Partners Group Private Equity Limited

Ladies and gentlemen, welcome to the Precinct's Private Equity Holding Q2 2022 Investor Conference Call and Live Webcast. I'm Moira, the Chorus Call Operator. I would like to remind you that all participants will be in listen-only mode and the conference has been recorded. The presentation will be followed by a Q&A session. Webcast viewers may submit their questions or comments in writing via the relative field. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Felix Haldner. Please go ahead, sir.

Good morning, ladies and gentlemen. A warm welcome to today's webcast. As you know, I'm a partner with Partners Group and a director with Princess Private Equity Holding, and I'd like to give you an update on what happened in the last quarter, the first half year, and some of our views as to going forward. As a reminder, the company, Princes Private Equity Holding, provides shareholders with an exposure to the direct private equity transaction flow of the manager or partners group. And whilst Princes invests predominantly in transactions that are led By partners group, it has also the ability to make so-called co-investments alongside other managers slash general partners. We have very much a kind of a thematic investment approach whereby we identify companies that enjoy tailwinds and then we lead them through a transformation. We build the company through what we call platform building and business transformation. And while doing so, we fully integrate the ESG factors in the investment process. And I'm happy that in the course of the presentation, will make a deep dive on what we are doing specifically. The company is managed by Partners Group, a leading global private market firm that has invested over 94 billion in private equity across market cycles, and there are more than 170 direct private equity professionals supported by a large network of industry experts and so-called operating directors with deep industry expertise. The objective of Princess is to generate long-term capital growth and an attractive dividend yield. So NAV total return stood at 9.9% per annum over the last 10 years. The share price total return stood at 14.8. The dividend objective is, as you will be reminded, is 5% per annum of the opening net asset value via semi-annual payments. And you will have realized that in June we made the first payment. This brings me directly to the NAV performance in the second quarter. It comes as no surprise given the extraordinary volatility in public markets and the way we value portfolio companies, that there was a negative performance in the second quarter, particularly actually in June. So NAV total return in the second quarter was then in total minus 7.5%, whilst the first quarter was still flattish. and the share price total return in the second quarter slightly positive, but year-to-date negative with 13.5%. This compares then to the MSCI world in the second quarter of minus 10.8% and year-to-date minus 13.5%. As said, the first interim dividend of MSCI 38 cents were paid in June. And for the whole year, a dividend of 76 cents per share is expected to be distributed in line with the company's objective to distribute 5% of the opening NAV. This then results in a fairly attractive dividend yield of short of 6%. In terms of activity, the portfolio, roughly 40 percent, pardon, roughly 40 million of investments were executed in the second quarter, including new investments in forefront dermatology, precisely Minecast and Climeworks, which leads us to an investment volume of 62.7 million for the whole first half year. and we have received a similar amount of realizations in the second quarter, of which a good part stemmed from the partial redemption from senior loans. Year-to-date, we have seen realizations of over 100 million euros. This brings me to the NAV and share price performance overview, and you will see that the In the long run, we are still outperforming the MSCI world, but in the short run, we certainly will observe as to what the market volatility is doing. You have observed, we've all observed in public markets, there has been a strong rebound in July and actually also in August, which is not yet reflected in these figures. So we expect that we will see some of it also then in the NAVs as the monthly reports are published later this year. In terms of discount development since the long listing in November 2007, end of the quarter, there was a discount of 22.3%, which is certainly disappointing However, considerably better than those of the peers, which I also attribute to the fact that investors have understood that the valuation, the timely valuation of princes versus some of the peers also provides kind of more accurate picture in the yield. This brings me to the key figures. Not much to be said, of course, in line with the declining NAV, the net asset value of the company has declined. NAV per share stood at 13.76. Investment level a bit more than 100%. The credit line was partially drawn, and there are unfunded commitments of 103 million However, as in previous calls, I emphasize, like to emphasize that only about 60 million are viewed as being active unfunded commitments that are anticipated to be called over the next couple of years. The balance is to mature funds, and it's not anticipated to be called in full. This brings me to the portfolio activities, pardon, to the portfolio review. And I'll start with a reminder of our valuation approach. Given the strong volatility also in the NAV we have experienced in the second quarter, Just as principle, valuations are performed in accordance to fair value principles. The technique maximizes the use of relevant observable inputs, and by that, we are, of course, in public markets, so public markets comparables in terms of multiples. However, also, our VAT values database of private companies that are in the sample and by that are observable for us. So the evaluation techniques are also applied very consistently. So you will see, you can expect to see upward valuations when the public markets are strongly buoyant and you can expect to see downward valuations as we have experienced in June. The valuations are bottom-up driven using ultimately the widely recognized market and income valuation methodologies. And of course, they are very solid. They are tested. They're reviewed on a regular basis. So, in a nutshell, for direct equity investments, which is the vast majority of Prince's portfolio. We use last 12-month EBTA data, which we have readily available on file from management reporting, financial reporting, from advisory board packages. We then apply enterprise value to EBTA multiple times. of public peer companies and of multiple private transactions. We deduct the debt and then derive to the net asset value. And more specifically, to determine the fair value multiple, of course, there's a quantitative assessment, and there's also a qualitative assessment, which includes company-specific characteristics like liquidity size, growth rate, risk, and so on. Having said so, we can dive deeper into the portfolio, and I'd like to discuss in a bit more detail the revaluations for the 10 largest portfolio companies in the second quarter and year to date. You will see as the largest, company still in the portfolio is SRS Distribution. This is this company that distributes roofing products. It provides residential and commercial roofing designs to actually end customers that are roofing and building contractors. So you can see that the value has been written down. And this is fully due to lowered valuation multiples applied. So as an example, the industry peers tanked about 25% in June in terms of multiple. At the same time, SRS remains highly acquisitive compared to its peers, has large white space potential, and also is less cyclical due to low exposure to commercial roofing. So SRS is growing. EPTA and revenue figures are growing. That's why also the downward valuations has been balanced by growing EPTA numbers. SRS is still largely able to pass on inflationary pressure to ENDS customers. That's to do with the continued strong demand. SRS is quarterly reviewing their pricing and adjusting it with a quarter announcement in advance. And they actually enjoy kind of a really price inelastic demand due to a number of factors. I mean, they have a greater exposure to residential damages in roofings