social impact report - global private equity...

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SOCIAL IMPACTREPORT

HARBOURVEST SOCIAL IMPACT REPORT 2016 / page 1

We’re driven by the belief that strong financial returns and positive social change can be accomplished in tandem.


CONTENTSWelcome ................................................................................3

HarbourVest Horizon Overview ...............................................5

Supporting Small and Emerging Managers .............................7

Seeding Underserved Managers .............................................9

Featured Portfolio Company .................................................11

Sourcing Diverse Managers ..................................................13

Supporting Diverse Managers ...............................................15

Tombstone Summary – Horizon Portfolio ..............................17

HarbourVest: Making an Impact Every Day ...........................19

Committed to ESG Issues ....................................................23

Outreach and Events ............................................................25

Partner Organizations ...........................................................29


DEAR READER,

As those who are familiar with HarbourVest Partners are aware, our firm has

spent over 30 years providing solutions across the private equity spectrum while

also striving to be conscientious corporate citizens in the communities in which

we work and invest. We are proud of this core value because it drives us to

ensure that our investments and activities serve our clients, meet environmental,

social, and governance (ESG) standards, and are consistent with the United

Nations Principles for Responsible Investing. Our values also compel us to extend this impact by

seeking leadership roles in organizations attempting to provide access to capital to all communities,

organizing knowledge-sharing events, and demonstrating the meaningful outcomes our investments

are having on underserved communities.

To remain a best-in-class investment firm, we constantly look for ways to augment our analytical

and decision-making processes and product offerings. This drive to constantly evolve and improve

also informs how we approach impact. For example, understanding the importance of investing in

private equity funds that are led by women and ethnic minority investment professionals, and finding

funds that invest in underserved geographies, led us to seek a partner with a long track record of

making such investments. In early 2016, we acquired HarbourVest Horizon, a private equity fund

investor that has a decades-long history of providing access to capital to diverse-led private funds

and general partners focused on people and places that have historically lacked access to capital.

The Horizon strategy enables us to generate additional material positive social effects. Its rigorous

investment process and focus on the dynamic lower middle market in the US provides a compelling

product extension for our investors. We believe our acquisition of the Horizon team is merely the

latest in a long history of looking for innovative ways to serve the community around us and our

investors in myriad ways.

...understanding the importance of investing in private equity funds that are led by women and ethnic minority investment professionals, and finding funds that invest in underserved geographies, led us to seek a partner with a long track record of making such investments.


We are pleased to present HarbourVest Partners’ 2016 Social Impact Report, which details

the impact we strive to realize through our investment, educational, and leadership activities on

behalf of our investor partners and employees. While only providing a sampling of these efforts,

we believe this report encapsulates how we conduct ourselves, while also providing us with an

opportunity to demonstrate the leadership our investor partners achieve through the manner in

which they deploy capital.

We hope you enjoy reading the report and are inspired by the meaningful positive outcomes

investing can engender when it is deployed in an analytical, disciplined, and thoughtful manner.

If you have any questions regarding our fund, co-investment, or secondary investment activities

or the impact we generate on behalf of our investor partners through these activities, please

reach out to us to learn more.

Sincerely,

Kathleen Bacon

Managing Director, HarbourVest Horizon

HarbourVest Partners Teammate since 1994.

Founding Member of Level 20, a nonprofit dedicated to

increasing opportunities for women in private equity.


HARBOURVEST HORIZON OVERVIEW


SMALL MANAGERSFunds that are smaller than core portfolio funds, typically below $750 million

Returns driven by investing in a less efficient part of the market; focus on operational improvements and selling to larger sponsors and strategics

EMERGING MANAGERSNew general partners, primarily first-, second-, or third-time funds

Build relationships with managers in early funds, seeding portfolio with future successful fund franchises

UNDERSERVED MARKETSFunds that invest in companies that have historically lacked access to capital

Invest in historically overlooked segments; focus on where your capital is invested

DIVERSE MANAGERSWomen or minority general partners

Tap into growing segment and purchasing power of changing US demographics by investing in diverse general partners

The Horizon team has worked together since 1997 and has been actively investing in lower middle market companies since 2002. During that time, Horizon has developed an expertise in identifying and managing investments that can drive meaningful, productive societal change.

Horizon accomplishes this by investing in:

As illustrated in this report, Horizon is making a significant impact in these crucial areas and we are encouraged by the results. We are particularly gratified to be able to achieve them in concert with our investment partners.



SUPPORTING SMALL AND EMERGING MANAGERSSMALL MANAGERS

Analyzing small managers takes a special skill set, one developed over many years of working as a cohesive team focused on ensuring that private equity capital is flowing to the next wave of promising fund managers. The drive to seed small managers takes an appreciation for the value this new talent provides to the private equity ecosystem. These budding firms bring an energy, philosophical diversity, and skill depth that all successful ecosystems require to identify better methods of operation. Over the last five years, Horizon has sourced and reviewed more than 975 funds with capitalizations of $750 million or less. These funds have gone on to collectively raise more than $219 billion in assets under management (AUM).

> More than 85% of the small managers reviewed over the last three years raised a first-, second- or third-time fund at the time of review.

> As of June 30, 2016, Horizon has closed and/or advised on commitments totaling approximately $977 million to 53 small managers. Together, these funds have raised more than $12 billion in AUM.

> 95% of all Horizon portfolio funds are sized at $750 million or less.

