Audited consolidated financial statements for the period from 1 January 2021 to 31 December 2021
Annual Report 2021
Princess Private Equity Holding Limited
Princess Private Equity Holding Limited ("Princess" or the
"Company") is an investment holding company domiciled in
middle and upper middle market. Princess is a direct investor
with a small legacy fund portfolio that is in run-off. The
Company is managed by Partners Group AG ("Partners
Group"). Princess aims to provide shareholders with long-
term capital growth as well as an attractive dividend yield.
The shares are traded on the Main Market of the London
Stock Exchange.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
This document is not intended to be an investment advertisement or sales instrument; it constitutes neither an offer nor an attempt to solicit
offers for the product described herein. This report was prepared using financial information contained in the Company's books and records
as of the reporting date. The charts and figures detailed in the Chairman's report, Private Equity market overview, Investment Manager's report,
ESG report, Portfolio composition, Portfolio overview, Structural overview, Company information, and Board of Directors have not been
audited. This report describes past performance, which may not be indicative of future results. The Company does not accept any liability for
actions taken on the basis of the information provided. Please consult the constituent documents for a more complete description of the
terms.
Cover image is for illustrative purposes only.
Page 2 | Annual Report 2021
Key figures
31 December 2021In EUR
1,055,014,221Total fund size
15.26NAV per share
0.67Total dividend per share
14.45Share price
-5.3%Discount
40,158,933Cash and cash equivalents
25,000,000Credit line used
1,051,241,219Value of investments
116,599,553Unfunded commitments
99.6%Investment level
3,773,003Net current assets
Past performance is not indicative of future results. There is no assurance that similar investments will be made nor that similar results will
be achieved.
Investment level: as per reporting date, calculated as value of investments divided by total fund size.
Net current assets: as per reporting date, calculated based on net asset value less total investments at fair value through profit or loss.
31 December 2020
923,334,182
13.35
0.435
11.75
-12.0%
31,514,763
0
903,416,996
106,623,004
97.8%
19,917,187
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 3
Table of contents
1 Chairman's report 5
2 Private equity market overview 6
3 Investment Manager’s report 8
4 Environmental, Social, and Governance ("ESG") 12
5 Portfolio composition 16
6 Portfolio overview 19
7 Structural overview 24
8 Company information 25
9 Board of Directors 26
10 Directors' report 28
10.1 Directors 28
10.2 Governance and regulatory matters 34
10.3 Committees
40
10.4 Corporate matters
42
11 Independent Auditor's report
44
12 Audited consolidated financial statements 53
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 4 | Annual Report 2021
1. Chairman's report
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 5
Dear Valued Investor,
In the course of 2021, Partners Group, the Investment
Manager of Princess, remained highly selective in its invest-
ment process, deploying a total EUR 342.4 million on behalf
of the Company. Besides new direct investments, the sub-
stantial amount includes add-on investments in portfolio
companies to finance mergers and acquisitions ("M&A")
activity and to further drive value creation initiatives through
entrepreneurial governance. Princess also invested EUR 135
million in senior loans for liquidity management purposes.
As Chairman of the Board of Princess Private Equity Holding
Limited ("Princess" or "the Company"), I am pleased to present
the 2021 Annual Report and audited consolidated financial
statements.
During 2021 we have seen an extraordinary comeback since
the early shocks of the pandemic, with most of our portfolio
companies having successfully navigated COVID-19 disrup-
tions. Princess' net asset value ("NAV") developed positively
and closed the reporting period at EUR 15.26 per share,
representing a 14.3% increase from the previous year. The
Company's NAV total return for the year, including the in-
creased dividend of EUR 0.67 per share, stood at 19.4%.
Princess' share price total return was 29.3%, reflecting both
the positive NAV return and a significant reduction in the
discount of the Company's share price to NAV, which closed
the reporting period at 5.3%, compared to a discount of
12.0% at the end of December 2020.
Although 2021 has been a remarkable year for Princess,
various constraints continue to unfold. As consumers and
businesses adjust to a new normal after the pandemic, the
conflict between Russia and Ukraine increases the level of
geopolitical risk. Princess has very limited exposure to the
region, through negligible positions in the legacy fund port-
folio which is in wind down. Together with the Company's
Investment Manager, we are closely monitoring the situation,
taking into account potential supply chain disruptions and
second order effects.
However since the year end, and as a result of the effect on
market sentiment of the Russia - Ukraine conflict, we have
seen the actual share price weaken to levels recorded at the
start of 2021 and the discount widen, in line with our peer
group, to levels close to 20%.
My fellow Directors and I would like to take this opportunity
to thank investors for the confidence they have shown in
Princess during these times of increasing economic volatility.
With the significantly positive NAV development over the
past year and the strong momentum for exits of Princess'
mature portfolio companies, despite increasing macroeco-
nomic uncertainty, I believe that Princess is well placed to
continue creating value for its shareholders over the years
to come and we will continue to work with Partners Group
to achieve this goal.
Dividends paid to shareholders in 2021 amounted to EUR
0.67 per share (2020: EUR 0.435 per share), in line with
previous guidance to distribute 5% of opening NAV for each
financial year, via semi-annual payments. The total dividend
of EUR 46.3 million was almost ten times covered by record
portfolio distributions. For 2022, the Board intends to
maintain the level of distributing 5% of opening NAV via
semi-annual payments in June and December.
Richard Battey
Chairman
In an active year of realizations, Princess received record
distributions of EUR 462.5 million, equivalent to 50.1% of
opening NAV. The main contributor remained the direct
portfolio, accounting for EUR 446.9 million. The remaining
balance was received from the Company's mature legacy
fund portfolio.
2. Private equity market overview
Private equity buyout activity
Global private equity buyout transactions started to show
signs of moderation in the final quarter of 2021. Registering
a total volume of USD 195.1 billion, transaction value in-
creased by a nominal 1.0% compared to the same period in
2020, which was at an improved state following the rollout
of pandemic-led government stimulus packages and central
banks' liquidity injections globally. The number of transactions
also increased by a marginal 0.7% year-on-year to 2,238 in
the fourth quarter, according to Preqin. Buyout activity was
once again driven by large-cap and upper mid-cap transac-
tions with value above USD 1 billion, which accounted for
73% of the global aggregate transaction value. However,
growth in transaction volume was much higher in the upper
small-cap transaction segment (USD 250-499 million).
North America continued to account for the majority of
global buyout transaction activity, generating 53.4% of total
transaction value during the quarter. On a year-on-year basis,
however, overall buyout activity in the region declined by
5.1% to USD 104.1 billion in aggregate value across 1,311
transactions. In November, Hellman & Friedman and Bain
Capital announced the region's largest transaction for the
quarter, with a USD 17 billion buyout of Athenahealth, a US-
based provider of network-enabled services for healthcare
and point-of-care mobile apps. This is the second time the
company has been acquired in the past three years, the first
being in 2019 by Veritas Capital and Evergreen Coast Capital.
Private equity buyout activity in Europe reached 614 trans-
actions and concluded at USD 52.4 billion in the fourth
quarter of 2021, about 5.2% higher than the same period in
2020. The largest transaction completed during the fourth
quarter was Clayton Dubilier & Rice's USD 9.6 billion take-
private buyout of WM Morrison Supermarkets, the fourth-
largest supermarket and grocery operator in the UK, which
has been listed on the London Stock Exchange since 1967.
Another notable transaction was CVC Capital Partners' ac-
quisition of Unilever's tea business, ekaterra, for USD 5.0
billion. This was part of the fast-moving consumer goods
("FMCG") giant's strategy to divest its low-growth portfolio
of food assets, following the sale of its frozen-foods business
to Permira in 2006 and its spreads business to KKR in 2019.
Meanwhile, aggregate buyout transaction value in Asia grew
by 19.2% year-on-year to USD 31 billion across 202 trans-
actions, whereas the average transaction size grew by a
nominal 0.2% over the period. The largest transaction an-
nounced in the region was the USD 6.6 billion bailout of
Huarong International Financial by a consortium of five state
firms, including China Insurance Investment's Rongxin Fund,
China Cinda Asset Management, China Life, and a unit of
Industrial and Commercial Bank of China. Huarong Interna-
tional is a state-owned asset management company in China,
with a focus on distressed debt management. Its shares were
suspended from trading for nine months and this was only
lifted in January 2022.
Private equity exit activity
Global private equity exit activity for the fourth quarter of
2021 grew by 17.1% year-on-year to USD 234.6 billion
across 775 transactions, according to Preqin. This represents
a quarter-on-quarter increase of 20.1% in value compared
with the previous quarter, with the most prevalent exit
strategies during the quarter continuing to be trade sales
(50% of total exit value) and secondary sales (35%).
North America continued to contribute the highest share of
global private equity exits for the quarter, representing 64.0%
of total activity. Aggregate exit value in the region increased
by a robust 33.5% to USD 150.2 billion, with the number of
exits increasing by 22.7% over the same period to 438
transactions. The largest exit over the quarter was the
aforementioned Athenahealth transaction, while another
notable exit in the region was the USD 6.7 billion take-private
of Nasdaq-listed Arena Pharmaceuticals, a drug maker for
treatments for gastroenterology, dermatology, and cardiology,
by COVID-19 vaccine developer Pfizer. This was the latest
transaction Pfizer undertook this year to expand its treatment
pipeline, having just acquired immune-oncology company
Trillium Therapeutics in November 2021.
In Europe, aggregate exit volumes declined 32.5% on a year-
on-year basis, bringing in USD 44.7 billion in realization pro-
ceeds across 187 exits during the quarter. The largest exit
in the region was the USD 7.3 billion trade sale of Inmarsat
Global, a UK-based provider of inflight broadband services
to airlines, which was sold to Viasat. The cash and stock
transaction valued Inmarsat at ten times 2021 EBITDA and
was a step up from the previous USD 6.1 billion buyout by
Apax Partners, Warburg Pincus, and two Canadian pension
funds in 2019.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 6 | Annual Report 2021
Meanwhile, exit value in Asia more than doubled in the fourth
quarter of 2021, increasing by 137.9% year-on-year to USD
24.5 billion. Out of the 94 transactions recorded, the largest
completed exit in the region was MBK Partners' USD 3.6
billion sale of Accordia Golf, Japan's largest golf course oper-
ator, to Fortress Investment Group, SoftBank Group's affili-
ated investment fund. Accordia had previously been taken
private off the Tokyo Stock Exchange by MBK Partners, in
2017.
Fundraising activity
Global private equity fundraising volume in the final quarter
of 2021 declined by approximately 32% year-on-year to
USD 264.1 billion across 541 funds, according to Preqin.
The amount of capital raised also declined on a quarter-on-
quarter basis (-8.6%), being the second consecutive quarterly
decrease in global fundraising activity since June 2021. The
largest private equity fund that held its final close during the
quarter was Summit Partners Growth Equity Fund XI, with
a fund size of USD 8.4 billion.
North America continued to account for the majority of
fundraising activity during the quarter, with 327 funds closed
and USD 172.3 billion raised, 28.9% lower than the prior-
year period and accounting for approximately 80% of the
total capital raised globally. The largest private equity fund
in the region that held its final close was the aforementioned
USD 8.4 billion Summit Partners Growth Equity Fund XI,
which followed two other 2020 vintage growth equity funds
from the same manager with more than USD 2.2 billion in
capital raised.
In Europe specifically, regionally focused funds saw a year-
on-year drop of 34.6% in fundraising activity, with USD 51.8
billion raised across 89 funds. The largest private equity fund
that closed in the region was Permira Growth Opportunities
II, with a fund size of USD 4.0 billion. The fund exceeded its
initial target of USD 2.5 billion and more than surpassed its
USD 1.7 billion 2019-vintage predecessor fund.
Asia-focused fundraising ended the quarter at a total of USD
20.9 billion, declining by 61.2% year-on-year in terms of
capital raised. The number of funds closed also decreased
by 71.7% year-on-year. Of the 70 funds that closed, the
largest was MBK Partners Special Situations II, which raised
USD 1.8 billion. The fund is the largest special situations fund
managed by an Asia-based investment firm since Ares SSG's
USD 1.9 billion SSG Capital Partners V fund in 2019, accord-
ing to Preqin.
IPO activity
Initial public offering ("IPO") markets in 2021 proved to be
the most active in the last two decades, having benefited
from rebounding economies, alongside COVID-19 vaccine
rollouts, as well as rolling liquidity from government stimulus
programs. A total of 621 IPOs raised a collective USD 112.2
billion in the final quarter of the year, according to Ernst &
Young. This represents a year-on-year increase of 16% by
transaction number and 9% by proceeds accordingly. Notably,
the technology sector continued to lead over the period,
representing more than one-fourth of all IPO activity.
In the US, IPO markets remained strong, with 94 companies
raising proceeds of USD 38.2 billion collectively. This repres-
ents a year-on-year increase of 25% by both transaction
number and proceeds. The largest IPO in the region - and
globally - was the USD 13.7 billion listing of Rivian Automot-
ive, a designer and manufacturer of electric vehicles and re-
lated accessories. Cornerstone investors in the listing include
asset manager T. Rowe Price and e-commerce giant Amazon,
where the latter recently acquired a 20% stake in the com-
pany.