are often supported by insurance coverage, or just simply that replacement needs are there within a stated framework. So, nothing fundamentally wrong with this company. On the contrary, we expect this to grow further in the quarters to come. Second largest portfolio company is KinderCare. We have discussed in quite some detail over the last couple of years as it was hit hard by the pandemic. It's the largest for-profit provider of early childhood education and care services in the U.S. So in the second quarter, KinderCare was written up. on the back of very robust financial performance, despite of multiple contraction in the peer group. So, with the normalization of the COVID-19 virus, KinderCare's licensed capacity was raised from the previous year, and KinderCare's really healthy performance is reflected by year-on-year increase in revenue. and adjusted EBTA over the last 12-month period, and that's attributed to strong enrollment rates as well as increasing occupancy rates. Remember that occupancy was the issue after the pandemic, whilst as we speak now, we enjoy similar numbers as pre-pandemic. The number three on this list is PCI Pharma. It's a leading global provider of outsourced pharmaceutical services offering. So they offer a full service integrated platform throughout the pharmaceutical supply chain. So the valuation of PCI Pharma services was written up, again, on the back of positive business performance. So PCA experienced robust organic growth across all of its business segments. And PCA is also able now to enter the sterile fill and finish market through an acquisition that was discussed in one of the previous calls. Sponsia. the France-headquartered company that provides property management and real estate services. So Foncia was written down to reflect the download trend in market comparable. Nonetheless, the EBTA for the last 12-month period increased year on year due to strong organic performance across all the company segments. Noteworthy is that the company benefit from strong acquisition activity. So some of you, particularly in the UK, may have realized that Foncia agreed to acquire Firstport, which is a leading provider of residential property management services in the UK. The UK has been for long a target market for Foncia, because Foncia's goal is to be the number one property manager in the three largest European markets, being France, where it is already there, Germany, where it's close, and now with the acquisition of Firstport, the foundation to be there, to get there in the UK. And Foncia intends to continue expanding its geographical footprint in both the new and existing markets via accretive bolt-on acquisitions at attractive multiples. Vishal, the franchisor and wholesale supplier for a network of over 500 stores across India, was written down. to reflect the downward trend in market comparable. Again, nevertheless, the company continues to recover from the effects of COVID-19 lockdowns with both revenue and EBITDA for the last 12-month period increasing, as also restrictions on stock operations have been lifted. So the next is Amiga. Amiga, similar story. Just to remind you, this is the parent company for the joint operations of Amiral Beltec and Megadyne, the global leader in mission-critical industrial power transmission and lightweight process conveyor belting. So, the valuation was lowered in the second quarter following the decrease in trading levels of public and sector comparable. So, the same story. Again, nothing fundamentally wrong. On the contrary, the company continues to perform strongly with both revenue and trading levels going up. So Tech-Am also suffered from a marking down. negatively revalued over the second quarter. And you will hear me again that nothing is fundamentally wrong. The company's financial performance remains very robust. TechGEM continues to deliver stable results, healthy year-on-year growth, as driven by high energy prices in TechGEM's energy efficiency services business segment and solid contribution from M&A activities. ICARE partners, which I covered in more detail in the last call, here, again, the valuation declined slightly over the second quarter to reflect the downward trend in market comparable. And FEMARCA, the developer, constructor, owner, operator of midstream natural gas infrastructure in Mexico, so the evaluation of the marker remained broadly stable. There's still some issues, and we are actively monitoring the delays in certain permits. However, we expect this to be solved over the next quarters. Finally, USIC. United States Infrastructure Corporation. That's a provider of infrastructure locating services. So, while the USIC, as you can see, was slightly marked down in the second quarter, you may have seen the news we released or the company released on the 10th of August, so after quarter end, whereby we basically sold USIC or part of it and reacquired at least part of it so that at the end, Partners Group and its clients will retain 50% of the company. And you will also have realized that the sales price was 23% higher than the last, well, the last observed data point that is the data point you have here in the presentation. So this also kind of shows you that whilst valuation with all the technology we have and is as accurate as it can be and reflecting as accurately public markets and other comparables, finally it's important at what price an asset is being sold. And I think those who have been longer with Princes have observed, like me, that there is a very typical pattern, that is that we typically sell companies at a higher price than the last observable market value. With this, I'll just give you the overview on the portfolio. Princess continues to be very diversified across investment sectors. You will see there are a number of very resilient sectors, including healthcare. The type of information technology we have, it's very service-driven, services-driven. The investments by type, we have most investments are direct investments. There's some debt, particularly as we have some debt basically parked in the senior loans for liquidity management purposes. Actually, that was reduced during the quarter in view of the financing needs of announced transactions. And you also see the diversification over vintage years. We observed that there are a number of vintage years, like 2014, 2015, 2016, where there are a number of assets where you can expect activity in the quarters to come, as these are typically fairly mature companies. This brings me to the portfolio metrics, where you can observe that actually we are still in growth mode and continue to do so. against the backdrop of general economic slowdown. You see a 20.3% revenue growth over the last 12 months, more or less unchanged. The EBITDA growth has slowed down to quarter one. EBITDA margins have been stable. So top line performance remains stable. Margins in this sample have gone down. However, we have also very sustainable capital structures comprising on average more than 60% of the equity. This brings me to the overview on our approach. Just as a reminder, we are a We are a thematic investor. We are looking for kind of an investment that goes for transformation. That is basically the answer to opportunities and challenges ahead of us. So we are looking for companies where growth is underpinned by long-term transformative trends. We build our conviction way before we transact. We systematically develop investment hypotheses, typically years ahead of transactions. And then we leverage our network of experts, advisors, to develop them more. And we also, once we own them, we compound long-term winners for longer for the benefit of our clients, as you have observed. in relation to international school partnership or FONCIA, or now very recently with United States Infrastructure Corporation. We then lead and guide these companies in a very entrepreneurial manner. We make the board the center of vision, strategy, and accountability. a very active or activist collaboration with the management teams. We then apply capabilities of our network and lead operating directors. And one of the examples I want to cover in a bit more detail at today's presentation is Guardian, Guardian Child Care and Education, an Australian company. And for this, I actually hand over to our new head of investor and shareholders relations, Sarah Page. The floor is yours.