> Small managers within Horizon’s investment pipeline deployed a wide range of investment strategies, including all stages of venture, growth equity, buyout, distressed mezzanine, and current income.

> Geographically, small managers within Horizon’s pipeline were dispersed across more than 30 states, with the highest concentrations in California, New York, Illinois, and Texas.

> Horizon holds an advisory board seat for more than 94% of the small managers in which it has invested.

> 87% of the small managers in Horizon’s portfolio are a Fund I, II, or III.

> 70% of the small managers in Horizon’s portfolio are a Fund I or II.

> 70% of the small managers in Horizon’s portfolio targeted companies are based in low-to moderate-income communities as part of their investment strategy.

Small Managers by Geography

CA

28%

28%8%

8%

5%

5%

4%14%

NYIL

TX

CT

PA

MA

Other

32%

28%

19%

11%

8%

2% Distressed

Venture

Buyout

Growth

CurrentIncome

Mezzanine

Small Managers by Investment

Emerging Managers by Geography

CA

34%

34%

10%

10%

6%6%

NY

IL

TX

CTMA

32%

28%

19%

11%

8%

2% Distressed

Venture

Buyout

Growth

CurrentIncome

Mezzanine

Small/Emerging Managers by Investment Strategy


EMERGING MANAGERS

Horizon has long held a sustained interest in sourcing and investing in nascent private equity firms. 88% of Horizon’s portfolio funds are emerging managers that have raised a Fund I, II, or III vehicle, reflecting Horizon’s skill in successfully identifying promising emerging managers early in their development.

> Over the last five years, Horizon has sourced and reviewed more than 1,200 funds raising a Fund I, II, or III. These funds have collectively raised more than $285 billion in AUM.

> Emerging managers within Horizon’s investment pipeline deployed a wide range of investment strategies, including all stages of venture, growth equity, buyout, distressed mezzanine, and current income.

> Geographically, emerging managers within Horizon’s investment pipeline were dispersed across more than 35 states, with the highest concentrations in California, New York, Illinois, and Texas.

> As of June 30, 2016, Horizon has closed on approximately $904 million in commitments to 49 emerging managers. Together, these funds have raised nearly $12 billion in AUM.

> 76% of the emerging managers in Horizon’s portfolio are a Fund I or II.

> 69% of the emerging managers in Horizon’s portfolio targeted companies are based in low-to moderate- income communities as part of their investment strategy.

Emerging Managers by Geography

CA

34%

34%

10%

10%

6%6%

NY

IL

TX

CTMA

32%

28%

19%

11%

8%

2% Distressed

Venture

Buyout

Growth

CurrentIncome

Mezzanine

Small/Emerging Managers by Investment Strategy


During its extensive investment history, Horizon has developed an ability to deliver impact by investing in people, places, and communities that have historically lacked access to private equity capital. This goal has been accomplished by investing in fund managers that invest in businesses which encourage company ownership or control by women and ethnic minorities; the creation of jobs in low-income, inner-city, and rural geographies; and investment in companies that serve ethnically diverse, minority, or socially responsible markets.

Some of the statistics for which Horizon is particularly proud:

> While the general partners within the mandate Horizon conducts for CalSTRS – which focuses on private equity funds investing in underserved companies – undertake a wide array of investment strategies, most focus in part on ethnic minority or low-to-moderate (LMI) income opportunities. All of the portfolio funds Horizon has invested in through its CalSTRS mandate target underserved markets as part of their investment theses.

> Over the last 10 years, funds in Horizon’s portfolio have created more than 900,000 jobs. More than 67% of these employees were ethnically and/or gender diverse.

> On average and since 2005, 71% of Horizon’s portfolio companies have addressed at least one of Horizon’s targeted underserved markets.

> More than 33% of Horizon’s portfolio companies serve ethnically diverse, minority or socially responsible markets through their products or services.

> 77% of the funds in Horizon’s portfolio targeted companies that are based in LMI communities as part of their investment strategy.

> Since 2005, Horizon portfolio companies have been led by nearly 100 female CEOs and more than 330 ethnically diverse CEOs.

> Over the last 10 years, nearly 700 portfolio companies backed by Horizon portfolio funds have been owned by ethnic minorities and/or women.

> Horizon portfolio funds have invested in more than 550 companies based in LMI geographies since 2005.

> Horizon portfolio funds have invested in more than 350 companies based in inner-city geographies since 2005.

SEEDING UNDERSERVED COMMUNITIES

PORTFOLIO COMPANIES OWNED BY ETHNIC

MINORITIES AND/OR WOMEN

700


LMI or RuralLocation

DiversePartnership

DiverseManagement

Target Diverse

Consumers

Based onNorth

America

TargetCompany

Profile


LEAGUE COLLEGIATE OUTFITTERS, LLC

In May 2010, Horizon committed $35 million to Dominus Capital Partners, LP (“Dominus”). Dominus is a diverse-led, middle-market private equity firm focused on management-led buyouts and growth capital investments in companies across the consumer, retail, business services, and light manufacturing sectors.

In June 2016, Dominus made an investment in League Collegiate Outfitters, LLC (“League” or the “Company”). League is a leading designer, manufacturer, and supplier of branded collegiate-licensed apparel to the college market. The Company provides a full apparel offering which includes high quality t-shirts, fleece, and bottoms, as well as adjacent product categories such as spirit blankets and pillows. League has longstanding licensing arrangements with the majority of the largest four-year collegiate institutions, and deep relationships with large and independent bookstores nationally.

