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HarbourVest Partners

Private Equity Market Overview

HarbourVest CONFIDENTIAL

Private equity overview

Multi-billion dollar asset class offering the potential for superior long-term returns through investments

in private companies*

Institutional investor participation since the 1970s

Returns generated through a sale or IPO

Includes venture capital, buyout, mezzanine, and distressed debt funds

– Venture capital: Equity investments in start-up, early stage, and growth companies

– Buyouts: Equity investments in established companies which include debt in their capital

structures

– Mezzanine: Investments in debt securities often with equity kickers, typically in mature

companies

– Distressed debt: Investments in debt securities of troubled companies

1


Investor allocation to private equity

28.0%

12.9%11.6%

6.5% 6.2% 5.7%

2.7%

31.7%

13.0%11.9%

6.4%7.3%

6.3%

3.3%

0%

5%

10%

15%

20%

25%

30%

35%

Family Offices Endowments Foundations Superannuations Public Pensions Private Pensions InsuranceCompanies

Avg. Current Allocation

Avg. Long-Term Target Allocation

Average Private Equity Allocation by Investor Type

(% of AUM)

* Source: Preqin Investor Intelligence 2014

2


Reasons investors utilize alternative investments

5%

30%

45%

45%

64%

90%

0% 20% 40% 60% 80% 100%

Other

Relationship with Inflation

Long-term Growth Potential of Alternatives

Alpha Generation

Volatility Management / Lack of Correlation

Diversification

3

% of Respondents

Source: Russell Investment’s 2012 Global Survey on Alternative Investing


10.6%13.3%

8.6% 7.1% 9.1%12.9% 14.5%

8.7% 6.4% 8.7%14.1% 16.1%

12.4%8.1%

15.7%

31.0% 28.6% 30.3%

14.4%

55.7%

0%

10%

20%

30%

40%

50%

60%

Dow Jones S&P 500 U.S. Private Equity U.S. Private Equity - Upper Quartile Funds

Why invest in private equity?

Upper quartile funds significantly outperform the private equity index and public markets

Accessing high quality managers is key to long-term success in private equity

4

Long-term historical performance exceeds public markets

As of March 31, 2015

Source: Cambridge Associates through ThomsonOne. The U.S. or European Private Equity return is a pooled IRR based on the combined cash flows of all private equity funds in

the benchmark The Private Equity-Upper Quartile Funds return is a pooled IRR based on the combined cash flows for the private equity funds in the benchmark that achieved upper

quartile performance. Public market comparison also provided by ThomsonOne based on a methodology of buying and selling the index with the same timing of cash flows as the

All Private Equity return. The securities comprising the public market benchmarks have substantially different characteristics than the private equity benchmarks, and the

comparison is provided for illustrative purposes only. Investors should bear in mind that past performance is not necessarily indicative of future results, and there can be no

assurance that future private equity investments will achieve similar results.

21.2%

11.7%7.6% 5.7% 6.8%

20.2%14.6% 14.1% 12.1% 14.1%

35.5%

20.4%

39.7%

25.0%

31.9%

0%

10%

20%

30%

40%

50%

1 Year 5 Year 10 Year 15 Year 20 Year

FTSE 100 European Private Equity European Private Equity - Upper Quartile Funds

Global Market Perspective


Global private equity market – Summary

Continued macro-economic tailwinds in a number of regions, albeit environment more

uncertain with recent equity market shocks

2015 fundraising pipeline remains strong

Intense competition for GP allocations, especially in the mid-market

Investment activity expected to modestly improve, but pricing discipline essential

Debt markets continue to be receptive to new deal activity

Recent growth and innovation in private credit, particularly in Europe

Liquidity environment favourable, although IPOs could be more challenging in 2H 2015

6


Investment pace remains modest

7

Source: Thomson Reuters, Incisive Media, and HarbourVest analysis of Asia from AVCJ, APER, EMPEA, and GP reporting

381

581

887

390

138

262

317

273294

353

200

$0

$200

$400

$600

$800

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H '15

$ B

illio

ns

U.S. Buyout U.S. Venture Europe Asia EM


GPs treading carefully in high price environment

8

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 ’15

U.S. Buyout European Buyout Asia Pacific

Global Buyout EV / EBITDA Multiples

Source: S&P Capital IQ Q2 2015, HarbourVest analysis of Asia from AVCJ, APER, EMPEA, and GP reporting

Avg. Entry

EV / EBITDA

2014 1H 2015

U.S. 9.7x 10.3x

Europe 10.0x 9.9x

Asia Pacific 8.7x


2014 – Record year for exits

9

Source: Thomson Reuters, Mergermarket, Incisive Media, and HarbourVest analysis of Asia from AVCJ, APER, EMPEA, and GP reporting

283

363

500

195

137

271

367349

325

573

214

$0

$200

$400

$600

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 14 1H '15

$ B

illio

ns

U.S. Buyout U.S. Venture Europe Buyout Asia

+27%


Exits and strong equity markets driving fundraising recovery

10

Source: Thomson Reuters, Incisive Media, and HarbourVest analysis of Asia from AVCJ, APER, EMPEA, and GP reporting

