20' presentation tailor made for small group audience of Family Offices at the 2017 session of Bloomberg Symposium

1. Demystifying…
Rajaa Mekouar
for Bloomberg
Luxembourg, 29th June 2017

2. #22 ANDY A LUXEMBOURG
mais plutôt un
partenaire ». Avec le
Brexit, le Luxembourg
dispose d’une belle carte
à jouer, sans compter les
investisseurs américains
qui identifient le
Grand-Duché comme
une base idéale pour
rayonner en Europe.
VOUS AVEZ
ACTIVEMENT
CONTRIBUÉ À LA
CONFÉRENCE “LPEA
INSIGHTS 360GP
VIEW”. QUELLE EST
L’AMBITION DE CET
ÉVÉNEMENT ?
En arrivant au
Luxembourg, j’ai constaté
un décalage entre la
réalité du pays et son
image à l’extérieur ainsi
qu’un déficit d’image
sur la possibilité d’être
basé au Luxembourg en
tant qu’investisseur PE.
J’ai rejoint le Board de
la LPEA et ai proposé de
réunir des investisseurs
PE de tous bords autour
R
de Ian Prideaux, ami
mentor et CIO du family
office de “Grosvenor
Estate”, qui gère les actifs
du Duc de Westminster.
Le premier événement
a été un succès avec
120 participants. Dès
le début, notre but
était de promouvoir la
diversification par le PE
auprès des gestionnaires
d’actifs. Nous avons
vu les choses en grand en
2017 avec une conférence
de plus grande envergure,
centrée sur les grands
investisseurs basés au
Luxembourg, comme
Kharis. Le succès de
cet évènement, avec
400 personnes, nous
permet de placer le PE
au centre de l’économie
luxembourgeoise et de
contribuer à l’image du
Grand Duché en tant que
hub pour le PE à l’échelle
européenne et au delà.
La prochaine édition
est déjà en cours
de préparation !
D’INFOS
www.myofficialstory.com/Rajaa Mekouar
www.khariscapital.com
35
avons ainsi investi 200
millions d’euros en deux
ans, avec notamment
l’acquisition de la chaine
Quick en Belgique et
au Luxembourg où
nous développons la
marque Burger King via
une master franchise
multi-pays. Nous
créons des emplois et
agissons au plus près
de l’investissement et
de l’investisseur, avec
un impact direct sur
l’économie. Certains
reprochent au PE de
bloquer l’investissement,
mais il s’agit d’un faux
problème. En réalité, il
permet d’accompagner
les entreprises sur le long
terme en fournissant
des rendements
très intéressants
aux investisseurs, la
fameuse notion de
“Illiquidity premium”. J’ai
apprécié la citation de
Pierre Gramegna : « Le
Luxembourg n’est pas un
concurrent de Londres,
otre
onnelle
c l’appui
de
eurs
ous
es
el
ique
ous
« Le Luxembourg
dispose d’une belle
carte à jouer dans
le Private Equity
international. »
Rajaa Mekouar,
Kharis Capital
©360Crossmedia
Moderation:
Rajaa Mekouar
Panelists:
Gorka Gonzalez, KBL
Matteo Novelli, Borletti Group
Nicolas Milerioux, Enovos
Our session today
GET TO ASK QUESTIONS
TO PRACTITIONERS (30’)
Panel discussion

3. A routinely
exceptional year
McKinsey Global Private Markets Review
A routinely
exceptional year
McKinsey Global Private Markets Review

4. Private Equity 1.0

5. It’s poll time!
Have you ever invested in Private equity?
- Yes (directly or via a PE fund)
- Yes (via a fund of funds)
- No

6. video
The big picture: It’s “real economy”!

7. The big picture: PE across the cycle

8. The big picture: Getting bigger!
2. OVERVIEW OF THE PRIVATE EQUITY
INDUSTRY
PRIVATE EQUITY:
2016 IN NUMBERS
THE INDUSTRY IS LARGER THAN EVER ANOTHER ROBUST YEAR FOR FUNDRAISING
$2.49tnPrivate equity assets under
management as of June 2016,
an all-time high.
$820bnDry powder held by private
equity funds as of December
2016, up from $755bn at the
end of 2015.
$347bnAggregate capital raised by
830 private equity funds
closed in 2016.
$10.8bnArdian raised the largest
secondaries fund ever closed,
Ardian Secondary Fund VII.
CAPITAL IS INCREASINGLY CONCENTRATED HIGH VALUATIONS ARE A CONCERN
2017 PREQIN GLOBAL PRIVATE EQUITY & VENTURE CAPITAL REPORT
- SAMPLE PAGES
Source: Preqin (end 2016)