League, based in Bridgeport, Pennsylvania, with an industry-leading production facility in El Salvador, is focused on employing ethical practices and reinvesting in its employees and facilities to further the Company’s deep commitment to social responsibility and improving local communities. League has been committed to the principles of the Fair Labor Association (“FLA”) for over 15 years, and prides itself on exceeding the requirements for FLA compliance, with a larger vision of restoring dignity to workers’ lives, positively impacting families and creating a community that the Company hopes will one day be a model for others.

League is leading this effort through a number of social initiatives, including offering rewarding jobs to people with disabilities, providing gang rehabilitation programs, and offering a number of educational and family services to its employees. The El Salvador facility provides families a host of programs, including a child development center (e.g., on-site child care) so mothers can bring their children to work with the knowledge they are being properly attended to and cared for. In addition, the Company pays for high school equivalency classes and has an on-site library and computer lab where employees spend 30 minutes per day learning English. League also has a renovated housing development, providing handicapped employees with a safe living environment.

League looks to advance its employees’ lives outside of the work environment by assisting in establishing entrepreneurial endeavors through micro-loans, and furthering their employees’ education through a local two-year engineering university.

FEATURED PORTFOLIO COMPANY


League is focused on employing ethical practices and reinvesting in its employees and facilities to further the Company’s deep commitment to social responsibility and improving local communities.


The number and quality of diverse-led funds within Horizon’s investment pipeline continues to rise. Over the last five years, Horizon has sourced and reviewed more than 500 diverse funds that have collectively raised more than $37 billion in AUM. Through September 2016, Horizon was on pace to review an average of three new diverse funds per week.

The Horizon team spends a considerable amount of time with emerging managers who are new to the process of raising institutional investor capital. Horizon regularly counsels fund managers whose funds are pre-formation or who require more seasoning before raising capital. Often, these fund managers prove successful at raising institutional capital and often secure capital commitments from Horizon.

> Historically, 60% of these diverse managers pass Horizon’s initial screen and progress towards due diligence.

> 54% of the investments Horizon has sourced and closed are led by two or more diverse partners.

> Nearly 33% of the investments Horizon has sourced and closed are led by at least one female partner.

> Horizon requested and analyzed track record information from more than 80 diverse managers in 2015.

> More than 80% of the diverse funds reviewed over the last three years raised a first-, second- or third-time fund at the time of review.

> On average, diverse partners in funds reviewed by Horizon received 55% of the carried interest and have 57% ownership in the general partner.

> Diverse funds within Horizon’s investment pipeline deployed a wide range of investment strategies, including all stages of venture, growth equity, buyout, distressed, and current income.

> Geographically, diverse funds within Horizon’s investment pipeline were dispersed across more than 30 states, with the highest concentrations in New York, California, Illinois, and Texas.

SOURCING DIVERSE MANAGERS


By Geography

CA28%

28%

6% 6%

34%

NY

ILTX

CT 4%

PA 3%

MA 3%

Other26%

20%

14%

16%

20%

4%Distressed

Venture

Buyout

Growth

CurrentIncome

Other

By Investment StrategyBy Geography

CA28%

28%

6% 6%

34%

NY

ILTX

CT 4%

PA 3%

MA 3%

Other26%

20%

14%

16%

20%

4%Distressed

Venture

Buyout

Growth

CurrentIncome

Other

By Investment Strategy

*Other includes hybrid and single industry focused strategies

Diverse Deals Reviewed / Last Five Years

0 20 40 60 80 100 120 140

2016 YTD

2015

2014

2013

2012

Pipeline of Diverse Funds


While the volume of diverse manager deal flow has increased significantly, Horizon remains highly selective – closing on approximately 2.5% of the funds reviewed each year.

> As of June 30, 2016, Horizon has closed and/or advised on $1.3 billion in commitments to 46 diverse-led funds. These funds have collectively raised nearly $14 billion in AUM.

> Performance of diverse managers is strong and competitive, with top-quartile performers in the broader market. On average, diverse funds had an average net IRR of 20.8% at the time of underwriting by Horizon.

> Diverse funds possessed attribution for an average of 17 realizations and generated an IRR and multiple of 36.8% and 2.6x, respectively, at the time of underwriting by Horizon.

> More than 80% of the funds in the Horizon portfolio are diverse.

> More than 58% of all Horizon portfolio funds have more than one ethnic minority or female partner.

> Horizon holds an advisory board seat for more than 91% of the diverse funds in which it is invested.

> 83% of the diverse funds in Horizon’s portfolio are a Fund I, II, or III.

> 61% of the diverse funds in Horizon’s portfolio are a Fund I or II.

> Nearly 40% of the diverse funds in Horizon’s portfolio had at least one female partner.

> On average, diverse partners in Horizon’s portfolio funds received 44% of the carried interest and had 54% ownership in the management company.

> 65% of the diverse funds in Horizon’s portfolio targeted companies based in LMI communities as part of their investment strategy.

> Geographically, diverse funds in the Horizon portfolio were dispersed among 13 states, with the highest concentrations in New York, California, Texas, and Connecticut.

> Diverse funds in the Horizon portfolio deployed a wide range of investment strategies, including buyout, venture, distressed mezzanine, growth equity, and current income.