IPO activity in the Europe, Middle East, and Africa ("EMEA")
region continued to rally strongly in the final quarter of 2021,
registering year-on-year growth rates of 29% by number of
listings and 81% by proceeds. The 189 IPOs raised USD 30.4
billion collectively, with the largest listing in the region being
the USD 2.3 billion Stockholm IPO of Swedish automaker
Volvo Cars. Chinese carmaker Geely, which acquired the
company from Ford in 2010 for USD 1.8 billion, remains its
largest shareholder.
In the Asia-Pacific region, IPO markets registered 9% year-
on-year growth by transaction numbers in the fourth quarter,
while proceeds declined by 19%. This was spread across 322
listings which raised a total of USD 41.5 billion. The largest
IPO in the region was the USD 3.5 billion listing of Chinese
biotech firm BeiGene, making it the first biotech firm to be
listed on the Nasdaq, HKEX, and the Shanghai STAR Market.
The listing attracted the backing of investors, including
Singapore's GIC, Rock Springs Capital, T. Rowe Price, and
Chinese alternative asset manager CPE. IPO activity, how-
ever, started to slow down in the region during the quarter,
partly as a result of China's tightened cybersecurity review
requirements for certain IPO aspirants, alongside US
guidelines mandating Chinese firms trading in the US to
prepare for additional disclosures and audit requirements.
Sources: Bloomberg; Preqin "Q4 2021 Private Capital Fundraising,
Deals/Exits"; Ernst & Young "2021 EY Global IPO Trends Report";
Partners Group Research.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 7
3. Investment Manager’s report
Positive NAV development in 2021
During 2021, markets recovered momentum supported by
record amounts of monetary and fiscal stimulus and record
low interest rates. Despite strong catch-up tailwinds and the
release of pent-up demand as companies and individuals
continued to adjust to life with COVID-19, the economic
recovery was uneven across sectors, with several periods of
volatility throughout the year. In this environment, the NAV
of Princess increased by +19.4% on a total return basis,
closing the year at EUR 15.26 (2020: EUR 13.35) per share.
Share price total return over the same period was 29.3%,
reflecting a narrowing to 5.3% of the Company's discount
to NAV.
Portfolio developments (+25.9%) were the main driver of
NAV growth in 2021, while currency movements were neg-
ative (-0.3%). Among the largest contributors to Princess'
NAV growth in 2021 were the investments in SRS Distribu-
tion ("SRS"), United States Infrastructure Corporation ("USIC"),
and PCI Pharma Services ("PCI").
● PCI PHARMA SERVICES
PCI, a global provider of outsourced pharmaceutical services
based in the US, was written up on the back of strong per-
formance across the clinical services as well as the manufac-
turing and development business segments. The uplift in
revenue and EBITDA over the last 12-month period was
mainly driven by the organic growth of the business. Strong
● UNITED STATES INFRASTRUCTURE CORPORATION
USIC, a US-based provider of underground utility locating
services, was positively revalued over the third quarter of
2021 on the back of continued robust financial performance.
The company's revenue and adjusted EBITDA for the last
12-month period increased driven by sustained positive de-
velopments across locate volumes and new contract renewal
rates and pricing.
● SRS DISTRIBUTION
SRS, a US distributor of roofing products, was among the
largest performance drivers. The value of SRS has been
written up following a period of strong financial performance.
SRS acquired Arrowhead Building Supply, a distributor of
residential and commercial roofing, siding, and other related
products in May. Arrowhead Building Supply is one of the
largest independent roofing distributors in the Midwest and
is expected to make an excellent addition to the footprint
SRS has in the region.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
NAV PERFORMANCE*
Page 8 | Annual Report 2021
*Last twenty years, as per reporting date. The Princess performance is calculated on a total return basis.
organic growth along with earlier bolt-on acquisitions has
enabled the company to expand its clinical business - which
led to higher EBITDA margins - as well as extend its reach
to new geographical regions and to new clients, primarily in
the small- to mid-sized pharmaceutical space.
Further, PCI acquired Lyophilization Services of New England
("LSNE"), a premier contract development and manufacturing
organization ("CDMO") in the US. LSNE will expand PCI's
breadth of services as a global CDMO, and further bolster
PCI's manufacturing and development business segment,
while complementing its existing clinical and commercial
packaging expertise.
Total investments for 2021
Investment activity
Partners Group's thematic sourcing approach enabled the
firm to secure a number of notable direct investments in
2021, deploying a record EUR 342.4 million on behalf of
Princess (2020: EUR 64.6 million). Towards the end of the
year and following an active period for realizations, EUR 135
million was allocated to a related fund that invests in floating
rate senior loans for liquidity management purposes. The
capital will be strategically used when targeting deployment
into direct investments. Partners Group's thematic sourcing
approach continues to generate a broad near-term pipeline
of investment opportunities to redeploy liquidity into.
● APEX LOGISTICS
EUR 7.7 million was invested in Apex Logistics ("Apex"), a
globally integrated logistics solutions provider. Partners Group
closed the acquisition of a 24.9% stake in Apex from majority
shareholder Kuehne+Nagel, one of the world's leading logist-
ics companies. Founded in 2001 and headquartered in Hong
Kong and Shanghai, Apex is a leading player in the China
cross-border freight-forwarding market, with a growing inter-
national presence and significant potential for further expan-
sion. Partners Group and Kuehne+Nagel will work closely to
implement a transformational value creation plan for Apex
together with the company's management team. Key initiat-
ives include establishing new freight-forwarding routes;
identifying new growth verticals, such as healthcare; and
M&A.
● BLUSKY
EUR 9.4 million was invested in BluSky Restoration Contract-
ors ("BluSky"), a leading US provider of restoration services
for commercial, industrial, healthcare, and multifamily real
estate. BluSky has more than 900 employees serving 5,000-
plus customers across the country. BluSky provides essential
services for customers that experience water, fire, wind, or
environmental damage or biological contamination at their
buildings. Key value creation initiatives will include branch
expansion into new markets, growing national accounts, ex-
panding service capabilities, partnering with customers on
environmental, social, and governance ("ESG ") and workplace
safety initiatives, and pursuing acquisitions.
● BREITLING
EUR 12.7 million was invested in leading Swiss watchmaker
Breitling. Partners Group acquired a significant minority stake
in the company. Breitling benefits from attractive macro and
sectoral growth trends, especially in Asia, where rising dispos-
able incomes among the middle classes are increasing de-
mand for premium products, including watches.
● DIVERSITECH
Princess invested EUR 24.4 million in DiversiTech, the
market-leading manufacturer and supplier of parts and ac-
cessories for heating, ventilation, and air conditioning
("HVAC") equipment in the US. The company serves over
6,000 customers through a broad product portfolio. As a
majority owner, Partners Group will work closely with Di-
versiTech's management on a value creation plan, with initi-
atives including accelerating new product development, ex-
panding through M&A, and bolstering internal manufacturing
capabilities.
The largest new investments in the second half of the year
were:
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 9
● REEDY INDUSTRIES
EUR 6.6 million was invested in Reedy Industries ("Reedy"),
a leading provider of commercial HVAC services. Reedy
combines technical expertise and financial resources with a
local high-touch delivery model, to act as a strategic partner
for servicing complex equipment with high costs of failure
or downtime. Partners Group will draw on its extensive ex-
perience transforming leading route-based commercial and
facility services businesses to support Reedy's customer-
centric value creation plan. Key initiatives will include geo-
graphic expansion to a multiregional footprint with well-
known hubs and local customer relationships, growing stra-
tegic accounts, expanding service capabilities, and partnering
with customers on sustainability and energy efficiency solu-
tions.
Total distributions for 2021
Distribution activity
Princess benefited from a supportive environment for realiz-
ations, receiving substantial portfolio distributions of EUR
462.5 million (2020: EUR 178.2 million), equivalent to 50.1%
of opening NAV. The main driver was the direct portfolio,
accounting for EUR 446.9 million (2020: EUR 152.1 million),
including proceeds from the exits of GlobalLogic, Cerba
HealthCare, and Foncia, as well as from the sale of a minority
stake in International Schools Partnership ("ISP"). The remain-
ing balance was received from the Company's mature legacy
fund portfolio.
● PACIFIC BELLS
Princess received during the year EUR 17.2 million, of which
EUR 16.4 million stemmed from the sale of Pacific Bells, a
leading franchisee of the Taco Bell brand in the US. Since
Partners Group acquired Pacific Bells in 2015, it has worked
with the company's management team to meaningfully grow
EBITDA and headcount, as well as almost triple the number
● FONCIA
The Company received total distributions of EUR 58.5 million
from Foncia, a European leader in residential property man-
agement services, with EUR 48.8 million stemming from the
transaction which Partners Group closed regarding the sale
of a 25% stake in Foncia to TA Associates, a global private
equity firm. Partners Group acquired Foncia in 2016 and
since then has accelerated the company's growth and market
leadership position in France and internationally. As part of
the transaction, Princess reduced its exposure to Foncia but
re-invested EUR 40.8 million to participate in the future
growth of the business.
growth. Key initiatives included increasing the size of the
company's top accounts and introducing a more targeted
sales strategy in certain customer segments, including the
development of a private equity-focused sales channel.
GlobalLogic also completed four strategic acquisitions, includ-
ing three in Europe. Additionally, Partners Group enhanced
GlobalLogic's focus on ESG initiatives, helping it establish a
dedicated ESG function focused on refining and implementing
its ESG strategy going forward.
● INTERNATIONAL SCHOOLS PARTNERSHIP
EUR 121.3 million was received from ISP, following an
agreement for OMERS, the defined benefit pension plan for
municipal employees in the Province of Ontario, to acquire
a minority stake in the business. Partners Group formed UK-
headquartered ISP in 2013 with the intention of creating a
leading international school group through a buy-and-build
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 10 | Annual Report 2021
The largest distributions in the second half of the year were:
strategy, capitalizing on the opportunities for consolidation
in the K-12 school market. Today, ISP is the fifth-largest K-
12 international school group globally, operating 50 schools
across 15 countries and serving more than 45,000 pupils.
As part of the transaction, Princess reduced its exposure to
ISP but re-invested EUR 15.1 million to participate in the
future growth of the business.
● GLOBALLOGIC
Princess received EUR 108.0 million from the sale of Global-
Logic, a leader in design-led digital engineering services, to
Japanese conglomerate Hitachi. The transaction assessed
GlobalLogic at an enterprise value of USD 9.5 billion. During
its holding period, Partners Group worked with the company
on several transformational value creation initiatives to drive
of stores from 86 at the time of investment. In the last six
years, Pacific Bells has also entered new markets, including
in Wisconsin, California, Mississippi, Tennessee, and Alabama;
introduced new energy efficiency projects; and optimized
operating processes.
● STRAIVE (FORMERLY SPI GLOBAL)
EUR 16.3 million was received from the sale of Straive, a
leading global provider of technology-driven content and
data solutions. Partners Group acquired a majority stake in
Straive, then known as SPi Global, in August 2017, on behalf
of its clients. Under Partners Group's ownership, Straive was
transformed from a provider of primarily content services
into a technology-driven content, data, and EdTech solutions
company. Straive's organic growth was supplemented by
three strategic bolt-on acquisitions. Other major initiatives
included the development of proprietary technology and
software products, as well as the deepening of strategic
customer relationships.
Partners Group
Investment Manager
Zug, 21 March 2022
As economic uncertainty continues to rise, corporate funda-
mentals remain solid. While the initial recovery has been
strong, we believe there are still clouds on the horizon. With
downside risks to growth dominating, we maintain strong
conviction in our strategy of transformational investing, which
combines thematic sourcing with a hands-on value creation
approach. The core of our investment strategy remains un-
changed: we focus on fundamental operational strength, re-
silience, and value creation opportunities in segments of the
economy that benefit from transformative trends. We will
maintain the same disciplined approach to manage Princess'
diversified portfolio and remain confident in its ability to cope
with short-term headwinds.
Furthermore, the invasion of Russia into the Ukraine adds a
new layer of complexity. Princess has negligible exposure to
the region through legacy fund investments; hence its port-
folio assets will likely be impacted through higher energy
costs and capital market developments, and indirectly via
second order effects (e.g. confidence and private demand).
Though in incipient stage, Partners Group is working closely
with the management teams of the portfolio companies to
take all appropriate measures to keep employees safe and
mitigate risks. Our experienced teams and our strong, stra-
tegic boards remain focused on providing genuine value as
we navigate through these times.
Total unfunded commitments at 31 December 2021
amounted to EUR 116.6 million (2020: EUR 106.6 million),
of which EUR 71.8 million are considered "active" and are
expected to be called over the next three to four years. The
remaining commitments are to funds which have completed
their investment periods and are therefore not anticipated
to be called in full. In line with the strategy to focus on direct
investments, no new third-party fund commitments were
made.
Liquidity and unfunded commitments
Princess' net liquidity position decreased to EUR 3.8 million
(2020: EUR 19.9 million), funded by drawings of EUR 25
million from the Company's EUR 80 million revolving credit
facility for bridging purposes, which is expected to be repaid
following receipt of delayed proceeds from realizations. In
addition to the remaining undrawn credit facility, Princess
maintains a liquidity buffer of senior loans, which can be sold
if required to generate liquidity. As of year-end, Princess held
EUR 135 million of its investment portfolio in senior loans.