194

248

314

270

77 81

153 153

179

212

123

$0

$100

$200

$300

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H '15

$ B

illio

ns

U.S. Buyout U.S. Venture Europe Asia EM

Global Private Equity Funds Raised

U.S. Market Overview


Stages of U.S. private equity

VENTURE BUYOUT MEZZANINE

DEBT

DISTRESSED

DEBT

SEED EARLYGROWTH/

EXPANSION

REVENUES None Limited Growing Yes Yes Yes

PROFITS Loss Breakeven Yes Yes Yes No

FUTURE CAPITAL

REQUIREMENTS

High Moderate Low Low to

MediumLow Low to

Medium

RISK OF LOSS Highest Moderate Lower Moderate Low Moderate

EXPECTED TIME

TO LIQUIDITY

7+ Years 4-8 Years 2-5 Years 2-5 Years 4-8 Years 4-8 Years

RETURN

POTENTIAL

Very High High High Moderate to

HighModerate Moderate

12


2%

15%

20%

64%

Greater than $5B

$1B-$5B

$250M-$999M

Less Than $250M

Buyout investment activity remains consistent

Despite strong financing markets, GPs

remain selective

– Asset prices remain high,

supported by public valuations and

debt markets

– Gap between seller and buyer

expectations

– Environment more conducive to

selling than buying

2014 volume was concentrated in middle

market with no deals above $5 billion

– GP reluctance to participate in

club deals

– High priced public market comps

– Strategic competition

With the PetSmart deal closing in March,

2015 has seen a return of the greater

than $5 billion deal. However, based on

count, greater than 60% of transactions

in 1H2015 remain less than $250 million

13

Disclosed Transaction Value

Source: S&P Capital IQ Leveraged Commentary & Data and S&P Capital IQ, Closed deals only

0

75

150

225

$0

$100

$200

$300

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H ’15

# of Deals with Disclosed Value

28%

50%

16%

6%

# o

f Dea

ls

1H 2015 Transaction Size

$ B

illio

ns

By Value By Count

434


7.8

9.6

10.3

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H ’15

EV <$250M EV $250-500M EV >$500M

U.S. buyout pricing remains elevated

Elevated pricing levels driven by

Run up of public market comparables

Availability of cheap credit

Competition from strategic and financial

acquirers

Increase in sources of non-traditional capital

(including co-invest) driving demand for

deals higher

Market leading companies with reliable cash

flow and strong management teams

commanding premium multiples

Traditional buyouts are being underwritten to

low-teens returns

14

Purchase Price Multiple of EBITDA*

Source: S&P Capital IQ Leveraged Commentary & Data

* HarbourVest estimates for EV<$250M in 2009, 2012, 2013, 2014, 1Q15 and for EV $250-$500M in 2009

Outperformance found in

high growth, “storied”, and

transformational transactions


U.S. credit issuance near all-time highs

Investor demand for yield fueling near record

issuance

Record covenant-lite issuance providing

borrowers with “cheap and benign” debt

creating forgiving capital structures

Low interest rates give borrowers ample

payment coverage

1H ’15 impacted by Fed regulation and

energy dislocation

15

Sponsored loan volume includes leveraged buyouts, acquisitions, refinancings, and recaps

Source: Credit Suisse (High yield data); S&P Capital IQ Leveraged Commentary & Data (Leveraged loan data)

$ B

illio

ns

$0

$100

$200

$300

$400

$500

$600

$700

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H'15Leveraged Loans High Yield Bonds

<$50M of EBITDA

>$50M of EBITDA

>$100M of EBITDA

Debt /

EBITDA4.0x-6.0x+ 5.0x-6.5x+ 6.0x-7.0x

Equity % 40%+ 30%+ 25%+

Typical Leverage LevelsCredit Statistics

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H

’15Debt / EBITDA EBITDA / Cash Interest

U.S. High Yield and Leveraged Loan Volume


U.S. buyouts – Shaping up to be another strong year of liquidity

The strong public markets of the last two years

have supported robust buyout-backed IPO volume

– 2014 IPO volume nearly doubled 2013 record

level

– With 29 IPOs in the first half, 2015 is lagging

the record setting pace of 2014, however

activity did increase in the second quarter

Secondary share sales continue to generate

meaningful liquidity for investors

– Mega buyout deals drive volume

– 2015 is on pace to exceed 2014 volume with

$29 billion of share sales in the first half

16

Source: IPOs from Thomson Reuters include all companies with at least one U.S. investor that

trade on U.S. exchanges, regardless of domicile; S&P Capital IQ Leveraged Commentary & Data

$0

$10

$20

$30

$40

$50

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H'15

Public Market Sales

$ B

illio

ns

0

25

50

75

100

$0

$15

$30

$45

$60

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H'15

# of IPOs

IPO Offer Amount

$ B

illio

ns

+73%

# o

f IP

Os


Rise of the tech buyout

17

Attractive Buyout Targets – Enterprise Software

Source: Gartner Group. Examples of private equity investments in which HarbourVest funds invested. Investors should bear in mind that past performance is not necessarily

indicative of future results

The Leaders

Exceptional Returns

Large and Growing Opportunity Set

80,000+ companies globally

$3.3 trillion market cap

Growth Rates Well Ahead of GDP

6.9% in 2014

7.3% forecast in 2015

Low Working Capital / Capital Expenditures

Cash Flow Predictability

Global customers across varied industries

High switching cost

Subscription / Maintenance revenue

Multiple Exit Options

HarbourVest has invested in over 140 companies creatingTV/TC of 2.5x


* As reported in press. Not yet closed.