SUPPORTING DIVERSE MANAGERS

OF DIVERSE FUNDS HAD AT LEAST ONE FEMALE PARTNER

40%

HORIZON DIVERSE FUNDS HAVE RAISED

NEARLY

$14 BILLION IN AUM


Diverse Portfolio Funds by Geography

CA

30%

25%8%

7%

15%

NY

IL

TX

CT

DC

MD

Other

54%

20%

11%

9%

4%

Distressed

VentureBuyout

Growth

Mezzanine

Other 2%

Diverse Portolio Funds by Investment Strategy

5%

5%

5%

Diverse Portfolio Funds by Geography

CA

30%

25%8%

7%

15%

NY

IL

TX

CT

DC

MD

Other

54%

20%

11%

9%

4%

Distressed

VentureBuyout

Growth

Mezzanine

Other 2%

Diverse Portolio Funds by Investment Strategy

5%

5%

5%



VENTUREAltos Ventures III, L.P. / 2005*

Altos Ventures IV, L.P. / 2008*

Ascend Ventures II, LP / 2005*

DBL Equity Fund- BAEF II, LP / 2010*

Syndicated Communications Venture Partners V, LP / 2006*

GROWTH CAPITALFulcrum Capital Partners, LP / 2003*

Hispania Private Equity II, LP / 2009*

Main Post Growth Capital, L.P. / 2015

New Harbor Capital Fund, LP / 2014*

Oak HC/FT Partners LP / 2014*

Pacific Community Ventures Investment Partners III, LLC / 2007*

Rustic Canyon/Fontis Partners, LP / 2005*

Sunstone Partners I, L.P. (TC Growth Partners I, L.P.) / 2015*

BUYOUT21st Century Group Equity Fund II, LP / 2008*

Acon-Bastion Partners II, LP / 2006*

Acon Equity Partners III, LP / 2012*

Belvedere Capital Fund II, LP / 2005*

Blue Point Capital Partners III, LP / 2014*

BVIP Fund VIII, LP / 2013*

CapStreet III, LP / 2010*

CapStreet IV, LP / 2014*

Delos Investment Fund, LP / 2014

Dominus Capital Partners, LP / 2010*

Dominus Capital Partners II, LP / 2014*

Encore Consumer Capital, LP / 2006

Grey Mountain Partners II, LP / 2009*

ICV Capital Partners II, LP / 2005*

ICV Capital Partners III, LP / 2012*

Incline Equity Partners III, LP / 2012*

Juggernaut Capital Partners III, L.P. / 2016

Marwit Capital Partners II, LP / 2006

Mistral Equity Partners, LP / 2009*

Nogales Investors Fund II, LP / 2006*

One Rock Capital Partners, LP / 2012*

Patriot Capital II, LP / 2008

Palladium Equity Partners III, LP / 2005*

Palladium Equity Partners IV, LP / 2012*

RLJ Equity Partners Fund I, LP / 2008*

Siris Partners II, LP / 2011*

Wasserstein Capital Partners IV, LP / 2016*

Wicks Capital Partners IV, LP / 2012*

Williams Capital Partners, LP / 2005*

Yucaipa Corporate Initiatives Fund II, LP / 2007*

MEZZANINEGMB Mezzanine Capital II, LP / 2011

Ironwood Mezzanine Fund II, LP / 2007*

Ironwood Mezzanine Fund III, LP / 2012*

Monroe Capital Partners Fund, LP / 2011*

Petra Growth Fund II, LP / 2008

Petra Growth Fund III, LP / 2013

Praesidian Capital Investors, LP / 2004

Praesidian Capital Investors II, LP / 2007

St. Cloud Capital Partners II, LP / 2007*

DISTRESSEDClearlake Capital Partners II, LP / 2009*

Clearlake Capital Partners III, LP / 2012*

SPECIAL SITUATIONSTenex Capital Partners, LP / 2011*

STRUCTURED EQUITYBison Capital Partners IV, LP / 2012*

* Denotes Diverse Funds

TOMBSTONE SUMMARYHORIZON PORTFOLIO AS OF JUNE 30, 2016


For more than three decades, HarbourVest has worked with private equity investors around the world to help them identify opportunities, build portfolios, and reach their long-term investment goals. Just as we are committed to making an impact on our clients’ portfolios, we are equally committed to making a difference in society, which to us means being a responsible corporate citizen in both our business operations and in the communities in which our employees work and live.

By consistently aligning our interests with those of our investors, investment partners, and employees, we have been able to build and maintain a rigorous culture that revolves around strong ethical behavior, transparency, and social responsibility.

We put these attributes into action every day by:

> Respecting the interests of our clients, employees, and key stakeholders

> Making responsible investment decisions

> Holding ourselves to the highest ethical standards

> Caring about our communities and the environment

HARBOURVEST: MAKING AN IMPACT EVERY DAY


RESPONSIBLE INVESTINGAs a proud signatory to the United Nations’ Principles for Responsible Investment (UNPRI), HarbourVest is committed to being a responsible investor, and we incorporate these principles into our investment process when evaluating private market opportunities – regardless of strategy, sector, or location. Our framework and policies are reviewed annually, and our 2016 report is available at www.unpri.org.

PRIMARY PARTNERSHIPS Since we operate as a fund-of-funds, whereby we invest in opportunities as a limited partner in private equity funds, we are largely removed from having direct engagement in the management of the underlying investments. However, since 2009 we have been actively evaluating our primary partnership managers on their overall ESG (environmental, social, governance) approaches, and we report these results on an ongoing basis to our Investment Committee.