Share price development and dividend
Princess' share price increased by 17.8% on a total return
basis during the second half of the year, resulting in a total
return of 29.3% during 2021. The Company paid a total di-
vidend of EUR 0.67 per share (2020: EUR 0.435) in line with
its previously announced objective to distribute 5% of
opening NAV for each financial year, via semi-annual pay-
ments, in June and December.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 11
Outlook
Consumers and businesses continue to adjust to a new nor-
mal after the pandemic. The strength of the recovery has
started easing from exceptionally strong levels as government
support measures have run out and pent-up demand is being
released. Certain constraints, however, are still unfolding.
Supply constraints are proving to be stickier than initially
thought. Labor shortages and delivery delays are limiting
output in select industries. Commodity prices are running
high. The COVID-19 pandemic and its repercussions are
blurring the economic picture, making forecasting and policy
decisions highly challenging. In Partners Group's economic
base case, we expect modest mid-term growth, higher infla-
tion, and a relatively accommodative policy backdrop. We
expect nominal rates to rise and real rates to remain low. But
the scope for policy error is immense.
Central banks, and the US Federal Reserve in particular, face
a narrow and ever-shrinking runway to achieve their goal of
moderately higher inflation combined with a smooth landing
for the economy. After living through a period of highly be-
nign financial market conditions that saw valuations rise to
record highs, the macroeconomic environment is tightening.
Investors should brace themselves for more volatile times.
Broad market return expectations need to adjust to this
changing tide.
4. Environmental, Social, and Governance ("ESG")
The Company shares and is aligned with the purpose, culture, and values adopted by Partners Group in their charter and as
given in their Corporate Sustainability Report, both of which are available at their website: www.partnersgroup.com/en/sus-
tainability/.
Partners Group aims to deliver sustainable performance across economic cycles through a focus on stakeholder impact. As a
global private markets firm, the industry, economy, and society have grown into a complex and interconnected system with
many different stakeholder interests to consider. Over the years, Partners Group, as Investment Manager to Princess, has
developed a systematic approach to addressing the interests of its stakeholders by embedding ESG factors into its investment
and business processes. Partners Group aspires to be known for transformative and impactful engagements with its portfolio
companies in the ESG areas that are most material from its perspective, as well as in areas of high societal importance that
benefit all stakeholders. The Investment Manager also aims to increase Princess' assets' value by considering ESG risks and
capitalizing on ESG opportunities that allow its investments to have an impact that goes beyond its ownership period.
Partners Group's ESG vision, objectives, and strategy
Partners Group's ESG vision is to maintain its global leadership position in building sustainable businesses. The Investment
Manager will act as a role model in responsible investing and continuously raise ESG standards for its industry. It will operate
as a sustainable business itself and outperform public markets ownership by building sustainable businesses in its portfolio
through its entrepreneurial governance approach.
The Investment Manager to Princess works to achieve its vision by pursuing three key objectives:
● EMBED ESG INTO THE STRATEGY, DIRECTION, AND GOALS OF PORTFOLIO COMPANIES
Value is created through impactful engagements with its portfolio companies on the most material topics for their business,
as well as on topics of high importance to its stakeholders, such as diversity and inclusion and climate change.
● HOLD ITSELF AND ITS INVESTMENT PARTNERS ACCOUNTABLE BY CREATING TRANSPARENCY THROUGHOUT
THE INVESTMENT PROCESS
Partners Group cares for and earns the trust of its stakeholders by being reliable and transparent about both its successes and
shortcomings.
● ESTABLISH ITSELF AS A LEADER IN INTEGRATING AND QUANTIFYING IMPACT IN ITS PROCESS
Partners Group drives the development of impact management in its industry and expands its values across private markets/port-
folio companies, not only focusing on products and services but also including the positive impact of ESG projects. Partners
Group leverages its expertise to create bespoke solutions for its clients who want to invest their resources to drive positive
social and environmental impact.
Partners Group translates this vision and objectives into action by using its governance rights to work with portfolio companies
on those areas where ESG is best positioned to add and protect value. Furthermore, the Investment Manager continuously
develops tools and processes that ensure a systematic and scalable approach.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 12 | Annual Report 2021
Governance structure and ESG & Sustainability team
At Partners Group, oversight for ESG integration lies with the most senior levels of the organization. At Board level, the Invest-
ment Oversight Committee assesses the quality and consistency of the investment process, including the approach to ESG
integration and risk management. The committee acts as an advisor to the Global Investment Committee, which is responsible
for making all in-/divestment recommendations. All recommendations made by the Global Investment Committee are informed
by their Responsible Investment Screening Framework and their ESG Due Diligence Assessment.
On 1 July 2021, André Frei, former Co-CEO of Partners Group, took over the role of Chairman of Sustainability of Partners
Group. In this role he is responsible for the firm's overall sustainability strategy, coordinating corporate sustainability and
portfolio-level ESG efforts, in interaction with the Partners Group's Executive Committee. Furthermore, Partners Group has
a dedicated ESG & Sustainability team located in Asia, Europe, and the US. This team is the nexus between the senior-level
guidance for Partners Group's sustainability objectives and their implementation and integration through the investment teams
who are responsible for investment sourcing, execution, and implementation of value creation plans during ownership. The
day-to-day management of ESG integration is therefore well embedded within their investment platform and shared by pro-
fessionals across all teams. Their ESG Due Diligence Assessment is carried out by investment professionals, with findings
flagged directly to the investment committees. More detailed ESG work, including their ESG engagements and value creation
initiatives with portfolio companies and assets, is led by the ESG & Sustainability team. In addition, they draw upon the expertise
of their Operating Directors and Entrepreneurial Governance team, as well as several other teams across the firm, to support
the ESG engagement activities and further inform their approach to ESG integration.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 13
Partners Group's ESG integration throughout the lifecycle
Case studies
Techem Metering
Techem Metering ("Techem"), a leading sub-metering service provider headquartered in Germany, provides cost allocation
services to approximately 420,000 customers, including landlords and property managers as well as tenants, across 11.9 million
commercial and residential units in 20 countries. The company's energy services business segment offers cost allocation services
in connection with the sub-metering of heating and water consumption, additional energy efficiency solutions to monitor energy
and water usage, as well as supplementary products and services that include installation, testing, and maintenance of smoke
detectors and Legionella bacteria analysis.
During due diligence, Partners Group identified a series of ESG risks and opportunities to address during the ownership period.
This included developing a waste management concept in line with regulation, a health and safety approach for the entire
company, and an approach to managing the company's carbon footprint; these approaches were key to the sustainability of
the business. They have been working on these topics since the acquisition. In 2021, the company continued improving its
waste management concept, which is to collect and dispose of the over five million measurement devices replaced every year,
on top of the company's municipal waste from its office operations.
In an effort to improve health and safety beyond Techem, Partners Group started rolling out additional health and safety
clauses in contracts with suppliers in Germany, France, Belgium, and Poland. In addition, they completed an assessment on
Techem's performance on health and safety compared to industry benchmarks focusing on Germany, as it is Techem's largest
market, and identified opportunities for future improvement. Partners Group has since then initiated similar assessments for
Techem's international offices.
Finally, at Techem, Partners Group piloted what they call the "Climate Change Sweep". This is a systematic approach to
identify and manage climate change-related impacts, risks, and opportunities at their portfolio companies. The result of the
initiative is to define specific actions that the portfolio companies can take during the ownership period to reduce their carbon
emissions and fortify their business models against climate-related risks. It involves a rigorous footprinting exercise that
measures Scope 1, 2, and 3 emissions, as well as a physical and transition risk assessment. The majority of Techem's total
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 14 | Annual Report 2021
emissions are generated in the Techem Solutions business area for the supply of heat and electricity, as the energy sources
are mostly natural gas (approximatively 62%), but also heating oil, biogas, or wood chips. To this end, Techem committed to
define a climate roadmap by 2022 and set a target date for climate neutrality. Furthermore, in order to make more customers
aware of sustainable solutions, Techem will in future show the product carbon footprint (CO2 per kWh of heat) for new Techem
supply solutions as well as the CO2 emissions on invoices for customers.
Building on the ESG work they conducted with Techem since acquisition in the aforementioned topics, in 2020 Partners Group
hired a sustainability specialist who, together with others, initiated a detailed sustainability materiality assessment across the
company, including workshops with senior management to set the baseline for Techem's sustainability strategy. In 2021, Techem
published the company's first sustainability report detailing how it addresses climate change, waste disposal, health and safety,
and other key material factors.
United States Infrastructure Corporation
USIC is the leading provider of infrastructure-locating services in the US, serving approximatively 1,000 customers across six
utility end markets, including cable, telecoms, electric, gas, and water. Their 9,000 field technicians ("techs") are on the road
each day conducting locates on tight deadlines. Retaining a talented workforce, protecting techs' safety on the road, and
managing fuel usage for USIC's fleet of over 9,000 trucks are material issues that directly impact the business. These have
been Partners Group's top ESG priorities for USIC since acquisition.
Given the business model, employee health and safety was a key ESG topic identified during due diligence as critical to the
business, so this is where Partners Group started USIC's ESG journey. By adopting a zero-tolerance safety program for all
USIC operations, Partners Group has had a material impact on employee safety. Since the beginning of their ownership period,
they have eliminated over one-third of all motor vehicle accidents, reducing collisions per million miles from 9.0 in 2017 to
5.3 in 2020. Furthermore, they have also driven down the rate of injuries in the field by nearly 50%, moving lost time incident
rate from 8.1 to 4.3.
While keeping employees safe at work is essential, Partners Group also knows that it is simply not enough to attract and retain
a talented workforce. They have become acutely aware of how USIC's technicians feel day-to-day, working predominantly
alone and at-times in high-risk environments. Therefore, the ESG & Sustainability team has expanded their focus from health
and safety to employee well-being more broadly, which is a key focus area for the investment over the next three years.
Digitization has also helped drive ESG improvement and create value. Over the past years, USIC's IT team has custom-built
new features for its proprietary TicketPro' software system that provides USIC employees with a list of their locations each
day. This tool optimizes field operations while also managing key ESG impacts, including carbon emissions, driver safety, and
employee retention. This innovative and customized software, which is embedded into USIC's core technology platform, improves
the company's optimal routing capability that organizes the techs' daily schedules based on the most efficient driving routes,
conserving fuel and reducing emissions, while also minimizing the techs' time on the road and risk of accidents. Due to this
initiative, USIC could reduce mileage per ticket by 4.4% on average and has saved over 400 tons of CO2 since 2020.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 15
5. Portfolio composition
B
A
Investments by transaction type
4%DirectA 96% B Funds
D
C
B
A
Investments by regional focus
8%Asia-PacificC51%North AmericaA
36%EuropeB 5%Rest of WorldD
D
C
B
A
Investments by financing category
19%Special situationsC51%Buyout Small/Mid-capA
27%
Buyout
Large/Mega-cap
B
3%Venture capitalD
J
I
H
G
F
E
D
C
B
A
Portfolio assets by industry sector
5%MaterialsF20%HealthcareA
1%
Telecommunication
services
B
9%FinancialG
5%Consumer staplesH
20%
Consumer
discretionary
C
19%IndustrialI
3%EnergyD
3%UtilitiesJ
15%ITE
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 16 | Annual Report 2021
J
I
H
G
F
E
D
C
B
A
Investments by investment year
10%2017F6%Pre 2013A
2%2013B 18%2018G
8%2019H6%2014C
7%2015D 6%2020I
30%2021J7%2016E
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 17
Development of net cash flows
NAV development
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 18 | Annual Report 2021
6. Portfolio overview
Fifty largest direct investments (in EUR)
Since inception
% of NAVNet asset valueResidual costInvestment
year
Financing categoryRegional focusIndustry sectorInvestment
4.1%43,315,3258,171,4032018Buyout Small/Mid-capNAMMaterialsSRS Distribution, Inc.
3.9%40,796,83740,796,837Buyout Large/Mega-capWEUFinancialsFoncia
3.8%39,734,29125,912,8442018Buyout Small/Mid-capWEUIndustrialsAmmega (Megadyne - Ammeraal Beltech)
3.7%39,483,4582016Buyout Small/Mid-capNAMHealthcarePCI Pharma Services
3.7%39,145,93412,264,0422015Buyout Small/Mid-capNAMConsumer discretionaryKinderCare Education
3.5%37,332,50013,977,2292018Buyout Small/Mid-capAPCConsumer discretionaryVishal Mega Mart
3.3%34,722,45719,244,0612017Buyout Large/Mega-capWEUIndustrialsTechem Metering GmbH
2.4%25,607,51611,994,6082013Buyout Small/Mid-capWEUInformation technologyCivica
2.4%25,378,15417,735,2712020Buyout Small/Mid-capNAMHealthcareEyeCare Partners
2.4%25,215,06915,159,9052014Special situationsROWEnergyFermaca
2.3%24,713,3527,741,2952017Buyout Small/Mid-capNAMUtilitiesUnited States Infrastructure Corporation
2.3%24,172,86824,172,8682021Buyout Large/Mega-capNAM
IndustrialsDiversiTech
2.3%23,819,42210,721,3212017Buyout Large/Mega-capWEUInformation technologyCPA Global (Clarivate merger)
2.0%21,269,68928,093,5242015Buyout Small/Mid-capNAMIndustrialsForm Technologies
2.0%21,010,22520,297,3062018Buyout Large/Mega-capNAMConsumer staplesHearthside Food Solutions
1.7%18,258,17210,204,1362020Buyout Large/Mega-capWEUHealthcareGalderma
1.7%18,058,2964,330,1562019Buyout Small/Mid-capNAMInformation technologyIdera Inc.