Thank you Felix and welcome everyone. I'm delighted to speak to you today about Guardian because it's a great example of partners group transformational investing philosophy that Felix has just presented to you. Guardian is currently the second largest childcare and education provider and cares for over 10,000 children aged up to preschool age. The investment was made in June 2016 when revenues were $162 million Australian dollars and was Partners Group's largest private equity investment in Australia in 2016. Under Partners Group ownership, as at June, its revenues have increased to $380 million. Next slide, please. As Felix mentioned earlier, transformational investing is underpinned by thematic investing and entrepreneurship at scale. So how does this look like in real life? In terms of thematic investing, on this slide are some industry factors to give you a feel for the potential that Princess shareholders are buying into from a macro perspective. The industry growth has a stable upward trajectory, which is expected to accelerate over the next four to five years, in the region of 3.6%. And this is supported by factors such as stable births and migration forecasts, as well as increased government spending. So the industry fundamentals are attractive. The way the investment team went about sourcing this opportunity was that they not only leveraged their own deep knowledge, which they gained through prior investments in the US, UK and India, but they also leveraged experts experts and advisors to build the solid investment thesis. Now they did this over three years, which involved monitoring the macro factors I mentioned earlier, as well as several onsite visits, getting to know the management team and the local market. Next slide, please. Now in terms of the second pillar of transformational investing, which is entrepreneurship at scale, this was applied to Guardian in the following way. Firstly, the Partners Group Network was leveraged to support the board with high-quality and experienced operating directors, including the hiring of a new CEO who came from a larger competitor at the time. In the early years of the investment, development was slower than anticipated, so this led to management changes being implemented. Secondly, the board set the vision and strategy with a three-year plan focusing on organic growth, M&A and operational efficiencies. These strategic value creation plans have so far produced the following results. Guardian is outperforming its peers in terms of national quality standards of its centers. Also, customer satisfaction has improved, which you can see through the net promoter scale on the bottom right-hand side. And these best-in-class quality ratings are building a solid reputation for Guardian. which is helping to retain as well as attract more customer demand. In fact, Guardian has enjoyed the highest occupancy rates in the sector at over 74%, despite the impact of four waves of COVID-19. And this, in turn, has fed into increases in revenue and EBITDA. A good reputation is also helping to retain employees, which has lowered labour costs. In terms of increasing the number of centres, organic expansion has been in attractive catchment areas, not only in local communities, but also with on or near site care for children of staff working for some of the country's largest corporations. Also, several potential M&A sites have been identified, exhibiting high margins and occupancy rates. To give you more colour, there are roll-up opportunities in this highly fragmented industry, which has around 6,600 sites mainly run by small private operators. The investment has been in the portfolio now for around six years, and by holding on to solid companies for longer, Partners Group is capturing more value for Princess shareholders through long-term commitment and conviction. Now I'll hand over back to Felix to take you through the rest of the presentation.