We measure our general partners’ ESG efforts through a proprietary scorecard that ranks them on key metrics. The scorecard measures efforts at both the portfolio and corporate level, and generates an overall rating for the manager based on whether they have an ESG policy, how that policy is integrated into their investment process, and how they communicate its importance to limited partners. From there, the rankings are stored in our database for ongoing monitoring. See Exhibits 1 and 2 on the following page for examples of some of the portfolio and company ESG metrics we track on an ongoing basis.

...we are equally committed to making a difference in society, which to us means being a responsible corporate citizen in both our business operations and in the communities in which our employees work and live.


MANAGER’S ESG POLICY

Does the Manager have an Environmental, Social & Governance (ESG) or Socially Yes/No/ Responsible Investment (SRI) policy? Unknown

If so, please describe below in comments. If not, do they plan to adopt any in the future?

Is the Manager a signatory to the United Nations-supported Principles for Responsible Yes/No/ Investment (PRI)? [HarbourVest is a signatory] Unknown

Does the Manager incorporate the most recent version of the ESG Disclosure Framework Yes/No/ for Private Equity in its communication practices with Limited Partners? Unknown Manager ESG Policy Rating [ ]

Exhibit 1

ENVIRONMENTAL / MANAGER SCORE

Does the Manager have recycling or other conservation measures established in its offices?

SOCIAL / MANAGER SCORE

Is the Manager’s investment staff diverse and inclusive (i.e., women, minorities, LGBT, veterans, etc.)?

GOVERNANCE / MANAGER SCORE

Does the Manager have a robust investment process that is reflective of its strategy and size of the organization?

Exhibit 2


As a signatory to the UNPRI, HarbourVest strongly encourages managers without ESG policies to consider adopting them, and we make a concerted effort to educate them on why having such a policy is vital. Our usage of the scorecard has brought positive results. Since introducing it seven years ago, 45% of our managers report that they have adopted and implemented ESG policies, with the strongest adoption rates in Europe, where 70% of our managers have ESG frameworks in place.

Additionally, HarbourVest team members sit on approximately 80% of advisory boards of the funds in which we invest, and we take an active role in leveraging our position to drive deeper ESG engagement, including governance of underlying portfolio companies.

SECONDARY INVESTMENTSFor traditional secondary deals, our investment teams verify whether the manager of the funds we acquire has an ESG policy; if they do not, we encourage them to adopt one and share materials that can help them get started. We also assess the existing portfolio for any high-risk ESG factors, and highlight any issues to the Investment Committee during the due diligence process. For secondary investments where we have more ability to influence how the manager operates, such as complex transactions, we take a more proactive approach similar to that of the primary teams.

CO-INVESTMENTSHarbourVest’s global co-investment team assesses and monitors ESG risks and considerations for both GPs and companies, both at the time of the investment and throughout its life. We work with lead sponsors to fully understand their ESG policies and how they communicate and prioritize that with their stakeholders, and we analyze company-specific ESG considerations based on business models, geographies, stages, etc. As part of this process, the team tracks each GP and company through a “traffic light” scale, which provides grades on key ESG metrics. The optimal outcome is that all active investments fall within the green or yellow category, meaning the GP and the company actively monitor/consider ESG issues.

GOVERNANCETo oversee all aspects of our ESG efforts, HarbourVest has established an ESG Committee comprised of senior-level employees from our Investment, Client Relations, Marketing, and Operations teams. The Committee meets approximately every month to discuss the ongoing integration of ESG into our operations, processes, and facilities globally.


INVESTINGWe currently operate a fund-of-funds product, Cleantech Fund II, which is focused on investing in companies that have products, services, or processes that are designed to reduce or eliminate negative ecological impact, and improve the productive and responsible use of natural resources. According to the independent Cleantech Group, global venture investing in clean technology companies totaled more than $19 billion in 2015, up 37% from 2014. Formed in 2008, the fund had more than $140 million in assets under management at year-end 2015.

Beyond offering focused products, being a socially responsible investor also means investing in companies that are committed to making the world at large a better place. Whether it’s a company specializing in new and innovative technologies or medicines, or a company focused on reducing carbon footprints in cities around the world, HarbourVest takes its obligation to be socially conscious very seriously. Nowhere is this more evident than in the efforts of the portfolio companies our Horizon team invests in, which are moving the meter in terms of creating jobs and employment opportunities in urban areas.

We are also committed to increasing diversity and inclusion in our industry. Gender diversity, in particular, is an area in which HarbourVest has a strong voice and passion, and a proud history. While the private equity industry has a significant gender gap today at the most senior executive levels, our co-founders, Brooks Zug and Ed Kane, made it a priority from day one to consider women who were equally qualified to serve in senior roles. As a result, while females hold just over 12% of all senior private equity roles globally today, that figure is doubled at HarbourVest, where women hold 24% of all senior roles, and 25% are managing directors.

Many of our employees are involved in diversity efforts, including London-based Managing Director and ESG Committee chair Kathleen Bacon, who is a founding member of Level 20, a European organization devoted to attracting more women to the private equity industry. To see a recent interview with Kathleen on the issue of gender diversity in private equity, please visit www.harbourvest.com/insights/viewpoints.

CHARITABLE/COMMUNITY WORKHarbourVest and its employees take active roles in supporting many worthy causes and organizations across the globe, including youth mentoring; children and adult special education; gender diversity; poverty and homelessness; various health causes; women’s leadership; and the arts.