Source: Thomson Reuters, Preqin

17,000

10,900

5,750 3,662

1,750 1,050 775

$0

$6,000

$12,000

$18,000

Nov ’14 Oct ’14 May ’14 Q3 ’15* Nov ’14 Dec ’14April ’15

U.S. buyout fundraising healthy

2015 fundraising YTD is on pace to exceed 2014

despite the number of funds raised being down

LP demand driven by

– Confidence in the asset class

– Distributions outpacing capital calls

– Influx of new investors from retail to

sovereign wealth

Fundraising trends continue as 87% of PE fund

closing hit their targets in 1H2015, compared to

62% in 2011

– Rapid fundraises across market from mega-

funds to small funds

– Manager access is key due to supply /

demand imbalance

18

Amount Raised

0

30

60

90

120

150

$0

$50

$100

$150

$200

$250

’05 ’06 ’07 ’08 ’09 ’10 ’11 ’12 ’13 ’14 1H'15

# of Funds

# o

f Fu

nd

s

$ M

illio

ns

Top Tier Managers Enjoy Rapid FundraisesAmount Closed

$ B

illio

ns


Fundraising Investments

Pipeline remains robust

LP demand is up and increasing

Access is key

Economy continues to strengthen, GPs remain highly selective due to elevated pricing

Managers attracted to opportunities where they have an edge

– Clear paths to operational improvement and cash flow growth

Investment activity expected to modestly improve, but catalyst needed for a significant increase – corporate M&A may be the key

Liquidity Companies to Watch

Anticipate another strong full-year of

distributions, but may fall below the last two

years of record liquidity due to the recent

volatility in capital markets

U.S. buyout outlook

19

Examples of investments across the private equity industry. Private equity investments involve significant risks, including loss of the entire investment. HarbourVest funds may not

have participated in all of these investments. Investors should bear in mind that past performance is not necessarily indicative of future results, and there can be no assurance that

future private equity investments will achieve similar results.


The information contained herein is highly confidential and is being provided to you at your request for informational purposes only and is not, and may not be relied on in any manner as, legal, tax or investment advice or as an offer to sell or a solicitation of an offer to buy an interest in any investment sponsored by HarbourVest Partners L.P. or it’s affiliates (the “Fund”). A private offering of interests in the Fund will only be made pursuant to a confidential private placement memorandum (the “Memorandum”) and the Fund’s partnership agreement and subscription documents, which will be furnished to qualified investors on a confidential basis at their request for their consideration in connection with such offering. The information contained herein will be superseded by, and is qualified in its entirety by reference to, the Memorandum, which will contain information about the investment objective, terms and conditions of an investment in the Fund and will also contain tax information and risk disclosures that are important to any investment decision regarding the Fund. No person has been authorized to make any statement concerning the Fund other than as will be set forth in the Memorandum and any such statements, if made, may not be relied upon. The information contained herein must be kept strictly confidential and may not be reproduced or redistributed in any format without the express written approval of HarbourVest Partners L.P. (together with its affiliates, “HarbourVest”).

Investment in the Fund will involve significant risks, including loss of the entire investment. Before deciding to invest in the Fund, prospective investors should pay particular attention to the risk factors contained in the Memorandum. Prospective investors should make their own investigations and evaluations of the information contained herein. Prior to the closing of a private offering of interests in the Fund, HarbourVest will give investors the opportunity to ask questions and receive additional information concerning the terms and conditions of such offering and other relevant matters. Each prospective investor should consult its own attorney, business advisor and tax advisor as to legal, business, tax and related matters concerning the information contained herein and such offering.

Certain information contained herein (including financial information and information relating to investments) has been obtained from published and non-published sources. Such information has not been independently verified by HarbourVest. Except where otherwise indicated herein, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof.

In considering any performance data contained herein, you should bear in mind that past performance is not indicative of future results. Certain information contained herein constitutes forward-looking statements, which can be identified by the use of terms such as “may”, “will”, “should”, “expect”, “anticipate”, “project”, “estimate”, “intend”, “continue” or “believe” (or the negatives thereof) or other variations thereof. Due to various risks and uncertainties, including those discussed above, actual events or results or actual performance of the Fund may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward-looking statements in making their investment decisions.

None of the information contained herein has been filed with the Securities and Exchange Commission, any securities administrator under any state securities laws or any other governmental or self-regulatory authority. No governmental authority has passed on the merits of the offering of interests in the Fund or the adequacy of the information contained herein. Any representation to the contrary is unlawful.

Additional information

20

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