Thank you, Sarah. This brings me to the investment and realization activity in the second quarter. you will see that we acquired Forefront Dementology. I'll come to that in a minute. Precisely, a global leader in data integrity software. Mindcast, a leading UK-based email security and cyber resilience company. And finally, we invested in a company called Climeworks, a leading Switzerland-based designer, developer, operator of direct air capture plants. In terms of realizations, there was this partial redemption from senior loans, and there were some legacy fund and debt investments. The new investment, the largest one, Forefront Thermatology, which was announced actually in February, As the name would suggest, it's a dermatology platform. It's actually the largest of its kind in the U.S. It's headquartered in Manitowoc in Wisconsin. It owns 20 clinics in 18 states and has over 400 board-certified clinics. dermatologists, physicians, assistants, nurse practitioners. So the company's mission is ultimately to offer patients kind of superior access to world-class care within their communities. And now, Forefront is basically in support of this. So it provides the dermatologists with a wide range of central support services, to reduce administrative burdens and allow them to focus on their patients. You will see a very similar business model as Princess has already in its portfolio with the physical therapist, with the optometrist, ophthalmologist, and other practitioners. So it's a clear market leader. We have favorable market dynamics. There's a consistent record of organic and inorganic value creation. And what we want to do is certainly continue to increase the pace of acquisitions in core add-on acquisitions program, but also expand ancillary services, invest in technology to improve business operations, and maintain our reputation as a best-in-class clinical provider This brings me to the near-term pipeline on this page where you see that we work on very specific transactions in all of our verticals, goods, products, technology, services, health, and life. Actually, in the services sector, you will see the top-on-top top-line financial service providers. You may have seen a press release, a partners group issued recently. So we acquired the company Foundation Risk Partners, a specialist insurance broker in the U.S. that is present in 18 U.S. states. But there's more to come. Activity has slowed down in comparison with last year, there's no doubt. However, there's a lot of work done behind the scenes and you can expect more announcements in the quarters to come. This brings me actually to a topic many of the investors are very interested in as this is a topic that is in everybody's mouth. where investors are very interested in. That's what we are specifically doing in terms of the ESG factors and the portfolio. And I'm very happy that we are actually in private markets and can achieve true impact as opposed to rely on public market figures, on ratings, and other stories. So by that, I hand over to Adrian Pohl, a team member of our ESG team. Please.

