Borough of Kensington and Chelsea Pension Fund 2 Confidential Quarterly Report-Q2'19 Market Update (Continued) Summary of New Investments (Q3'19) Primary Investments near-term. Adams Street's longstanding relationship with Accel-KKR helped facilitate dialogue regarding GP-led opportunities prior to this transaction coming to market, Flexpoint Fund IV-A — Flexpoint Fund IV-A is an opportunity to invest with an and was key to us earning a co-lead investor role. experienced mid-market buyout investor focused on the financial services and healthcare sectors with a strong franchise and historical track record. Flexpoint Ford Project Radio — Project Radio involves the purchase of an approximately $22 million LLC (“Flexpoint”) is a middle market buyout investor focused on the non-bank commitment to Berkshire Partners Funds VI, VII, and VIII. These interests were financial services and healthcare sectors. Flexpoint will pursue control and structured stripped out of a larger portfolio deal managed by Greenhill, as Berkshire is a top minority deals with the majority of the investments expected to be control. Adams Street GP whose funds are regularly targeted by the Secondary program. The portfolio is healthy and has strong momentum, consisting of market-leading assets Flexpoint Overage Fund IV-A — Flexpoint Overage Fund IV-A is an opportunity to across a diverse mix of industries. Further, these assets are characterized by invest with an experienced mid-market buyout investor focused on the financial established and recurring revenues, demonstrated margin enhancement, and multiple services and healthcare sectors with a strong franchise and historical track record. avenues for continued growth in size and scale. Our longstanding relationship with Flexpoint Ford LLC (“Flexpoint”) is a middle market buyout investor focused on the the GP, along with our history of secondary transactions in these funds, allowed for non-bank financial services and healthcare sectors. Flexpoint will pursue control and deep diligence access and helped position Adams Street as a preferred buyer in the structured minority deals with the majority of the investments expected to be control. deal. RoundTable Healthcare Partners V — RoundTable Healthcare Partners V is an Project Venice — Project Venice is a structured, GP-led transaction which involves opportunity to invest with a top franchise in the lower middle market buyout space the creation of a continuation vehicle for Vitruvian Investment Partnership I (VIP I). focused on medical products and devices, pharmaceuticals, and distribution Adams Street's investment comprised a €53 million commitment to VIP CF LP, predominantly in North America. RoundTable Healthcare Partners (“RoundTable”) which will enable the GP to unlock further upside in the remaining five assets through invests in established, profitable companies with significant growth potential at additional value creation and follow on capital. VIP I delivered strong historical reasonable valuations. Investments typically focus on disposable products, medical investment performance and the remaining portfolio assets have demonstrated devices, medical products, medication delivery systems, pharmaceuticals, specialty strong organic and inorganic growth, solid cash generation, and have outperformed distribution,