9. The big picture: Investors
$bn invested in PE by investor type and as a % of total AuM
Source: Preqin

10. The big picture: Investors
PE makes up 21% of a
Family Office (FO)
por7olio
(and it’s increasing…)
year, pointed to diversification benefits and the potentia
equity.
Private equity is expected to further strengthen its positi
participants indicated they intend to either maintain or in
family offices will co-invest and invest more directly in th
their activity within those areas.
Private Equity Allocations - % of the average family
Private Equity includes: Direct venture capital/private eq
Average
Direct venture capital/private equity 11
Private equity funds 7
Co-investing 3
Commodities 2
Hedge funds: includes all strategies 8
Equities, developed markets 18
Equities, developing markets 6
Fixed income, developed markets 9
Fixed income, developing markets 3
Cash or equivalent 8
Real estate direct investment 15
REITs 1
ETFs 2
Agriculture (forest, farmland, etc.) 2
Tangibles 1
Other 2
Future intentions for private equity allocations - % o
Source: Campden Wealth / KKR (2017)
Alloca&on across asset classes for Family Offices

11. Myth no1:
It’s too expensive
Myth no2:
It’s too illiquid
Myth no3:
It is too risky (Blackbox)

12. PE Economics
Management Fees
Yearly:
1-2.5%
Downward
pressure
Carried Interest
At exit
One off:
10-20%
Clawback pressure
Other fees
Placement
Monitoring
Break fee
Transparency
push
Alignment of interests:
Managers invest their own money
New trends emerge with no commitment fee, shorter
commitment periods

13. It is about long term investing….
The PE J curve
Commitments
Capital calls
Distributions
Net cumulative cash flows
(US$m)
Source: Pictet
Chart shows evolution of cash in/out and cashflows in a typical PE cycle

14. Commenting the “J Curve” effect
❖ Commitment drawdown and allocation: over time unlike with hedge funds
❖ Net contributions (of distributions) rarely exceed 2/3 of committed capital
❖ Key performance measures:
❖ IRR* (Internal rate of return)
❖ Multiples (without time factor) / TVPI** (Total value to paid-in capital)
❖ DVPI (Distibuted to paid in capital)
❖ Pre distribution, negative IRR* due to:
❖ Impact of management fees
❖ Conservative valuations (eg illiquidity discount / upside via realisation)
❖ Ways to smooth the J Curve effect:
❖ Fee reduction
❖ Secondary investments (Trade off)
*The IRR is the discount rate that makes the net present value of all cash flows equal to zero
**Total value to paid-in (TVPI) ratio represents the fund’s total value as a multiple of its cost basis. TVPI is calculated by dividing the realised amount added to the net asset value of unrealised investments by
the investment cost

15. PE Programs have been cash flow positive
for 6 years running
Global Private Equity Report 2017 | Bain & Company, Inc.
Figure 1.10: LPs’ private equity programs have been cash flow positive for six years running
Capital contributions and distributions (global buyout funds)
2005 06 07 08 09 10 11 12 13 14 15 H1 16
1.2 2.0 2.3 1.91.0 0.8 0.4 0.4 0.8 1.2 1.5 2.4
–200
–100
0
100
$200B
100
Ratio of distributions
to contributions
Contributions Distributions Net cash flows
Source: Cambridge Associates
Figure 1.11: Buyout net asset value—the numerator for limited partners—is decreasing

16. Buyout funds outperformed public markets in all
regions over short and long time horizons
Page 22
One strand of the returns story bears watching: The spread between buyout returns and public markets—and
within buyouts, the spread among fund performance quartiles—has narrowed in recent years. To understand
why, let’s look at a few underlying trends.
Figure 1.21: Buyout funds have outperformed public markets in all major regions over short and long
time horizons
US Europe Asia-Pacific
0
5
10
15
20%
End-to-end pooled IRR (as of June 2016)
1
6
4
3
15
13
5
13
13
10
11
8
20
12
7
Investment horizon (in years)
US buyout funds S&P 500 mPME
−15
−10
−5
0
5
10
15
20%
End-to-end pooled IRR (as of June 2016)
1
10
−11
3
17
10
5
13
7
10
11
4
20
15
5
Investment horizon (in years)
−15
−10
−5
0
5
10
15
20%
1
2
−9
3
14
2
5
9
2
10
12
3
20
11
3
Investment horizon (in years)
End-to-end pooled IRR (as of June 2016)
Developed Europe
buyout funds
MSCI Europe mPME Asia-Pacific buyout
and growth funds
MSCI AC Asia
Pacific mPME
Notes: Data for US and Asia-Pacific calculated in US dollars; data for Europe calculated in euros; Europe includes developed economies only; Cambridge Associates’ mPME is a
proprietary private-to-public comparison methodology that evaluates what performance would have been had the dollars invested in private equity been invested in public markets
instead; the public index’s shares are purchased and sold according to the PE fund cash flow schedule; discrepancies in bar heights displaying the same values are due to rounding
Source: Cambridge Associates