1.7%17,839,21813,544,4072016Buyout Large/Mega-capNAMInformation technologyeResearch Technology, Inc.
1.7%17,617,7015,146,7062014Buyout Small/Mid-capWEUConsumer staplesHofmann Menue Manufaktur
1.6%17,374,8148,284,5412014Buyout Small/Mid-capWEUHealthcareVoyage Care
2021
0
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 19
Since inception
% of NAVNet asset valueResidual costInvestment
year
Financing categoryRegional focusIndustry sectorInvestment
1.5%15,934,6076,225,4112017Buyout Large/Mega-capWEUHealthcareSTADA Arzneimittel AG
1.5%15,811,5789,950,5252016Buyout Small/Mid-capAPCConsumer discretionaryGuardian Childcare & Education
1.5%15,806,36115,834,8502021Buyout Small/Mid-capWEUConsumer discretionaryInternational Schools Partnership II
n.a.n.a.8,024,0532021Buyout Large/Mega-capAPCConsumer discretionaryApex International Corporation
1.4%14,294,84310,594,3952016Buyout Large/Mega-capWEUInformation technologyIDEMIA
1.3%14,149,6049,175,0002019Buyout Large/Mega-capWEUConsumer discretionaryAxel Springer SE
1.3%14,140,37410,417,8242013Buyout Small/Mid-capWEUHealthcarePharmaceutical developer
1.3%14,004,19512,737,8702021Special situationsWEUIndustrialsTelepass
1.2%12,710,29912,710,2992021Buyout Large/Mega-capWEUConsumer discretionaryBreitling
1.2%12,300,2665,705,2812019Buyout Small/Mid-capNAMHealthcareBlue River PetCare, LLC
1.1%11,810,9599,570,1642020Buyout Large/Mega-capNAMIndustrialsAlliedUniversal
1.1%11,159,43211,056,2772012
Buyout Small/Mid-capNAMConsumer discretionaryCareismatic Brands
1.0%11,000,0514,183,9882019Buyout Small/Mid-capNAMHealthcareConfluent Health
1.0%10,958,4408,764,4952019Buyout Small/Mid-capNAMFinancialsConvex Group Limited
1.0%10,791,7968,571,2092021Buyout Small/Mid-capNAMHealthcareWedgewood Pharmacy
0.9%9,647,1719,647,1712021Buyout Small/Mid-capNAMIndustrialsBluSky
0.9%9,405,7625,0782012Buyout Small/Mid-capWEUFinancialsGlobal Blue
0.8%8,388,1086,719,3392020Buyout Large/Mega-capWEUMaterialsRovensa
n.a.n.a.16,959,6352020Special situationsNAMHealthcareEnvision Healthcare
0.8%8,171,1288,171,1282021Buyout Large/Mega-capWEUConsumer staplesWM Morrison Supermarkets PLC
0.7%7,813,6573,376,2202018Buyout Small/Mid-capAPCIndustrialsTrimco Joint-investment 2018
0.7%6,892,4616,823,9302021Buyout Small/Mid-capNAMIndustrialsReedy Industries
0.6%6,657,7286,500,5672021Buyout Small/Mid-capNAMHealthcareAxia Women's Health
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 20 | Annual Report 2021
Since inception
% of NAVNet asset valueResidual costInvestment
year
Financing categoryRegional focusIndustry sectorInvestment
0.6%6,584,8413,422,7252016Buyout Small/Mid-capNAMConsumer discretionaryPolyconcept
0.6%6,437,0207,907,7742020Special situationsNAMTelecommunication servicesSeabras-1
0.6%6,403,7753,656,8622015Buyout Small/Mid-capWEUConsumer discretionaryTOUS
n.a.n.a.n.a.2021Buyout Small/Mid-capAPCIndustrialsEcom Express Private Limited
0.6%6,143,6473,201,4622019Buyout Small/Mid-capWEUConsumer discretionarySchleich GmbH
0.6%5,895,9193,630,5362017Buyout Small/Mid-capWEUFinancialsKey Group
0.5%5,644,7447,311,7952018Buyout Small/Mid-capWEUInformation technologySHL
78.8% Total fifty direct investments 833,824,064 528,648,323
The portfolio's holdings are ranked by percentage of net asset value. Some names and figures (marked "n.a.") may not be disclosed for confidentiality reasons. Furthermore, some investments have
been made through Partners Group pooling vehicles at no additional fees. The portfolio overview of Princess has been prepared on a look through basis, although the audited consolidated statement of
financial position includes the valuation of certain Partners Group investment vehicles. Residual cost is the initial investment cost after receipt of distributions from such an investment until the end of
the reporting period. Negative residual costs (receipt of distributions > initial investment cost) will result in an amount of zero.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 21
Twenty largest fund investments (in EUR)
Since inception
% of NAVNet asset valueUnfunded
commitments
VintageFinancing categoryRegional focusInvestment
1.9%20,245,93752,7592008Venture capitalROWAnonymized Emerging Markets Venture Fund 2
0.3%3,108,9621,609,1432000Venture capitalNAMINVESCO Venture Partnership Fund II-A, L.P.
0.2%1,943,80702008Venture capitalWEUIndex Ventures Growth I (Jersey), L.P.
0.2%1,932,533675,4352005Buyout Small/Mid-capNAMSterling Investment Partners II, L.P.
0.2%1,906,932904,6452007Buyout Small/Mid-capWEUAnonymized European Buyout Fund 7
0.2%1,694,58129,7472007Special situationsWEUInnisfree PFI Secondary Fund
0.1%1,392,22702000Buyout Small/Mid-capROWExxel Capital Partners VI, L.P.
0.1%1,184,928195,8332008Venture capitalWEUSummit Partners Europe Private Equity Fund, L.P.
0.1%1,043,705105,0872007Buyout Small/Mid-capROWRussia Partners III, L.P.
0.1%921,32602000Venture capitalROWPitango Venture Capital Fund III
0.1%753,3611,759,0562008Special situationsWEUPartners Group Global Real Estate 2008, L.P.
0.1%614,31831,4082010Special situationsNAMSearchlight Capital PV, L.P.
0.1%564,14422,6242011Buyout Small/Mid-capWEUValedo Partners Fund II AB
0.1%561,069
13,4092008Special situationsWEUHitecVision V, L.P.
n.a.n.a.n.a.2010Buyout Small/Mid-capAPCPeepul Capital Fund III, LLC
0.1%548,154126,6212000Venture capitalNAMVortex Corporate Development Fund, L.P.
0.1%533,242207,7232008Special situationsNAMAlinda Infrastructure Parallel Fund II, L.P.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 22 | Annual Report 2021
Since inception
% of NAVNet asset valueUnfunded
commitments
VintageFinancing categoryRegional focusInvestment
0.0%526,3638,3962009Buyout Small/Mid-capROWHelios Investors II, L.P.
0.0%519,318664,4002008Special situationsNAMAres Corporate Opportunities Fund III, L.P.
0.0%510,91702009Venture capitalAPCCapital Today China Growth Fund II, L.P.
40,505,8246,406,286
The portfolio's holdings are ranked by percentage of net asset value. Some names and figures (marked "n.a.") may not be disclosed for confidentiality reasons. Furthermore, some investments have
been made through Partners Group pooling vehicles at no additional fees. The portfolio overview of Princess has been prepared on a look through basis, although the audited consolidated statement
of financial position includes the valuation of certain Partners Group investment vehicles. Remaining net asset value is the net asset value of primary and secondary investments after receipt of
distributions from such investments until the end of the reporting period.
4.0%
Total twenty fund investments
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 23
7. Structural overview
Princess Private Equity Holding Limited is a Guernsey re-
gistered private equity holding company founded in May
1999 that invests in private market investments. In 1999
Princess raised USD 700 million through the issue of a con-
vertible bond and invested the capital by way of commit-
ments to private equity partnerships. The convertible bond
was converted into shares in December 2006. Concurrently,
the investment guidelines were amended and the reporting
currency changed from the US dollar to Euro. The Princess
shares were introduced for trading on the Frankfurt Stock
Exchange (trading symbol: PEY1) on 13 December 2006 and
on the London Stock Exchange (trading symbol: PEY) on 1
November 2007. Princess consolidated all trading activity to
the London Stock Exchange on 6 December 2012 and ceased
being listed on the Frankfurt Stock Exchange.
On 6 September 2017, the Company announced the inten-
tion to introduce an additional market quote in Sterling
(trading symbol: PEYS) for its existing ordinary shares on the
London Stock Exchange, alongside the Company's existing
Euro market quote. The purpose of the introduction of the
Sterling quote was to broaden the potential ownership of
the Company's ordinary shares. Following the introduction
of the Sterling quote, which was admitted for trading on 8
September 2017, shareholders have the option to make a
dividend currency election to receive dividends in Sterling.
For the avoidance of doubt, all dividends continue to be de-
clared in Euros and the default currency for dividend pay-
ments remains Euros.
Princess aims to provide shareholders with long-term capital
growth and an attractive dividend yield. The Company's in-
vestments are managed on a discretionary basis by Partners
Group AG (prior to 1 July 2020 by Princess Management
Limited, a wholly owned subsidiary of Partners Group Holding
AG). The Investment Manager is responsible for, inter alia,
selecting, acquiring, and disposing of investments and carrying
out financing and cash management services.
Partners Group AG is a global private markets investment
management firm with USD 127 billion in investment pro-
grams under management in private equity, private debt,
private real estate, and private infrastructure. Through the
management agreement, Princess benefits from the global
presence, size, and experience of the investment team and
relationships with many of the world's leading private equity
firms.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 24 | Annual Report 2021
8. Company information
Princess Private Equity Holding LimitedCompany
EuroCurrency denomination
Princess intends to pay a dividend of 5% p.a. on opening NAVDividends
No incentive fee on primary investments; 10% incentive fee per secondary
investment; 15% incentive fee per direct investment; subject in each case to
a 8% p.a. preferred return (with catch-up)
Incentive fee
1999Incorporation
JPMorgan Cazenove
Numis Securities Ltd.
Joint corporate brokers
London Stock ExchangeListing
1.5% p.a. of the higher of NAV or value of Princess' assets less any temporary
investments plus unfunded commitments. With effect from 1 July 2020
unfunded commitments in respect of Primary and Secondary investments are
excluded.
Management fee
Fully paid-up ordinary registered sharesSecurities
Guernsey company, authorized closed-ended fund in GuernseyStructure
ISIN (Euro and Sterling Quote): GG00B28C2R28
WKN (Euro and Sterling Quote): A0M5MA
Trading symbol (Euro Quote): PEY
Bloomberg (Euro Quote): PEY LN
Reuters (Euro Quote): PEY.L
Trading symbol (Sterling Quote): PEYS
Bloomberg (Sterling Quote): PEYS LN
Reuters (Sterling Quote): PEYS.L
Trading information
Each ordinary registered share represents one voting rightVoting rights
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 25
9. Board of Directors
Richard Battey
(appointed 28 May 2009)
Richard Battey is a Guernsey resident. He has been Chairman
since August 2018 and a director since May 2009, serving
as Chair of the Audit and Risk Committee until May 2018.
Since 2007 he has been a non-executive director of a number
of investment companies and funds. These have included
London Stock Exchange-listed companies Pershing Square
Holdings Limited, Better Capital PCC Limited, NB Global
Floating Rate Income Fund Limited, The Prospect Japan Fund
Limited, and AcenciA Debt Strategies Limited, all for periods
of nine years as Chair of the Audit Committees. He is a Fel-
low of the Institute of Chartered Accountants in England and
Wales, having qualified with Baker Sutton & Co. in London
in 1977. Richard was formerly Chief Financial Officer of Ca-
nArgo Energy Corporation. Prior to that role he spent 27
years with the Schroder Group and worked first in London
with J. Henry Schroder Wagg & Co. Limited and Schroder
Investment Management Limited and then in Guernsey, as
a director of Schroders (C.I.) Limited from April 1994 to
December 2004. He was a director of Schroder Group
Guernsey companies covering banking, investment manage-
ment, trusts, insurance, and private equity administration; he
retired from his last Schroder directorship in December 2008.