Thank you very much, Felix. It's a pleasure to be part of this call. I have already covered a few ESG concepts in our philosophy last time. I'll give a brief refresher and recap and share the most recent updates. As Felix has mentioned, ESG is a hot topic in our industry since it's become a trend over the past two to three years. But for Partners Group, it is nothing new. It's something we have been doing for over 15 years. We've been among the first signatories of the UNPRI and have consistently earned high ratings in their assessments. And we are also, since last year, the only global private markets then to be included in the Dojo and sustainability indices, which reflects our sustainability leadership within our industry. We turn to the next slide. It's important for us to highlight that part of our philosophy is that ESG at Partners Group starts with the G we believe even though it's maybe the letter that is often omitted or that one can not really rely to it's the backbone for us it's what drives the improvements on the environmental and the social side so setting up a clear ESG governance within our firm and our portfolio companies is crucial so ESG lies with the most senior levels of our firm. Our board of directors are responsible for the sustainability strategy. Our executive team are then responsible for the implementation and our sustainability team, which I'm part of, then drives and realizes sustainability at scale. by defining the processes and the control frameworks. So, we really focus on having ESG responsibilities at every level of decision-making, and this will be crucial in the next slides I will present as well. If we turn to the next slide, just putting our philosophy into perspective with what we know also from the public market space, So in the public market space, there is a traditional ESG approach often referred to as stewardship, where basically we want to integrate ESG criteria or ratings or ESG avoidance lists pre-investment or in the portfolio construction. We do this as well, of course. We also have avoidance lists. Public markets engage with companies. They have management meetings. They can write letters to CEOs. But at Partners Group, we believe we are in a unique position where we can go beyond this and we want to go beyond this public markets approach by following a strategic approach to ESG, which is based on our active ownership philosophy. that Felix has also spoken about. And our aim is really to enhance companies, which means to raise their ESG standards across our portfolio and to transform them, so really make them impact leaders in specific topics. What do we mean when we speak about raising ESG standards and imposing minimum ESG standards? Well, that's what we have defined in May in our newly launched sustainability strategy, which you see on slide 27. So this is the update as compared to what I discussed in the last call. We have defined 12 portfolio-level targets that we expect our portfolio companies to achieve during our ownership. So these are four targets. per dimension, E, S, and G. And I'll not have the time to cover all of these 12 targets within this call, but let me dive deeper into some select targets. And as mentioned before, if we turn to slide 28, ESG starts with the G, a partners group. So, the first target we expect our portfolio companies to achieve is to appoint ESG responsibles at every level of decision-making within the first 100 days and then develop a meaningful ESG journey. So, if you turn to the next slide, you see an example of a portfolio company, Schleich, which is a German toy manufacturer. where we have basically replicated our ESG governance just as we have it within our firm. We've replicated this within Schleich, and we do this across all portfolio companies. So it's really defining a board member, an executive team member, and on a management or operational level, a head of sustainability. So really helping also our portfolio companies to hire someone who is – our daily counterpart and driving ESG projects on a daily basis, and who interacts with a member of our ESG team or the investment team. which you see on the right. And together with this ESG governance, we developed an ESG journey, which you see on the next page, an example of what we defined as the key focus areas for Schleich. So it's a plastic toy manufacturer. So for us, it was key to address the use of plastics of this company, be it in the packaging, so reducing the plastics used in the packaging, but also the plastic figurines themselves. So, we are collaborating with a plastics specialist and external consultant to use recycled plastic and also toys that can be recycled again. So, really implementing the concept of circular economy within the business model, and this is really a great example of transforming businesses to make them more sustainable as one example of a key initiative within Schleich. Besides, also, another target that we mentioned in the sustainability strategy is a stakeholder benefits program that we have launched at Schleich. So we have given employees the possibility to invest in the company. So we have launched an employee incentive program or participation program, and we have doubled their investment so that they can really participate in the value we create with the firm and the upside that is being generated. And to the next slide, that's the slide that the part that most investors currently focus on is, of course, what do we do on the environmental side and our sustainability strategy and the targets we have on the environmental side. are really about leaving assets on their path to net zero. So we, of course, due to the nature of our business, we will not hold our assets until 2050, which is the target that the COP21 has set and that we have set for our portfolio of achieving net zero. But what we want to do is to do the best efforts we can to develop a strategy and lead our assets on the path to net zero. So, concretely, what does this mean? If we turn to slide 32, you see basically the targets broken down in a timeline So, we are, given the nature and the focus of our investment activity, we invest in the mid-market space. So, these are companies that have, often when we invest in them, not reflected on environmental or ESG issues more generally. GHC emissions is often a black box for them. So, for us, it's really important to lead them by the hand. and in the first year measure their GHG footprint together with them, receive within the second year an external assurance so that we know that the data and the measurement that we have is reliable and that we can work with this to in the third year then develop a tailored GHG reduction strategy, so really tailored to every individual portfolio company. And the aim, of course, of this strategy is to be net zero by 2050. But we believe that 2050 is too far away for the business leaders, for our portfolio company CEOs and board members, and for us as a firm as well. So that's why we have defined the first intermediate target of reduction by 50% by 2035. And our aim is to achieve 20% GHC emission reduction during our ownership to really launch and initiate this reduction already during our ownership. So one example, you know, from the portfolio, Felix has also mentioned it before in terms of valuation, is Techem, so our leading sub-meetering service provider in Germany. And Techem is a brilliant example of a company that From a thematic perspective, we liked a lot. We liked a lot. It's an energy efficiency company. If we turn to the next slide, you see one main reason we invested or we liked it also from a sustainability perspective is the services that Tekken offers makes their clients avoid almost 9 million tons of CO2 per year. This is a figure that the company is very proud of and was very proud of when we acquired it. As I mentioned in the space we invest in, most companies don't look at their own operations, and that was a key focus of our sustainability efforts is to really look at what are the emissions that this company actually produces, which they were not aware of at the time of acquisition. So we did, and you see the pass on slide 35, we assessed their emissions, which are still significantly high due to the nature of their business. We measured their GHG footprint globally. They're about to receive an assurance, and we are developing their GHG reduction strategy as we speak. And the company has published their first CSR report last year, which is also something we encourage our portfolio companies to do because it's part of the ESG journey of the reflection process. and they have published their GHG emission data there, and they will receive assurance on this year's report on this data and announce their decarbonization roadmap in this process. So I think this illustrates very well the process that we face in the private markets industry, which is, as Felix mentioned, focused on the actual impact, and it's very operational. But we also want to measure the progress we achieve across our portfolio and that's what you see on the next slide. As we publish what we call our dashboard and it's part of the reporting also in our sustainability report. So we do not want to have an aggregate ESG rating as it is done in the public market space, but we really want to look at KPIs that we believe are the most material for each company. So in the dashboard, we publish the 12 most material ESG KPIs across all industries, and you see the coloring then identifies or tells us what are the focus areas, where have we improved and where do we still need to invest more time, more resources to really drive ESG progress within these companies. So, handing back to Felice.