17. Global Private Equity Report 2017 | Bain & Company, Inc.
Figure 1.18: Acquisition multiples rose to record highs
0
2
4
6
8
10
12X
Average EBITDA purchase price multiple for US LBO transactions
2007
9.7
08
9.1
09
7.7
10
8.5
11
8.8
12
8.7
13
8.8
14
9.7
15
10.3
Q1 16
10.5
Q2 16
9.7
Q3 16
10.9
Source: S&P Capital IQ LCD
Valuations are reaching record highs (US data)

18. Value creation: 3G and Heinz
Page 56
Vista’s playbook even extends to sourcing talent. In an interview with Columbia Business School, CEO Robert
Smith discussed Vista’s finely tuned aptitude test, the origin of which dates back decades to a questionnaire
Figure 2.12: 3G helped Heinz deliver market-leading margins
0
10
20
30%
EBITDA margin, 2014
18
26
Average 17%
Dean
Foods
Tyson
Foods
Hormel
Foods
Kellogg
Conagra
Mondelez
Danone
Campbell
Soup
General
Mills
Kraft
J.M.
Smucker
Hershey
Nestlé
Mead
Johnson
Heinz
2013
Heinz
2014
Sources: S&P Capital IQ; public company filings

19. Leading PE investor boosting Direct PE investments
ability to mount their own programs—notably, big pension funds in Canada, sovereign wealth funds in the
Middle East and Asia, and a few large European family offices. The Canada Pension Plan Investment Board
(CPPIB) illustrates the trajectory of these influential investors. CPPIB started its direct investing program in the
mid-2000s. By 2016, it had scaled up the direct PE program to a net asset value of C$16.6 billion, comprising
29% of its total PE investment (see Figure 3.2).
Figure 3.2: The Canada Pension Plan Investment Board is making a transition to more direct investments
CPPIB's direct private equity and natural resources investment value, in Canadian dollars
2007
1.0
08
3.2
09
2.9
10
4.0
11
5.6
12
6.7
13
9.8
14
2.1
11.6
13.7
15
1.5
15.8
17.3
16
1.4
16.6
18.0 38%
CAGR
2007–16
Year-end
33 35 3112 24 22 25 25 25 30
0
5
10
15
C$20B
Percentage of
CPPIB's total
PE investment
Direct PE+natural resources Natural resourcesDirect PE
Notes: For fiscal year ending March 31; prior to 2014, only the combined value of direct PE and natural resources was reported
Source: CPPIB annual reports

20. Fact No1:
It’s long term… Illiquidity Premium
Fact No2:
It’s still an insider’s world… Access is key
Fact no3:
It takes resources.. Time, people and capital

21. Getting in: Choosing the right strategy
Private Debt
Infrastructure
Secondaries
Listed PE LBOs
Real Estate
Venture Capital
Growth capital
Private Capital

22. Increasing risk and complexity
Getting in: From passive to active

23. Getting in: Manager selection is key
Global Private Equity Report 2017 | Bain & Company, Inc.
Figure 1.22: Top funds outperform by a wide margin
US Developed Europe
Note: Data in dollars for US funds and in euros for European funds
Source: Cambridge Associates
–10
0
10
20
30
40
50%
10-year horizon pooled net IRR, US buyout funds
06 07 08 09 10 11 12 13 14 15 16
As of June of year
2005
10-year horizon pooled net IRR, buyout funds in developed Europe
06 07 08 09 10 11 12 13 14 15 16
As of June of year
0
10
20
30
40
50%
–10
2005
MSCI Europe mPME All Top-quartileS&P 500 mPME All Top-quartile
Global Private Equity Report 2017 | Bain & Company, Inc.
Buyout returns have slowly trended downward. The PE industry has matured and become more competitive,
with many more participants and massive amounts of capital competing for a limited set of deals. To be sure,
Figure 1.22: Top funds outperform by a wide margin
US Developed Europe
Note: Data in dollars for US funds and in euros for European funds
Source: Cambridge Associates
–10
0
10
20
30
40
50%
10-year horizon pooled net IRR, US buyout funds
06 07 08 09 10 11 12 13 14 15 16
As of June of year
2005
10-year horizon pooled net IRR, buyout funds in developed Europe
06 07 08 09 10 11 12 13 14 15 16
As of June of year
0
10
20
30
40
50%
–10
2005
MSCI Europe mPME All Top-quartileS&P 500 mPME All Top-quartile
Source: Bain & Company

24. Getting in: Sourcing skills
Global Private Equity Report 2017 | Bain & Company, Inc.
Figure 2.3: PE firms need to generate an ample flow of high-quality deals for the top of the funnel
Source: Bain & Company
Out of 100 potential deal opportunities
30 make it to the investment committee
13 go to final committee
7 result in bids
1–2
deals close
Source: Bain & Company