Steve Le Page
(appointed 1 October 2017)
Steve Le Page is a Guernsey resident. He was appointed to
the Board in October 2017 and is a Chartered Accountant
and a Chartered Tax Adviser. Mr. Le Page was a partner with
PwC in the Channel Islands from 1994 until his retirement
in September 2013. During his career his main role was as
an audit partner working with a wide variety of financial
services businesses and structures, including many listed in-
vestment funds. Mr. Le Page also led that firm's Audit and
Advisory businesses for approximately ten years, and for five
of those years was the Senior Partner (equivalent to Execut-
ive Chairman) for the Channel Islands firm. Since his retire-
ment, Mr. Le Page has built a small portfolio of non-executive
director roles, including the listed funds Highbridge Tactical
Credit Fund Limited, Volta Finance Limited, Channel Islands
Property Fund Limited, Amedeo Air Four Plus Limited, and
Tufton Oceanic Assets Limited, all of which he serves as
Chairman of the Audit Committee. He is a past Chairman of
the Guernsey International Business Association and a past
President of the Guernsey Society of Chartered and Certified
Accountants.
Felix Haldner
(appointed 23 August 2017)
Felix Haldner is a Swiss resident and is responsible for stra-
tegic client development in Europe; he is based in Zug. Felix
also sits on the Boards of a number of Partners Group-affili-
ated companies as an operating director. Previously, he
served as Head of the Investment Structures business depart-
ment and was a member of the Global Executive Board. He
has been with Partners Group since 2001 and has more than
30 years of industry experience. Prior to joining the firm, he
was a partner at PwC where he advised clients from the in-
surance, asset management, and private equity industries.
He holds a Master's degree in Business Law from the Univer-
sity of St. Gallen (HSG), Switzerland. He sits on the Board of
the Swiss Asset Management Association where he co-chairs
the Sustainability Chapter and he has previously been the
Association's president for six years.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 26 | Annual Report 2021
Fionnuala Carvill
(appointed 1 September 2018)
Fionnuala Carvill is a Guernsey resident and a Chartered
Fellow of The Chartered Institute for Securities & Investment;
a Fellow of the London Institute of Banking & Finance
(Chartered Institute of Bankers); a Fellow of The Chartered
Governance Institute; and a Chartered Governance Profes-
sional. Ms Carvill is a non-executive director of Investec Bank
(Channel Islands) Limited and The Chartered Institute for
Securities & Investment. Previous executive positions held
include Managing Director of Kleinwort Benson (Channel
Islands) Investment Management Limited, Director of Klein-
wort Benson (Channel Islands) Limited, Commission Secretary
and Head of Innovation at the Guernsey Financial Services
Commission, and Director of Rothschild Bank (CI) Limited.
Ms Carvill is a past President and committee member of The
Chartered Institute for Securities & Investment, Guernsey
Branch, a Liveryman of the Worshipful Company of Interna-
tional Bankers, and was granted Freedom of the City of
London in 2007. Ms Carvill sits on the board of several
charities, holding roles from funding and capacity building to
governance and impact assessment. She previously volun-
teered with Voluntary Service Overseas (VSO), where she
took the role of Organizational Development Advisor during
a placement with the Environment & Development Center
of a university in the People's Republic of China, aiming to
support program delivery, aid capacity building, and develop
knowledge of governance and fundraising. Ms Carvill holds
a Master's degree in Corporate Governance (Distinction).
Henning von der Forst
(appointed 13 November 2012)
Henning von der Forst is a German resident. He is a Member
of the Supervisory Board of the Nuremberger Life and non-
life insurance company and of various investment trusts and
investment companies. Previously he served as a Member
of the Executive Board of Directors and as Chief Investment
Officer of Nuremberger Insurance Group. There he was re-
sponsible for Asset Management, Banking Services and
Treasury, Investor Relations, and International Relations from
1992 until his retirement in 2015. Prior to this, he worked
as a marketing manager at SBCI Swiss Bank Corporation In-
vestment Banking, London, and as Head of the Group
Treasury and Finance Department with VIAG Aktiengesell-
schaft, Bonn (E.on today). He holds a Master's degree in
Business Administration from the University of Münster.
Merise Wheatley
(appointed 1 September 2018)
Merise Wheatley is a Guernsey resident and has over 30
years' experience at Board level in risk financing and insur-
ance management. She is a Fellow of the Association of
Chartered Certified Accountants, having completed her
training with Abbey Life Assurance and National Mutual Life
Association of Australasia in the UK, and qualified in 1982.
In addition to her directorship of Princess Private Equity
Holding Limited, Merise serves as a director on the Boards
of a number of non-listed regulated insurance entities in
Guernsey. From 1988 until June 2019 Merise worked for a
number of leading insurance management service providers
in Cayman, Guernsey, and Malta, including Artex Risk Solu-
tions, Heath Lambert, Marsh and Johnson & Higgins,
providing strategic and operational insurance management
services and serving as executive director to a portfolio of
client insurance companies. Merise is a past Chairman of the
Guernsey International Insurance Association. In 2007 she
achieved the Diploma in Company Direction awarded by the
UK Institute of Directors.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 27
10. Directors' report
10.1 Directors
The Directors present their report and audited consolidated financial statements of Princess Private Equity Holding Limited
for the period from 1 January to 31 December 2021.
Directors
R. Battey (Chairman)
S. Le Page
F. Carvill
F. Haldner
H. von der Forst
M. Wheatley
The Board, roles, and committees
The Board consists of six directors, all of whom are non-executive. The independent Chairman of the Board is Mr. Battey, who
was appointed to the role on 1 September 2018. As Chairman, he is responsible for leading meetings of the Board to ensure
that they are efficient and effective, promoting the long-term sustainable success of Princess Private Equity Holding Limited
(the "Company"), generating value for shareholders (as disclosed in the Strategy section), and contributing to wider society.
Mr. Battey satisfies all the criteria for assessing director independence set out by the Association of Investment Companies
("AIC") and adopted by the Board. Although he has served on the Board for more than twelve years, it is the opinion of the
other members of the Board that Mr. Battey continues to demonstrate objective and independent thought processes during
his leadership of the Board and his dealings with the Investment Manager, and they therefore consider him to be independent,
despite his long service. In addition, it should be noted that the average tenure for the members of the Board is six years and
two months, or four years and ten months excluding Mr. Battey. The Board has concluded that his knowledge of the Company,
built up over his service with it, contributes to the effectiveness of the Board and his continued service is in the best interests
of shareholders. Additionally, he has no other significant business commitments and the Board is satisfied that he has sufficient
time available to discharge fully his responsibilities as Chairman of the Company.
At each quarterly board meeting, the Directors consider several reports and performance indicators to assess the Company's
success in achieving its objectives. These include:
• Monitoring of the share price (and associated premium or discount);
• General performance reporting at the underlying investment level;
• Cash flow projections;
• Risk management and adherence to investment guidelines;
• Broking and shareholder analysis reports, including peer group comparisons;
• Reports from committees, together with the monitoring, evaluation, appointment, and removal of service providers;
• Approval of financial statements and dividends; and
• Corporate governance and compliance.
In addition, the consent of the Board is required if the Investment Manager wishes to borrow more than 30% of the value of
the Company's assets, lend or pledge any of the Company's assets (other than in the context of a hedging transaction), enter
into an investment or other transaction with affiliates of the Investment Manager, or invest more than 10% of the value of
the Company's assets into any single investment.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 28 | Annual Report 2021
Furthermore, the Board confirms that it considers any conflicts or potential conflicts of interest in accordance with the Company's
existing procedures.
Audit
& Risk Committee
The Audit & Risk Committee ("A&R Committee") meets on a quarterly basis and has been chaired by Mr. Le Page since 16 May
2018. The Board is satisfied that at least one member of the A&R Committee has recent and relevant financial experience,
and that the committee has the skills and experience required to fulfill its responsibilities.
The A&R Committee is responsible for:
• Reviewing and recommending approval of the semi-annual and annual consolidated financial statements of the Company,
comprising Princess Private Equity Subholding Limited (the "Subsidiary") and Princess Direct Investments, L.P. Inc. (the
"Sub-Subsidiary" and together with the Company and Subsidiary, the "Group");
• Reviewing the effectiveness of the accounting and internal control system;
• Overseeing the relationship with the Independent Auditor, including but not limited to meeting them regularly, and monit-
oring their remuneration, terms of engagement, and independence; and
• Monitoring the risks and their potential impact on the Company.
Management
Engagement Committee
The Management Engagement Committee ("ME Committee") meets at least annually and is chaired by Mr. Le Page following
his appointment to that role on 16 May 2018.
The ME Committee is responsible for:
• Considering the performance of the Investment Manager in respect of the service level requirements set out in the Invest-
ment Management Agreement, including compliance with the Board's instructions, reporting to the Board and investors,
and responsiveness to Board queries;
• Considering whether the continuing appointment of the Investment Manager, on the terms of the management contract,
is aligned with the interests of shareholders, and making recommendations to the Board thereon together with a statement
of the reasons for their view; and
• Reviewing and considering the performance and engagement terms of other service providers to the Company.
During the year, the ME Committee initiated the review and updating of the agreements with Administrator and Company
Secretary to provide clear provisions in respect of duties and responsibilities of all parties. The Investment Manager is considered
to be aligned with the interests of shareholders as a whole, given its global reach, access to leading private market houses, and
expertise.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 29
The following table is an extract of the various Directors' attendance at Board and Committee meetings for 2021 compared
against those for which they were eligible:
Committees
MEA&RBoardName
2/24/47/7R. Battey (Chairman)
2/24/47/7F. Carvill
2/24/47/7S. Le Page
--6/7F. Haldner
2/24/47/7H. von der Forst
2/24/47/7M. Wheatley
Board composition
The Board has a breadth of experience relevant to the Company and a diversity of skills, experience, and age. Its members
possess the broad range of skills, expertise, industry knowledge, and other experience necessary for the effective oversight
of the Company's business. In addition, the Board recognizes the importance of maintaining its diversity and that this is a much
wider issue than gender. It will continue to evaluate applicants to fill vacant positions without prejudice. Applicants will be as-
sessed on their range of skills, expertise, and industry knowledge, and on their business and other experience.
The Directors have resolved to put themselves forward for election on an annual basis and were all duly re-elected at the
2021 annual general meeting.
Re-election recommendations have always been subject to an assessment of the respective Director in question, their objective
and independent thought process, knowledge of the Company, and continued satisfactory performance. In view of the long-
term nature of the Company's investments, the Board believes that a stable and diversified board composition is fundamental
to running the Company properly. The Board has not stipulated a maximum term of any directorship. The Board continues to
be satisfied with the contribution of each of the Directors, and that they have each maintained their independent perspective,
whilst noting both Mr. Battey and Mr. von der Forst have served a term on the Board in excess of nine years.
Given the size and nature of the Company, the Board deemed it not necessary to form a separate remuneration or nomination
committee and that the whole Board would consider all new Board appointments.
Directors' duties and responsibilities
The Board meets at least quarterly and it is the duty of each Director to inform the Board of any potential or actual conflict
of interest prior to a Board discussion. Representatives of the Investment Manager (prior to 30 June 2020, representatives of
the Investment Advisor) attend board meetings. The Company's corporate brokers also attend to assist the Directors in under-
standing the views of major shareholders regarding the Company.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 30 | Annual Report 2021
The Board of Directors has overall responsibility for the Company's affairs and is responsible for the determination of the in-
vestment policy of the Company, resolving conflicts and monitoring the overall portfolio of investments of the Company. To
assist the Board in the operations of the Company, arrangements have been put in place to delegate authority for performing
certain day-to-day operations of the Company to the Investment Manager, (the Investment Advisor prior to 30 June 2020),
and other third-party service providers, such as the Administrator and the Company Secretary. Although the Board meets
formally at least four times a year, the Investment Manager and Company Secretary stay in more regular contact with the
Directors on a less formal basis. These formal and informal discussions allow the Directors to constructively challenge and
assist in the development of strategy. Individual Directors have direct access to the Company Secretary and may, at the expense
of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties.
The Directors are responsible for preparing financial statements for each financial period that give a true and fair view, in ac-
cordance with applicable Guernsey law and International Financial Reporting Standards, of the state of affairs of the Group
and Company, and of the profit or loss of the Group and Company for that period. In preparing those financial statements,
the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgments and estimates that are reasonable and prudent;
• state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained
in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and
Company will continue in business.
So far as the Board of Directors are aware,
• there is no relevant audit information of which the Group and Company's auditor is unaware, and
• each Director has taken all the steps that he or she ought to have taken as a director in order to make himself or herself
aware of any relevant audit information and to establish that the Group and Company's auditor is aware of that information.
The Directors confirm that they have complied with the above requirements in preparing the audited consolidated financial
statements. The Directors of the Company have elected to prepare audited consolidated financial statements for Princess
Private Equity Holding Limited for the period ended 31 December 2021 as the parent of the Group in accordance with Section
244(5) of The Companies (Guernsey) Law, 2008. They are not required to prepare individual accounts for Princess Private
Equity Holding Limited in accordance with Section 243 of The Companies (Guernsey) Law, 2008 for the financial period.
To the best of their knowledge and belief:
• The Annual Report, which includes information detailed in the Chairman's report, the Investment Manager's report, the
Directors' report, and the notes to the audited consolidated financial statements, includes a fair review of the development
and performance of the business and the position of the Company together with a description of the principal risks and
uncertainties that the Company faces, as required by Financial Conduct Authority's Disclosure Guidance and Transparency
Rules ("DTR") 4.1.8 and DTR 4.1.11; and
• The audited consolidated financial statements, prepared in accordance with International Financial Reporting Standards,
give a true and fair view of the assets, liabilities, financial position, and profit and loss of the Company.
The Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the
financial position of the Group and Company and enable them to ensure that the audited consolidated financial statements
comply with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Group and
Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 31
The maintenance and integrity of the Group and Company website are the responsibility of the Directors. The work carried
out by the Independent Auditor does not involve consideration of these matters and, accordingly, the Independent Auditor
accepts no responsibility for any changes that may have occurred to the audited consolidated financial statements after they
were initially presented on the website. Legislation in Guernsey governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Directors, directors' interests, and directors' remuneration report
The Directors of Princess Private Equity Holding Limited are as shown above. As at 31 December 2021, the Directors had no
beneficial interest in the share capital of the Company other than as shown below:
R. Battey (Chaiman): 65,000 shares
S. Le Page: 7,500 shares
F. Haldner: 225,554 shares
M. Wheatley: 5,000 shares
No service contract or arrangement existed in the period in which any of the Directors has an interest, other than with Mr.
Haldner. The Board considers all the Directors, other than Mr. Haldner, as independent of the Investment Manager and free
from any business or other relationship that could materially interfere with the exercise of their independent judgment or
create potential conflicts of interest.
Mr. Haldner is not considered independent during the reporting period, as he is a shareholder in Partners Group Holding AG,
the beneficial owner of the Administrator, and an employee of the Investment Manager.
Directors' remuneration is presented in the notes to these audited consolidated financial statements and is shown below. Mr.
Haldner did not receive a fee for the provision of his services as a director of the Board. Directors' remuneration was split as
follows in Euro:
(31.12.2021 / 31.12.2020)
R. Battey (Chairman) (62,000 / 62,000)
F. Carvill (50,000 / 50,000)
S. Le Page (56,000 / 56,000)
H. von der Forst (50,000 / 50,000)
M. Wheatley (50,000 / 50,000)
The sole director of Princess Private Equity Subholding Limited, which held office during the period, was Princess Private
Equity Holding Limited.
Directors' and officers' liability insurance
The Company maintains insurance in respect of Directors' and Officers' liability in relation to their acts on behalf of the Company.
Suitable insurance is in place and due for renewal on 8 December 2022.
Strategy
Strategic objectives
The Company's investment objective is to provide shareholders with long-term capital growth and an attractive dividend yield,
through investment in a diversified portfolio of private equity and private debt investments, rather than through fund investments.
In addition, the Investment Manager has a goal to achieve a long-term sustainable impact on the companies in which it invests,
their underlying clients, and the wider environment in which they operate.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 32 | Annual Report 2021
Prior to 30 June 2020, the Investment Manager of the Company was Princess Management Limited, and the Investment Advisor
was Partners Group AG (a Swiss limited liability company). As of 1 July 2020, the Investment Manager of the Company is
Partners Group AG (the "Investment Manager").
The Investment Manager seeks to achieve a long-term sustainable impact by working in partnership with the management
and employees of the companies in which the Company invests and through active entrepreneurial ownership initiatives with
clear goals and continuous monitoring.
In addition, the Investment Manager (prior to 30 June 2020, the Investment Advisor) works with portfolio companies on a
variety of ESG engagements. This commences during the investment due diligence phase and, after acquisition, they implement
initiatives by systematically integrating ESG factors, alongside commercial and financial factors.
They continuously monitor the effectiveness of any ESG-relevant policies through maturity assessments to evaluate progress
and impact.
As part of its annual visit to the Investment Manager, the Board obtains an overview of the value creation initiatives, including
ESG initiatives, on the underlying investments, and a detailed progress report on the monitoring of risk and impact on valuations.
It should be noted that due to the restrictions imposed as a result of the global COVID-19 pandemic, the Board were unable
to visit the Investment Manager physically during 2021 but utilized videoconferencing facilities to ensure all aspects of the
usual visit were covered.
Purpose, culture, and values
The Company shares and is aligned with the purpose, culture, and values adopted by Partners Group (which includes the In-
vestment Manager and Administrator) in their charter and as given in their Corporate Sustainability Report, both of which are
available at their website www.partnersgroup.com/en/sustainability/
.
The Company's mission is to develop companies and assets which it invests in through entrepreneurial ownership. This stems
largely from the belief that the ability to create value, enabled by a governance framework that supports entrepreneurialism,
is the key driver of the returns.
In summary, investments are managed with a long-term perspective to the benefit of individuals and societies worldwide and
the investment teams leverage the global Partners Group integrated platform to systemically engage with entrepreneurs and
corporate leaders to create value in the investments. In addition, the investment teams liaise with management in underlying
companies in constructive dialogue and have open debates, while in parallel taking their fiduciary duty to all stakeholders into
account.
Partners Group is fully committed to investing clients' capital in a responsible manner by integrating ESG factors, alongside
commercial and financial factors, into investment due diligence and ownership.
Major developments in the year
During the year, the Board carried out the following projects:
• initiated the review and updating of agreements with Administrator and Company Secretary to provide clear provisions in
respect of the duties and responsibilities of all parties.
• reviewed Partners Group's established controls to mitigate potential conflicts of interests arising from re-underwriting of
assets, and are satisfied with them.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 33
Review of performance
The Board undertakes an annual evaluation of its own performance and the performance of its committees and individual
Directors, to ensure that they continue to act effectively and efficiently, to fulfill their respective duties, and to identify any
training requirements. During this evaluation, the Directors also reconfirmed that they continue to be able to allocate sufficient
time to the Company in order to discharge their responsibilities, to provide constructive challenge and strategic guidance, to
offer specialist advice, and to hold third-party service providers to account.
Viability statement
The Directors confirm that they have a reasonable expectation that the Group will continue to operate and meet its liabilities,
as they fall due, for the next three years. The Group's viability testing considers multiple severe, yet plausible, stress scenarios.
The Directors' assessment has been made with reference to the Group's current position and prospects, the Group's strategy,
the Board's risk appetite, and the Group's principal risks and how these are managed. The Directors consider this is an appro-
priate period to assess the viability of an investment company for the purposes of giving assurance to shareholders, as eco-
nomic factors are very difficult to forecast over a longer period.
The strategy and associated principal risks underpin the Group's three-year plan and scenario testing, which is reviewed by
the Directors on a quarterly basis. The three-year plan is built on an investment-by-investment basis using a bottom-up approach.
The three-year plan makes certain assumptions about the development of underlying investments, in terms of future expected
capital calls and distributions, potential future investments, and the ability to refinance debt when required. The plan is built,
monitored, and updated quarterly based on any changes to expected cash flows and forward-looking assumptions, which help
to drive the model and to determine when to make new investments.
The three-year plan review is underpinned by the regular Board of Directors briefings provided by the Investment Manager,
including discussions around liquidity reporting and risk management reports undertaken by the Board of Directors in its normal
course of business. These reviews consider both the market opportunity and the associated risks, principally the ability to
realize investments at their fair value and secure new investments while maintaining sufficient working capital. These risks are
considered within the Board of Directors' risk appetite framework.
Based on the Company's processes for monitoring, anticipating, and managing cash flow, operating costs, share price discount,
the Investment Manager's compliance with the investment objective, asset allocation, the portfolio risk profile, gearing, coun-
terparty exposure, and liquidity risk, the Directors have concluded that there is a reasonable expectation that the Company
will continue in operation and meet its liabilities as they fall due over the three-year period to 31 December 2024.
10.2 Governance and regulatory matters
Corporate governance report
The Directors have determined to report against the Principles and Provisions of the AIC as endorsed by the Guernsey Financial
Services Commission ("AIC Code"), dated February 2019. The AIC Code is available on the AIC website www.theaic.co.uk/aic-
code-of-corporate-governance/. In assessing the Board's corporate governance practice for 2021, the Directors confirm that
throughout the period the Company complied with the provisions of the AIC Code. The Company has complied with the rel-
evant provisions of the UK Corporate Governance Code (the "UK Code") as issued by the Financial Reporting Council and
dated July 2018, except as set out below:
• The role of the Chief Executive;
• The role of the Senior Independent Director;
• Executive Directors' remuneration;
• The need for an internal audit function and the monitoring and reviewing of the effectiveness of such a function.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 34 | Annual Report 2021
The Guernsey Financial Services Commission has a standing Finance Sector Code of Corporate Governance that was amended
in June 2021 (the "Guernsey Code"). In the introduction to the Guernsey Code, it states: "Companies which report against the
UK Corporate Governance Code or the Association of Investment Companies Code of Corporate Governance are deemed to
meet this Code." As a company listed on the London Stock Exchange the Company is subject to the Disclosure Rules, the
Transparency Rules, and the UK Code but uses the AIC Code instead as it is a member of AIC and considers this appropriate
for an investment company and that it provides information that is more relevant to shareholders. As an AIC member domiciled
in Guernsey which reports against the AIC Code, the Company is not required to report separately against the Guernsey Code.
AIFMD
In July 2014, the European Alternative Investment Fund Management Directive ("AIFMD") came into effect. At present, the
Board considers that the Company falls outside the scope of this Directive, in that the number of its shares in issue is static
or declining, and accordingly it does not market new shares inside the European Union. In the event that the Company seeks
to raise capital, it will reconsider this.
Risks
Principal risks and uncertainties
The Board is responsible for managing and overseeing risk and reviews and assesses quarterly the impact of risks that it considers
apply to the Company that may compromise the achievement of the Company's strategic objectives. These risks encompass
the significant risks to which the Company may be exposed, including the macro environment and uncertainties in respect of
the valuation of unquoted investments, and their impact on the cash flow modeling employed by the Company. Notes 4 and
18 of the audited consolidated financial statements provide further comment on certain other risks connected with the invest-
ments and financial assets / liabilities held by the Company and how they are managed.
Statement of principal risks
The major risks to which the Company may be exposed are ranked by a risk index, considering both likelihood and impact.
When assessing the likelihood and potential impact of such risks, the Board considers whether the outcome could pose:
• an immediate threat to the existence of the Company;
• a medium-term threat (resulting in the Company being placed into run-off);
• a reputational threat from which the Company could be expected to recover fully in due course; or
• no immediate threat to the Company or its operating activities.
The risks are split into eight main sections: (i) investment risk, (ii) shares trading at a discount, (iii) financial risk, (iv) governance
risk, (v) regulatory risk, (vi) operational risk, (vii) macro-economic and other external risks and (viii) valuation risk.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 35
For the reasons set out in the AIC Code, and in the preamble to the UK Code, the Board considers these provisions are not
relevant to the position of the Company, being an overseas investment company with an appointed Investment Manager.
There are no executives with contractual obligations directly with the Company and thus the Executive Directors' remuneration
rules do not apply. The A&R Committee and the Board of Directors regularly consider the risk and operational aspects of the
Company. The Board has access to the appointed Compliance Officer of the Administrator who reports quarterly. As there is
delegation of operational activity to appointed service providers, the A&R and ME Committees and the Board have determined
there is no requirement for a direct internal audit function, although they do have access to and meet with the internal audit
function of Partners Group Holding AG.
In this year's assessment the Board has continued to consider the impact of the global COVID-19 pandemic on financial markets
and on the specific activities of each investee of, or service provider to, the Company. The Board has concluded that, given
the nature of the Company, the pandemic is a cause of risk, increasing the likelihood of certain risks crystallizing, rather than
a risk in itself. Accordingly, the Board has reassessed the likelihood of those risks and reconsidered whether any additional
mitigation is required. The fact that the impact of the pandemic on past activities is known has given some comfort to the
Board that the Company's risks are adequately controlled. The risk of mis-valuation of the Company's portfolio is now considered
to be stable as the impact on future operations and market comparables is becoming clearer, but it remains a principal risk
given its potential impact on NAV and reputation.
The Board also continues to assess the impact of ESG factors on the Company's key risks, primarily within the context of the
Investment Manager's ESG framework which seeks to embed ESG into the strategy, direction and goals of portfolio companies
and to quantify the impact of its initiatives.
In its assessment, the Board considers that none of the risks present an immediate threat to the existence of the Company
and have, in each case, worked with the Investment Manager, Administrator, Company Secretary, or broker to ensure that
adequate measures are in place to mitigate the occurrence and impact of these risks. The Board also obtains regular reporting
so that these risks can be continuously assessed.
Although the conflict between Russia and Ukraine increases the level of geo-political risk the Company has negligible direct
exposure to the region, but with the Company's Investment Manager we are closely monitoring the situation, taking into account
potential supply chain disruptions and second order effects. The Board has not identified any other emerging risks that could
have a significant impact on the Company.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 36 | Annual Report 2021
The following table provides details of the six risks that were ranked as having the highest inherent risk likelihood and/or impact at
the year-end, together with the mitigating factors.
KKey risk
22021 AAssessment
PPotential impact
CControl eexercised by the Board
ESG risks (including
climate change)
Stable
The impact of ESG factors is
considered as part of the assessment
of all the principal risks listed below
and the risk is assessed as stable
given the maturity of the Investment
Manager's ESG integration process.
Unsuitable investments
leading to adverse impact
on valuations, the
environment and society.