Thank you Adrian Paul. So, hope you find this insightful and certainly we're interested in feedback as to whether we shall deep dive over time again in other examples. which we would be happy to do. This brings me to the summary before I then hand over back to the audience for Q&A. Princess Long, the manager's strategy to follows a thematic investment approach. We identify companies benefiting from transformative trends, investing into attractive companies with a clear development potential. We then build the companies through platform building, business transformation, and as we heard, we fully integrate ESG factors. The company is managed by an experienced manager, with vast resources, direct private equity professionals, industry experts, supported by about 1,000 other professionals at the firm. And we've got a very attractive portfolio, very diversified. You will have seen the full list of the 50 largest investments in the semiannual report we published last Friday. We have a very balanced portfolio across investments in value creation mode and mature investments where we may seek to crystallize value. And there is a very attractive near-term investment pipeline across regions and sectors. We just recently announced a number of these transactions. I also believe as in June, we fully, with the download valuations, we fully reflected the market's losses in June. There is a clear upward potential again in terms of NAV, partly because of public markets in July and to August. have increased considerably. But also, and importantly, the example of USIC, where we have basically marked down the value end of June because of comparables. and only a month and a half later we can announce a third-party transaction whereby the company was valued 23 higher than the last observable value so i personally believe there's a lot of value in this portfolio with that i hand back to the operator and to the audience to ask questions. You've got the tool. Please type them in and we try as good as we can to use the last 10 minutes to answer some of them.