COMMITTED TO ESG ISSUES


At a corporate level, HarbourVest supports several Boston-area organizations on an annual basis, including the Greater Boston Food Bank, which works to stem hunger, and The Jimmy Fund, which raises money for adult and pediatric cancer care and research. In October 2016, the firm introduced its first Volunteer Week, which allows employees to donate their time to these causes during work hours. Employees in our offices across Asia Pacific and Europe are also generous with their time and money, providing aid and advocacy for organizations in support of autism, down syndrome, and youth mentoring.

This commitment to doing good by others flows through the organization, and extends from senior management to all levels of the firm. Peter Wilson, one of three people currently serving on HarbourVest’s Executive Management Committee, is the founding chairman and a trustee of City Year UK, which asks youths aged 18 to 24 years to provide a year of volunteer service as in-school mentors to children from disadvantaged backgrounds. Thanks in large part to Peter’s leadership and guidance, City Year UK now operates in 23 schools across London, Birmingham, and Manchester, with 190 “corps” members impacting the lives of more than 15,000 children.

Similarly, three members of our investment team, Ryan Gunther, Ian Lane, and Mike Pugatch, have been actively involved with Minds Matter, a Boston-based nonprofit that works with low-income, inner-city high school students to prepare them for success in college and beyond. Ryan, Ian, and Mike have served the organization in a variety of capacities over the past 12 years, and more than 20 HarbourVest employees have also donated their time and efforts to this group.

CARING FOR THE ENVIRONMENTHarbourVest has long taken an active interest in environmental issues, from the types of companies in which we invest, to the products we offer, to how we conduct our business.

One example was our decision to work with a company called Artcraft as our outside print vendor. We were attracted to Artcraft because it is one of the “greenest” companies in the world, using more than 1,100 solar panels to power approximately 75% of its printing operations. We also work with Artcraft to ensure that all of the materials we produce are created using environmentally friendly materials and inks.

Finally, our facility management team is constantly working to ensure that our properties globally are keeping pace with the latest environmental trends. Beacon Capital Partners, a large commercial real estate firm which owns HarbourVest’s Boston building, was recognized by the US Environmental Protection Agency in 2012 as an ENERGY STAR partner for its efficiency efforts. Beacon Capital was selected from more than 20,000 candidates for this recognition, and was one of only two commercial real estate managers to be honored.


2016 EVENTS2016 Southeast Venture Conference/Fusion Conference / March 17, McLean, VA FUSION is a gathering presented by TechMedia that showcases emerging technology firms, offering exposure to top venture capitalists and private equity investors. TechMedia strives to educate, network, and build technology economies in regional areas, through networking forums and media.

The Vinetta Showcase / March 24, Toronto, Canada A pitch and panel series where female founders who are seeking actionable feedback and meaningful new connections pitch to a panel of activist investors and successful startup founders. The series is organized by The Vinetta Project, an organization focused on changing gender ratios in innovation and investment by creating an ecosystem that supports high-growth female founders.

HarbourVest Principal Senia Rapisarda served as an industry expert panelist at the Toronto Vinetta Showcase, offering her insight on raising capital and creating scalable innovation.

SEO Alternative Investments Conference / March 23-24, New York, NY An annual conference featuring industry-leading speakers, educational panels and robust networking opportunities designed to increase access and career development for more than 400 professionals from backgrounds traditionally underrepresented in alternative investments. HarbourVest Managing Director Ed Powers is a member of the organization’s Limited Partner Committee.

Responsible Investment Forum / May 25, London, UK The largest gathering of global private equity professionals committed to overcoming environmental, social and governance issues (ESG) in alternative asset investing. The Forum is co-hosted by Private Equity International and the Principles for Responsible Investment (PRI).

Kathleen Bacon, Managing Director at HarbourVest, was a panelist in the session entitled How Responsible Investment Can Drive Growth in Alternative Assets. She provided her insight on the meaning of responsible investment to the alternatives community and what role ESG plays when considering asset allocations.

Association of Asian-American Investment Managers National Conference 2016 June 1-2, San Francisco, CA The 10th anniversary of an annual conference that brings together Asian-American investment managers from across the major asset classes of private equity, hedge funds, public equities, fixed income, and real assets to explore emerging trends that will shape the future.

HarbourVest Managing Director Sanjiv Shah acted as the moderator for a breakout session entitled Emerging Trends: Where the Tea Leaves Swirl, which considered how leading asset managers are able to successfully build out their firms while facing strong headwinds in a competitive environment.

OUTREACH AND EVENTS


13th Annual ConsortiumEAST / June 8-9, New York, NY A two-day event singularly focused on facilitating educational conversation and relationship development between small/diverse managers and decision-makers at key institutional investors, consultants, and fund of funds.

HarbourVest Managing Director Ed Powers participated as a “Bootcamp Coach” in one of the bootcamp sessions offered for emerging managers, offering insight on issues managers may face in areas like fundraising and operations as they are building out their businesses.

NASP 27th Annual Pension and Financial Services Conference / June 16, Atlanta, GA The National Association of Securities Professionals (NASP) is the premier organization that assists people of color and women achieve inclusion in the financial services industry. NASP connects members to industry leaders and business opportunities; advocates for policies that create equal representation and inclusion; provides educational opportunities; and works to build awareness about the value of ensuring that people of color and women are included in all aspects of the financial services industry. This annual event provides three days of essential education, relationship building with key decision-makers, and access to business opportunities.