25. Total PEP 2009 Commitments: $141,500,000 Open Commitments: $120,275,000
Date of Valuation:
% of Committed Capital
Date Capital Called
02-Mar-09 7.50% 10,612,500 - (10,612,500)
30-Sep-09 7.50% 10,612,500 - (10,612,500)
QS PEP 2009 CASH FLOWS AND PERFORMANCE
Contributions
QS PEP 2009 Status
Summary of Cash Movements (All values in $US)
Net
Cash FlowsDistributions
Total 15.00% 21,225,000.0 - (21,225,000.0)
0.00%
Net Realized IRR To-Date: NM
Net Realized CoC To-Date: -
Performance and Valuation
Staying in: Reporting

26. FUND NAME: CHARLESBANK EQUITY VII
Summary of Fund Terms Summary of PEP Involvement
Type: Mid-Cap LBO PEP Commitment: 17.28$ mm Drawdowns to Date: 0.72$ mm
Industry Focus: Diversified Date of Commitment: Jun-09 Distributions to Date: -$ mm
Geographic Focus: US
Fund Size: $ 1.5 bn Relevant Team Track Record (as calculated by QS PEP as of 3/31/2009 - in $ mm)
Average Transaction Size: $ 50 mm to $ 100 mm
Investment Period: 6 years
Partnership Life: 10 years with up to two 2-year extensions Fund I-III 1991 N/A $617.5 $1,480.9 $9.5 2.4x 29.0%
Hurdle Rate: 8% Fund IV 1998 $280.0 $279.5 $683.7 $17.8 2.5x 28.0%
Management Fee: 2% in the first 6 years, then applied on invested capital Fund V 2000 $500.0 $504.4 $823.8 $343.4 2.3x 33.3%
Carried Interest: 20% Fund VI 2005 $900.0 $470.0 $199.1 $411.8 1.3x 26.2%
Professional Team Size: 35 (19 Investment Professionals)
Offices: Boston, MA; New York, NY
Fund Description
Strategy Sourcing
Invests in middle-market companies with EV's between $ 100 mm to $ 750 mm across a broad range of industries Develop a detailed investment theme and then identify specific investment opportunity
Careful and extensive due diligence on the target company and related industry dynamics to capitalize on it
Fund
Inception
Year Fund Size
Gross IRR
to LPsGross CoC
Realized
Capital
Unrealized
Capital
Invested
Capital
Employs flexible approach to structuring investments to minimize risk Broad network of relationships with prior portfolio company executives, industry experts,
Identifies potential exit options as part of each due diligence process and enters investments professional advisers and intermediaries
with at least one articulated strategy
Targets Value-Added
Target companies with the following characteristics: Active involvement post-investment:
o Proven management team o Regular communication with management teams
o Strong market position and demonstrated competitive advantage o Strategic planning sessions and periodic reviews
o Businesses with low technical risk and resistant to industry and economic cycles o Active participation on the board of directors
o Companies with potential for profit improvement through revenue growth and cost reductions o Help management teams complete financings, acquisitions and divestitures
o Engage outside specialists including consulting, investment banking, legal and tax advisers
Key Strengths and Issues to Monitor
Strengths Potential Issues
Demonstrated good performance Lack of realizations in Fund VI - only 42% of invested capital returned
o Charlesbank VI returns favorably compare to other 2005 vintage funds History of co-investment
o Charlesbank's portfolio EBITDA remained flat during a time where EBITDA declines are common o Charlesbank often partners with other PE firms which makes it difficult to assess
Experienced investment team with Principals working together over the past 14 years how much of their performance success is a result of their actions versus those of others
Discipline at the height of the market
o Charlesbank avoided overpaying, overlevering and overbuying at the height of the market
o Charlesbank realized $ 240 mm in proceeds between 2006 and mid-2007 and only invested $ 101 mm
o Average purchase price and leverage multiples for Fund VI were in line with historical levels
Staying in: Reporting

27. Trend no1:
Becoming Mainstream
Trend No2:
Going Direct (Family Offices AND companies)
Trend no3:
Segmenting (stage, region, strategy)

28. Key takeaways
Recap No1:
PE does drive overall portfolio performance
Recap No2:
Illiquidity is a “blessing” to count in
Recap No3:
Taking the time to select the appropriate vehicle
and strategy is paramount
CONCERNS:
Valuations
Leverage
Competitiveness

29. CalPERS: How PE contributes to performance…

30. Time for introspection…
1.Minimum possible exposure to be relevant for performance
2.Short term liquidity needs
3. Level of “risk” that fits profile - Venture or LBO (convictions)
4.“KYC”: Build relationships with the teams (time… trust)
5.Acceptable fee level: Alignment of interests
6.Access: Which vehicle fits amount, costs and fiscal exposure
7.Attitude: Be honest and realistic about your capabilities