We will now begin the question and answer session. Webcast viewers may submit their questions or comments in writing by the relative field.

We already started to receive a number of questions. Actually, Felix, the first one would be for you. Queen says PE now valuations are done on monthly base. For portfolio companies, this can include considerable adjustments if markets show high volatility, as we have seen in July. MSCI World TR is here today just minus 1.4% versus minus 13.5% up to end of June. This will also apply to Prince's NAV of end of July, whereby we know that PY portfolio is not a reflection of the MSEI.

I can keep this short as I expanded on that quite a bit. Yes, you can – I mean, I expect and you can expect a major correction again as a consequence of public market comparables. And that's the – And as rightly observed, we are not a mirror of MSCI. I think we've got companies that are on average growing quicker, have more EBITDA growth, more revenue growth, as demonstrated when I covered the portfolio metrics.

Thank you. Yet another one. Credit facility has been upped from €80 million to €110. Is this increase done against a background of softer exit opportunities versus more attractive purchase opportunities?

Again, a short answer. The increase has to do with the increase of the gross assets of Princess. So we just wanted to adjust.

What is your projected performance based on the current rebound of public markets? Do you expect a negative performance in 2022?

I think for the whole year, that's a crystal ball. I think short term, I mean, you can expect upward adjustments as a result of comparables that have adjusted significantly in upwards way in, for example, in July.

Thank you. Thank you very much. Adrian, Paul, I have a question for you. You mentioned stakeholder benefits as a target in your sustainability strategy. Can you explain? Do you have any examples?

Yes. Thank you. It's actually a key focus of our social targets. One example is the one I mentioned for our portfolio company, Schleich. The idea is that we really want to build companies that employees wish to work for, and we want them to participate in the value we create, so be it through employee participation plans, as it has been done at Schleich, or learning opportunities. So it's really about reinvesting profits in the companies to the benefits of the employees.

Mm-hmm. Thank you very much. Now, Felix, I have another question back to you. What is the current cost of the credit line, and is this projected to change?

We disclosed actually the new terms in all detail in the June monthly, so I refer you to that. But broadly spoken, it has not changed.

Perfect. Yet another question for you, Felix. Do you know what caused the share price appreciation in late June and depreciation early July, which seems to have been inverse to the broader LPI index?

Unfortunately, that's not a question I can answer, but I'm sure there are, I mean, the brokers in London will have an answer for that.

Do you expect further realizations of portfolio companies in 2022?

Yes, I do so. I know that we are working on a number of exits, and I would hope that one or the other would then materialize and would be happy then to report in the next quarters.

Great. And I see, Adrian, Paul, you are receiving good feedback on transparency evaluations and ESG explanation. So I think we can continue in this manner. And then... One more question for you, Felix, as we're running short on time. Do you plan to redeem the remaining senior loan balance in the coming quarters?

I would expect the senior loans to be reduced as we find opportunities to invest directly in equity as a reminder when the allocation has been a pure liquidity play. At the time we made the decision last year, we had negative interest in euro accounts, and by that this was a liquidity tool.

Great. And with this, we would like to conclude today's webcast, and we thank you for participating. We are looking forward to welcoming you to the next update during autumn. Thank you very much.