HarbourVest Canada Annual Growth Fund Conference / July 12-13, Toronto, Canada HarbourVest Canada hosts this annual meeting, which provides timely updates to investors on fund performance and progress, key market trends, and case studies and lessons learned. Topics covered at the 2016 meeting included opportunities and challenges in North American venture capital, and a panel that explored the rising popularity of impact investing and what it means for the industry at large. Matt Autrey from HarbourVest participated on the panel with representatives from other private equity firms from around the world.

Emerging Manager Connect / July 19, New York, NY PartnerConnect is a series of networking events hosted by the editors of Buyouts, VCJ, and peHUB.com that fosters networking, idea-generation and deal-making opportunities among senior private equity executives. Emerging Manager Connect was the first event in the PartnerConnect series that focused specifically on emerging and diverse managers.

During a Limited Partner Bootcamp panel at the event, Ed Powers shared his perspectives on the risks and rewards of investing in emerging managers. He also offered his advice for successfully launching an emerging manager program.

US Small Business Administration SBIC Program Dialogue / September 19, New York, NY A panel discussion hosted by the US Small Business Administration’s Office of Investment and Innovation, which is responsible for running the Small Business Investment Company (SBIC) Program. The program partners with private investors to capitalize professionally-managed investment funds that finance small businesses.

Ed Powers joined other SBIC fund managers and limited partners as they shared their experiences as practitioners of the SBIC program with prospective fund managers.


NAIC Annual Private Equity & Hedge Fund Conference / October 3-4, New York, NY An annual thought leadership conference that encourages private equity and hedge fund professionals, institutional investors, and policymakers to explore industry trends, challenges, and investment opportunities. The discussion also included a focus on the performance of female/diverse managers.

HarbourVest Managing Directors Craig Fowler and Ed Powers both participated in the conference. Craig addressed institutional investors during the morning session with a briefing based on his expertise in the industry. As a panelist in a session entitled We’ve Got Alpha: Recognizing Outperformance of Diverse Managers, Ed questioned an experienced investment team about how a particular award-winning deal was sourced, put together and exited to create value.

BVCA Summit 2016 / October 5-6, London, UK A summit by the British Private Equity & Venture Capital Association where delegates and speakers debated the future of UK private equity and venture capital in light of the UK exiting the European Union.

Kathleen Bacon, Managing Director at HarbourVest, spoke in a breakout session entitled Measuring ESG Across Your Portfolio: How Relevant Are Individual Company and Portfolio-Wide KPIs?

Small Business Investor Alliance (SBIA) National Summit / October 10-11, Palm Beach, FL The Small Business Investor Alliance is the premier organization of lower middle market private equity funds and investors. Members provide vital capital to small- and medium-sized businesses nationwide, resulting in economic growth and job creation. Specifically, the SBIA seeks to provide member funds and LPs with real advocacy power on Capitol Hill, access to exceptional networking opportunities, and continuing education programs with an emphasis on industry best practices. Members gather at this annual meeting to share ideas, discuss new and evolving trends, and brainstorm on solutions for solving challenges. HarbourVest Managing Director Matt HoganBruen interviews many emerging managers throughout this annual event and other regional SBIA events.

Inner City Capital Connections (ICCC) Events Co-founded and jointly hosted by Horizon and the Initiative for a Competitive Inner City, ICCC is a national program that increases the financial sophistication of entrepreneurs and introduces them to capital providers. ICCC demonstrates that growing inner city companies, when given access to capital, generate the jobs and wealth that are crucial to the transformation of their communities. ICCC identifies and prepares a select group of 75 to 150 inner city companies to present their business plans to debt and private equity providers, meet individually with investors, and network with peers and industry leaders. The inaugural ICCC event was held in the fall of 2005 in Los Angeles and subsequent ICCC events have taken place in Boston, Chicago, Dallas, Detroit, Miami, New York, and Philadelphia. In keeping with prior years, Horizon played a key role in ICCC in 2016 including moderating a panel on private equity investors in Boston on June 8 and through coaching entrepreneurs in the fall.


2016 Southeast Venture Conference/Fusion Conference / March 17, McLean, VA

FUSION is a gathering presented by TechMedia that showcases emerging technology firms, offering exposure to top venture capitalists and private equity investors. TechMedia strives to educate, network, and build technology economies in regional areas, through networking forums and media.

The Vinetta Showcase / March 24, Toronto, Canada

A pitch and panel series where female founders who are seeking actionable feedback and meaningful new connections pitch to a panel of activist investors and successful startup founders. The series is organized by The Vinetta Project, an organization focused on changing gender ratios in innovation and investment by creating an ecosystem that supports high-growth female founders.

HarbourVest Principal Senia Rapisarda served as an industry expert panelist at the Toronto Vinetta Showcase, offering her insight on raising capital and creating scalable innovation.

Responsible Investment Forum / May 25, London, UK

The largest gathering of global private equity professionals committed to overcoming environmental, social and governance issues (ESG) in alternative asset investing. The Forum is co-hosted by Private Equity International and the Principles for Responsible Investment (PRI).

Kathleen Bacon, Managing Director at HarbourVest, was a panelist in the session entitled How Responsible Investment Can Drive Growth in Alternative Assets. She provided her insight on the meaning of responsible investment to the alternatives community and what role ESG plays when considering asset allocations.