Regular reporting by Investment
Manager on their ESG strategy
and initiatives and Board training
to enable a good understanding
of ESG reporting
Lack of suitable
investments
Stable
This risk was assessed as remaining
stable as the Board considers that the
investment manager is able to
identify suitable investments that
meet the investment objectives, with
the appropriate mix.
Adverse movement in net
asset value versus peer
group. Inability to meet
target dividend.
Effectiveness of investment
strategy reviewed at every Board
meeting using performance
reports and discussions with
brokers and Investment
Manager.
Company's shares
trading at a material
discount compared to
peers
Decreasing
The risk was assessed as decreasing,
as it has improved relative to the
sector. However, the Board is aware
that the need to adjust the dividend
policy last year resulted in more
volatility.
Decline in shareholders'
mark-to-market valuation
and impact on demand from
shareholders and prospects.
Monitoring of investor
sentiment and expectations and
performance vs. peers.
Maintenance of good market
communication. Maintenance
and achievement of dividend
target.
The Board also considers the
dis
count is due to general market
sentiment, rather than Company
fundamentals.
Loss from exposure to
foreign exchange
denominated hedged or
unhedged positions
Stable
This risk was assessed as stable,
while noting that a significant
portion of the Group's assets is
denominated outside of its
Functional Currency and volatility
has decreased in the key foreign
currency markets
Decrease of net asset value
outside the control of the
Investment Manager
Quarterly review of foreign
exchange exposure report and
assessment of hedging strategy,
as applicable
Delegation risk –
failure of
service providers to fulfill
contractual obligations to
acceptable standards
Stable
This risk was assessed as stable as
key service providers have
maintained adequate resources and
met all service requirements.
Financial loss or regulatory
breach.
Regular reports on
performance of contractual
requirements and compliance
with regulatory requirements.
Review of independent reports
on internal controls and
systems.
On-going assessment by
Management Engagement
Committee.
Valuation risk – under-
or
overstating the
valuations of private
markets investments
Stable
This r
isk was assessed as stable
based on continued volatility in
market comparable companies,
ability for underlying investments
to operate normally given
government restrictions,
together with the need to monitor
contractual terms.
Financial loss or
reputational risk.
Policies and tools used to
determine valuations have been
challenged and this remains a
significant area for review by
the Independent Auditor.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 37
S
Stakeholder disclosures
The Company is an externally managed investment company, has no employees, and as such is operationally quite simple. The Board does
not believe that the Company has any material stakeholders other than those set out in the following table.
Investors
Service providers
Community and environment
Issues that matter to them
Performance and liquidity of the shares
Growth and liquidity of the Company
Reputation of the Company
Compliance with law and regulation
Remuneration
Informed stewardship of the
environments in which the Company
operates and acting as a good
corporate citizen
Compliance with law and regulation
Impact of the Company and its
activities on third parties
Engagement process
Annual General Meeting (see detail below)
Frequent meetings with investors by
brokers and the Investment Manager (at
least one of which is attended by the Chair)
and subsequent reports to the Board
Monthly factsheets and regular news
releases
Key Information Document
Quarterly briefings by the Investment
Manager via telephone conference which
are attended by at least one Board member
who briefs the remainder of the Board
Annual and semi-annual financial
statements
The two main service providers – Partners
Group and Aztec – engage with the Board
in face-to-face meetings quarterly, giving
them direct input to Board discussions.
The Board also considers the views of its
corporate brokers and interests of its
credit
facility lender at each of its meetings.
Going forward, all key
service providers are
asked to complete a questionnaire annually
(others on a rotation basis) which includes
feedback on their interaction with the
Company, and the Board undertakes an
annual visit to Partners Group in
Switzerland. As noted elsewhere in this
report, videoconferencing facilities have
been used during 2021 due to the on-
going
restrictions arising from the COVID-19
pandemic.
The Company itself has only a very
small footprint in the local community
and only a very small direct impact on
the environment.
However, the Board acknowledges
that it is imperative that everyone
contributes to local and global
sustainability.
The Investment Manager has an ESG
framework which is a key element of
the
investment process which overlays
throughout the portfolio.
Rationale and example outcomes
Clearly investors are the most important
stakeholder for the Company. Most of our
engagement with investors is about
“business as usual” matters, but has also
included discussions about the discount of
the share price to the NAV. The major
decisions arising from this have been for the
Board to seek to ensure long-term value
(e.g. the decision to commit to the Partners
Group long-
term investment vehicle) and to
seek greater liquidity for the Company’s
shares through increasing its profile.
In addition, the Board has focused on
valuation of assets, a key priority for
shareholders, thus ensuring a robust and
reliable methodology is applied.
The Company relies on service providers
entirely as it has no systems or employees
of its own. During the year, the Board
initiated the review and updating of
agreements with Administrator and
Company Secretary to provide clear
provisions in respect of duties and
responsibilities of all parties.
The Board always seeks to act fairly and
transparently with a
ll service providers, and
this includes such aspects as prompt
payment of invoices.
The nature of the Company’s
investments is such that they do not
provide a direct route to influence
investees in ESG matters in many
areas, but the Board has made its view
s
in this area clear to Partners Group,
which, on behalf of the Company and
other investors, works closely with
investee companies to promote ESG
issues as well as financial performance.
Further details are set out elsewhere in
this document and on the Partners
Group website.
Board members do travel, partly to
meetings in Guernsey, and partly
elsewhere on Company business,
including for the annual due diligence
visit to Switzerland. The Board
considers this essential in overseeing
service providers and safeguarding
stakeholder interests. Otherwise, the
Board seeks to minimize travel by the
use of conference calls whenever good
governance permits.
Engagement processes are kept under regular review. The global COVID-19 pandemic has meant that it has not been possible to carry
out many of the face-to-face activities outlined in the table above during 2021, but has replaced them with video or telephone conferences.
The Board intends to restart the face-to-face meetings as soon as is permissible. Investors and other interested parties are encouraged to
contact the Company via the Investor Relations contacts given on page 96.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 38 | Annual Report 2021
Annual general meeting ('AGM')
The Directors propose a separate resolution on each substantial issue tabled at the AGM, including the approval of the consol-
idated financial statements, and publish on the Company's website www.princess-privateequity.net/en/investor-relations/fin-
ancial-reports/, shortly after the AGM, details of the valid proxies received, votes for and against and withheld in relation to
each resolution. No resolution at the 2021 AGM received more than 0.02% votes against the Board recommendation .
Shareholder information
The net asset value and the net asset value per share are calculated (in Euro) every month at the last business day of each
month by Partners Group (Guernsey) Limited, acting as Administrator. The net asset value is calculated in accordance with
International Financial Reporting Standards ("IFRS"), which require the Company's direct investments and fund investments
to be valued at fair value. Thereafter, it is announced by the Company on its website and submitted to a regulatory information
service approved by the UK Listing Authority as soon as practicable after the end of the relevant period.
Dividends
Two dividends of EUR 0.335 each per share were declared on 15 April 2021 and 14 October 2021 and were paid on 24 June
2021 and 17 December 2021 respectively. This compares to dividends of EUR 0.145 per share, being declared on 23 June
2020 and paid on 24 July 2020, together with a second interim dividend of EUR 0.29, per share, declared on 19 November
2020, which was paid on 7 January 2021. Since the December 2017 dividend, shareholders have been able to also elect to
get their dividends paid in Sterling or to elect to participate in the Dividend Reinvestment Plan, but this does not result in the
issuance of any new shares.
Substantial interests
The European Union Transparency Directive requires substantial shareholders to make relevant holding notifications to the
Company and the UK Financial Conduct Authority. The Company must then disseminate this information to the wider market.
Those shareholders who have declared accordingly that they held above 5% of ordinary shares, as at the period end, were:
• Bayer-Pensionskasse VVaG - 7.56%
• CCLA Investment Management Limited - 5.05%
• CVP / CAP Coop - 5.07%
• Deutsche Asset Management Investmentgesellschaft - 7.66%
• Rathbone Brothers - 5.26%
• Société Générale Option Europe - 5.31%
This information has been prepared based on disclosures made by shareholders to the Company in accordance with stock
exchange rules.
Share capital
Although the shareholders granted authorization to the Directors to make market acquisitions of ordinary shares, the Company
purchased and redeemed / canceled no shares (31 December 2020: nil) during the year.
There was no change in the issued and paid-up share capital as at 31 December 2021 and 31 December 2020. Accordingly,
the paid-up share capital as at 31 December 2021 was 69,151,168 ordinary shares of EUR 0.001 each (31 December 2020:
69,151,168 ordinary shares of EUR 0.001 each).
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 39
There are no restrictions regarding the transfer of the Company's securities, no special rights with regard to control attached
to the Company's securities, no agreements between holders of the Company's securities regarding their transfer known to
the Company, and no agreements to which the Company is party that might be affected by a change of control following a
takeover bid.
Results
The results for the period are shown in the audited consolidated statement of comprehensive income.
Key information document
The Company is required to produce and publish this document by U.K. PRIIPs Regulation on key information documents for
packaged retail and insurance-based investment products (the "Regulation"). The key information document is available on the
Company's website www.princess-privateequity.net/en/investor-relations/kid/
and is subject to an annual review by the Board.
10.3 Committees
Committees of the Board
Audit
& Risk Committee
The A&R Committee meets at least four times a year and is responsible for ensuring that the financial performance of the
Company is properly reported on and monitored. It provides a forum through which the Group and Company's Independent
Auditor may report to the Board. Furthermore, it ensures that any reports issued by the Board present a fair, balanced, and
understandable assessment of the Company's position and prospects. The A&R Committee reviews the annual and semi-an-
nual accounts, results, announcements, internal control systems and procedures, and accounting policies of the Company. It
also considers the performance and quality of the external audit and makes appropriate recommendations to the Board con-
cerning the Independent Auditor.
The Group's and Company's Independent Auditor is PricewaterhouseCoopers CI LLP. The A&R Committee is responsible for
reviewing the independence and objectivity of the Independent Auditor and ensuring this is safeguarded notwithstanding any
provision of any other services to the Group or Company. The Board of Directors recognizes the importance of safeguarding
auditor objectivity and has taken the following steps to ensure that auditor independence is not compromised:
• The A&R Committee carries out each year an evaluation of the Independent Auditor as to their independence from the
Group and Company and relevant officers of the Group and Company, and that they are adequately resourced and tech-
nically capable of delivering an objective audit to shareholders. Based on this evaluation, the A&R Committee recommends
to the Board the continuation, removal, or replacement of the Independent Auditor.
• The A&R Committee gives careful consideration before appointing the auditor to provide other services. These other services
are generally limited to work that is closely related to the annual audit (such as regulatory and statutory reporting) or where
the work is of such a nature that a detailed understanding of the Group's and Company's business is necessary (such as
assistance on tax or regulatory matters). Such services will however be assessed on a case-by-case basis so that the best-
placed adviser is retained. Where the auditor is engaged to provide additional services, the auditor, in providing these
services, utilizes different teams. The Independent Auditor did not provide any non-audit services during the year.
• The A&R Committee reviews the Independent Auditor's confirmation of their independence in accordance with Crown
Dependencies' Audit Rules and with Securities and Exchange Commission ("SEC") Independence Rules. In addition to the
steps taken by the Board to safeguard auditor objectivity, PricewaterhouseCoopers CI LLP operates a five-year rotation
policy for audit engagement leaders on listed companies such as the Company. PricewaterhouseCoopers CI LLP has remained
in place as auditor for a considerable number of years and the audit contract has never been put out to tender. However,
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 40 | Annual Report 2021
the A&R Committee notes that the audit engagement leader was rotated in 2017 and that the Company and Group benefit
from the auditor's detailed knowledge of the systems and processes operated by Partners Group. The audit engagement
leader will rotate after the 2021 audit. Accordingly, the A&R Committee has not recommended that the external audit
appointment be tendered, but the position will be closely monitored. As the Company is not a FTSE 350 company, the
external audit contract is not required to be put out to tender at least every ten years.
In addition, the terms of reference for this Committee are available on the Company's website www.princess-pri-
vateequity.net/en/about-princess/committees/. The significant areas considered by the A&R Committee during the year were:
• Valuation of private investments − the Committee pays particular attention to this area at each quarterly date, and members
of the Board discuss the approach both during those reviews and during the annual visit to the Investment Manager (prior
to 30 June 2020, the Investment Advisor). Significant valuation movements are challenged, and disposals are compared
to the most recent valuation. Whilst this area is easily the most significant for the financial statements, it is also well under-
stood and subject to an established process, including checks and balances at the Investment Manager (prior to 30 June
2020, the Investment Advisor), as well as to challenge by the Committee and the Independent Auditor. On this basis, the
Committee has concluded that the valuation of private investments is fair and reasonable for inclusion in the
audited consolidated financial statements.
• Incentive fees are a significant area of the financial statements because of their nature rather than their size. Their calculation
is also somewhat complex, being accrued on an investment-by-investment basis in the Company, but often on a "whole
fund" basis by underlying vehicles. At each meeting, the Board reviews a schedule of fees accrued and paid, comparing it
to the valuation gains recognized on the investments, and the Committee has discussed the accounting for these fees with
both the Investment Manager and the Independent Auditor. On this basis, the Committee has concluded that the incentive
fees are fair and reasonable for inclusion in the audited consolidated financial statements.