BVCA Summit 2016 / October 5-6, London, UK

A summit by the British Private Equity & Venture Capital Association where delegates and speakers debated the future of UK private equity and venture capital in light of the UK exiting the European Union.

Kathleen Bacon, Managing Director at HarbourVest, spoke in a breakout session entitled Measuring ESG Across Your Portfolio: How Relevant Are Individual Company and Portfolio-Wide KPIs?


In addition to its fund investing efforts, Horizon spends considerable time developing additional ways to leverage its expertise in the emerging domestic market to enhance its impact. Below are a number of examples of how Horizon operationalizes its vocation for providing access to capital.

PARTNERING WITH ORGANIZATIONS FOCUSED ON THE DEVELOPMENT AND GROWTH OF THE EMERGING DOMESTIC MARKETSTHE ASSOCIATION OF ASIAN AMERICAN INVESTMENT MANAGERS (AAAIM)Horizon is a Trustee Member of AAAIM, and HarbourVest Managing Director Sanjiv Shah serves on its board as a Vice Chair and member of the Executive Committee. AAAIM was founded in 2006 to serve as a platform for Asian-American investment managers to meet and conduct business with plan sponsors, funds-of-funds, and institutional investors. AAAIM is an alliance of prominent Asian-American investment managers and executives, and provides a national platform for creating new opportunities domestically and globally. AAAIM promotes advancement of Asian-American investment professionals through industry education, professional development, and networking. Its members are among the most successful fund managers in the U.S., as well as talented emerging managers across the major asset classes of venture capital, private equity, real estate, hedge funds, and public equities. Horizon plays a role in generating events and strategic initiatives for the organization. www.aaaim.org

THE NATIONAL ASSOCIATION OF INVESTMENT COMPANIES (NAIC)Horizon is a member of the NAIC and HarbourVest Managing Director Craig Fowler serves on its board. The NAIC was founded in 1971 to serve as the industry association for diverse-owned and emerging managers, many of which rank among the best-performing private equity firms and hedge funds in the United States. With more than 40 member firms representing over $40 billion in assets managed, the NAIC is a recognized thought leader on the U.S. Emerging Domestic Market (EDM). The Group works to increase the supply of capital to the EDM and raise the visibility of its member firms and industry through advocacy and strategic relationships. www.naicpe.com


THE NATIONAL ASSOCIATION OF SECURITIES PROFESSIONALS (NASP)The National Association of Securities Professionals is the premier organization that helps people of color and women achieve inclusion in the financial services industry. NASP connects members to industry leaders and business opportunities, and advocates for policies that create equal representation and inclusion. Founded in 1985, NASP is headquartered in Washington, D.C., with additional chapters located in major financial capitals throughout the United States. Members include asset and wealth managers, brokers, public finance professionals, investment bankers, bond counsel, commercial bankers, institutional investors, plan sponsors, and other professionals in the financial services industry. www.nasphq.org

THE SMALL BUSINESS INVESTOR ALLIANCE (SBIA)Horizon is a Founding Member of the Small Business Investor Alliance and HarbourVest Managing Director Matt HoganBruen serves on its executive board. The SBIA is the premier organization of lower middle market private equity funds and investors. Its members provide vital capital to small- and medium-sized businesses nationwide, resulting in economic growth and job creation. www.nasbic.org

SPONSORS FOR EDUCATIONAL OPPORTUNITY (SEO)Horizon is an active member of the SEO Limited Partners Advisory Council, on which HarbourVest Managing Director Ed Powers serves. SEO works to provide superior educational and career programs to young people from underserved and underrepresented communities to help maximize their opportunities for college and career success. Since the organization was created in 1963, 10,000 talented students have participated in SEO’s programs in the U.S. and abroad, including more than 7,000 who have participated in SEO Career, which provides internships leading to highly competitive careers in finance, law, and other fields.

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HarbourVest is an independent, global private markets investment specialist with more than 30 years of experience and more than $40 billion in assets under management. The Firm’s powerful global platform offers clients investment opportunities through primary fund investments, secondary investments, and direct co-investments in commingled funds or separately managed accounts. HarbourVest has more than 400 employees, including more than 100 investment professionals across Asia, Europe, and the Americas. This global team has committed more than $31 billion to newly-formed funds, completed over $15 billion in secondary purchases, and invested $5 billion directly in operating companies. Partnering with HarbourVest, clients have access to customized solutions, longstanding relationships, actionable insights, and proven results.

This material does not constitute an offer or solicitation for any fund sponsored by HarbourVest Partners, LLC (“HarbourVest”) or its affiliates, or any investment services provided by HarbourVest. No sale will be made in any jurisdiction in which the offer, solicitation, or sale is not authorized or to any person to whom it is unlawful to make the offer, solicitation or sale. This document includes information obtained from published and non-published sources that HarbourVest believes to be reliable. Such information has not been independently verified by HarbourVest. Unless otherwise specified, all information is current at the time of issue. Any opinions expressed are those of HarbourVest and not a statement of fact. The opinions expressed do not constitute investment advice and are subject to change.

Past performance is not a guarantee of future success and there can be no assurance that investors in funds will achieve the returns discussed herein. Investments in private funds, involve significant risks, including loss of the entire investment. Before deciding to invest in a fund, prospective investors should pay particular attention to the risk factors contained in the fund documents. Investors should have the financial ability and willingness to accept the risk characteristics of an investment in a fund.

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 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 an investment decision.

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