Although the Directors believe that the Company and the Group have a robust framework of internal control in place, this can
only provide reasonable and not absolute assurance against material financial misstatement or loss and is designed to manage,
not eliminate, risk. In addition, the Board recognizes the importance of a sound risk management framework to safeguard the
Company's assets, protect the interests of the shareholders, and meet its responsibilities as a listed company.
The A&R Committee approaches its risk review covering qualitative and quantitative matters.
On a quarterly basis, the A&R Committee reviews the principal risks faced by the Company and the Group, covering (i) investment
risk, (ii) shares trading at a discount, (iii) financial risk, (iv) governance risk, (v) regulatory risk, (vi) operational risk, (vii) macroeco-
nomic and other external risks, and (viii) valuation risk. For each of these risks the A&R Committee evaluates how these risks
could arise, assigns responsibility to control and mitigate such risks, and determines the post-mitigation likelihood and impact
of the risk occurring. The A&R Committee makes decisions and requests additional reporting based on these findings.
On an annual basis, the A&R Committee reviews certain quantitative reports covering foreign currency exchange risk, interest
rate risk, liquidity risk, market price risk, and counterparty risk as disclosed in the notes to the audited consolidated financial
statements. On an annual basis the Board of Directors meets with the internal audit team of Partners Group Holding AG to
discuss the upcoming internal audit plan, covering those controls assigned to Partners Group Holding AG and its affiliated
entities, and the material results or findings of any reports for the previous period that affect the Company or the Group. Ad-
ditionally, the Board of Directors is provided, annually by the end of April, with a copy of the Internal Controls report assured
by PricewaterhouseCoopers AG in accordance with the International Standard on Assurance Engagement 3402 "Assurance
reports on controls at a service organization". This information allows the Board of Directors to assess and monitor the risks
associated with the services delegated to Partners Group and to seek clarification or updates.
The risk management framework includes a sound system of internal controls that is designed to:
• identify and appraise all risks related to achieving the Company's objectives and principal risks;
• manage and control risk appropriately rather than eliminate it;
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 41
• ensure the appropriate internal controls are embedded within the business processes performed by service providers and
support the Company's culture which emphasizes clear management responsibilities and accountabilities;
• respond quickly to evolving risks within the Company and the external business environment; and
• include procedures for reporting any control failings or weaknesses to the appropriate level of management together with
the details of corrective action.
It should be noted that, due to the restrictions imposed as a result of the global COVID-19 pandemic, the Board was unable
to visit the Investment Manager physically during 2021 but utilized videoconferencing facilities to ensure all aspects of the
usual visit were covered.
Management
Engagement Committee
The ME Committee shall meet no less than once a year and is responsible for reviewing and monitoring service providers and
recommending to the Board their continued appointment. Service providers are reviewed on an annual basis. The Board re-
cognizes the importance of monitoring service providers' objectivity and ensuring their independence is not compromised.
In this regard, with respect to the appointment of the Investment Manager, the ME Committee:
• considers if there are any potential conflicts of interest associated with the appointment of the Investment Manager and
how the Investment Manager manages these potential conflicts;
• reviews with the Investment Manager any material issues arising from their work that the Investment Manager wishes to
bring to the attention of the Committee, whether privately or otherwise;
• reviews the performance of the Investment Manager both in terms of its delivery against the agreement governing its ap-
pointment and in terms of its delivery against the objectives of the Company.
Similar considerations are taken into account in the ME Committee's review of all other service providers to the Company. In
addition, the terms of reference for this Committee are available on the Company's website http://www.princess-pri-
vateequity.net/en/about-princess/committees/.
As previously mentioned, during the year, the ME Committee initiated the review and updating of the agreements with the
Administrator and Company Secretary to provide clear provisions in respect of duties and responsibilities of all parties. The
ME Committee also reviewed Partners Group's established controls to mitigate potential conflicts of interests arising from re-
underwriting of assets, and are satisfied with them.
10.4 Corporate matters
Registered office
Tudor House
St. Peter Port
Guernsey
GY1 6BD
Incorporation
The entities of the Group are incorporated and domiciled in Guernsey , Channel Islands.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 42 | Annual Report 2021
Investment management arrangements
Princess Management Limited, a wholly owned subsidiary of Partners Group Holding AG, was the Investment Manager to the
Company up until 30 June 2020. The Investment Manager was permitted to delegate some or all of its obligations and had
entered into an Investment Advisory Agreement (the "Advisory Agreement") with Partners Group AG. However, as of 1 July
2020, the Company has entered directly into an Investment Management Agreement with Partners Group AG (the "Investment
Manager"). Details of the management fees are shown within the audited consolidated financial statements. The Investment
Management Agreement automatically renews every two years but contains a two-year notice period. Termination will be
without penalty or other additional payments, save that the Company will pay management and incentive fees due and addi-
tional expenses incurred. The Directors (other than Mr. Haldner, who is not independent of the Investment Manager) have
determined that the appointment of the Investment Manager, on the terms of the Investment Management Agreement, is
aligned with the interests of shareholders as a whole, given the global reach and expertise of the Investment Manager.
Going concern
The Group closely monitors its future anticipated cash flows and, based on these forecasts and the sensitivities which have
been run on different scenarios, the Directors have a reasonable expectation that the Group and Company have adequate
resources to continue in existence for the next twelve months. For this reason, they continue to adopt the going concern basis
in preparing the accounts.
Company secretary
The secretary of the Company, as at 31 December 2021, was Aztec Financial Services (Guernsey) Limited.
Independent auditor
At a general meeting held on 18 June 2021, PricewaterhouseCoopers CI LLP was re-appointed Independent Auditor of the
Company for the period ended 31 December 2021, and the Directors were authorized to fix their remuneration.
R. Battey
Director
S. Le Page
Director
21 March 2022
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 43
11. Independent Auditor's report
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF PRINCESS PRIVATE EQUITY HOLDING
LIMITED
Report on the audit of the consolidated financial statements
Our opinion
In our opinion, the consolidated financial statements give a true and fair view of the consolidated financial position of Princess
Private Equity Holding Limited (the "company") and its subsidiaries (together "the group") as at 31 December 2021, and of
their consolidated financial performance and their consolidated cash flows for the year then ended in accordance with Inter-
national Financial Reporting Standards and have been properly prepared in accordance with the requirements of the Companies
(Guernsey) Law, 2008.
What we have audited
The group's consolidated financial statements comprise:
• the Consolidated statement of financial position as at 31 December 2021;
• the Consolidated statement of comprehensive income for the year then ended;
• the Consolidated statement of changes in equity for the year then ended;
• the Consolidated statement of cash flows for the year then ended; and
• the Notes to the consolidated financial statements, which include significant accounting policies and other explanatory in-
formation.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing ("ISAs"). Our responsibilities under those
standards are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements of the group, as required by the Crown Dependencies' Audit Rules and Guidance, and we have fulfilled
our other ethical responsibilities in accordance with these requirements. We are also independent in accordance with SEC
Independence Rules.
Our audit approach
Context
Our 2021 audit was planned and executed having regard to the fact that the operations of the group were largely unchanged
from the prior year. In light of this, our overall audit approach in terms of scoping and key audit matters was largely unchanged
with continued scrutiny over the valuation of unlisted investments and the calculation of incentive fees.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 44 | Annual Report 2021
Overview
Audit scope
• We have performed audit procedures on all items material to the group's consolidated financial statements only.
• Our supporting audit firm (a separate PwC network firm) performed audit work on the consolidated financial statements
under our direction and supervision.
• The group's return is driven primarily by the performance of the underlying investment portfolio and so the underlying
performance and prevailing trading conditions of these direct and indirect investments in unlisted companies, funds and
listed companies are of particular relevance to our audit.
Key audit matters
• Valuation of unlisted investments
• Calculation of incentive fees
• Consideration of the impact of COVID-19
Materiality
• Overall group materiality: €23.7 million (2020: €20.8 million) based on 2.25% of net assets.
• Performance materiality: €17.8 million.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated
financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain,
and we considered the risk of climate change and the potential impact thereof on our audit approach. As in all of our audits,
we also addressed the risk of management override of internal controls, including among other matters, consideration of
whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consol-
idated financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the consolidated
financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 45
KKey audit matter
HHow our audit addressed the key audit matter
Valuation of unlisted investments
Refer to the Directors' report, the Basis of preparation (note 2), the
Principal accounting policies (note 3) and notes 4, 9, 13,
16, 18 and 19 to
the consolidated financial statements.
The group has a diverse investment portfolio consisting of unlisted
investments and listed companies. The valuation of the portfolio of unlisted
investments is significant in assessing the
financial position and
performance of the group and is an area to which significant judgement is
often applied and estimates made by the directors.
The unlisted investments are valued on a basis considered most
appropriate by the directors in accordance wi
th the International Private
Equity and Venture Capital Valuation (“IPEV”) Guidelines, dependent on
the nature of the underlying business which has been invested in. This
includes:
• Applying a multiple to earnings;
• Applying a discount rate to future cash flows;
•
Using net asset values received from the relevant general partners;
and
• Using underlying asset valuations.
Where a multiple is applied to earnings, the multiple is calculated by taking
either a discount or a premium to the multiple of similar compani
es. This
discount or premium typically reflects differences between these
companies and the company being valued, for example, size and
marketability differences between listed and unlisted companies.
Both determining the valuation methodology and determin
ing the inputs to
the valuation are subjective and complex. This, combined with the
significance of the unlisted investments balance in the consolidated
statement of financial position, meant that this was a key audit matter for
our current year audit.
We updated and reconfirmed our understanding and evaluation of
management's processes and internal controls in so far as they apply to
investment valuations, the valuation models used and the areas where
significant judgements and estimates are made. We also
performed tests over
key controls in order to validate their operating effectiveness.
The unlisted investments are generally investments in private companies
(direct investments) and are initially valued by Partners Group AG (the
"Investment Manager") and
then subject to review by the Valuation Committee
before being recommended to the directors for review, challenge and approval.
We discussed with and challenged the Investment Manager as to the
appropriateness of the valuation methodology applied, using o
ur knowledge of
the investments and the IPEV Guidelines.
For a sample of investments, we tested the valuation techniques,
using
auditor's experts where deemed appropriate, used by
the Investment Manager
to value these unlisted investments as follows:
•
We obtained the Investment Manager's valuation model containing
earnings, trading multiples for listed comparable companies and th
e
m
ultiple used to value the investment, or the relevant cash flows models
and discount rates applied;
• We challenged
the appropriateness of the valuation methodology applied
by the Investment Manager, including the availability of representative
market data for earnings multiple models and whether a discounted cash
flow model would be more appropriate;
• We checked the mathematical accuracy of the model;
•
We obtained the management information including budgets, forecasts
and cash flows for the underlying companies being valued. We used this to
corroborate the earnings and cash flows being used in the model in
relation to th
e unlisted company being valued. We assessed the
a
ppropriateness of the earnings or cash flows being used based on our
understanding of the financial performance of the underlying companies,
independently confirming a sample of the management informatio
n
r
eceived, and challenged changes made, by the Investment Manager in the
application of this input to the valuation;
•
In testing the Investment Manager's fair valuation process, we assessed
trading multiples for the comparable companies identified by the
Inve
stment Manager and compared them to the multiples used in the
valuation. Where appropriate, we also considered whether any other
traded companies may be comparable and considered the impact of their
inclusion in the sourced trading multiples on the valuation;
•
We independently sourced, where appropriate, the inputs to the discount
rates used in any discounted cash flow calculations;
•
We challenged the Investment Manager on any adjustment to the
comparable multiples to arrive at the multiple or discount rate u
sed in
their valuation. This included considering how these changes compared
relative to the performance of the underlying company agains
t the
relevant industry sector;
•
Where underlying net asset valuations were used to value investments in
funds (indirect
investments), we corroborated these by tracing them to
supporting documentation such as capital account statements, which we
obtained as at quarter 3 2021
. Such source documentation was also used
to confirm details such as the group's committed capital, u
nfunded
commitments, percentage ownership and other specific details of the
respective fund investments. We then tested the control procedures
in
place to process quarter 4 2021
investment call and distribution notices
before inspecting a sample of the notices substantively;
•
After year end, we verified the listed market prices at year end for any
u
nderlying listed positions held by the indirect investments and assessed
a sample of the Investment Manager’s fair value adjustments made. We
also evaluated the appropriateness of su
ch source documentation by
independently confirming a sample thereof with the administrators of the
underlying funds. In addition, we evaluated the reliability of this
information by comparing such source documentation used in the group's
prior year valuat
ions against the audited financial statements issued by
the underlying funds in which the group was invested;
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 46 | Annual Report 2021
KKey audit matter
HHow our audit addressed the key audit mmatter
• For the direct investments, we also recalculated the value of the financial
instruments held that is attributable to the group. This includes, amongst
other procedures, inspecting the contracts supporting the financia
l
instruments in issue by the
underlying company and deducting any
attributable is
sued financial instrument value that has a higher ranking
than that of the group in the waterfall;
•
For our sample of investments, we performed open source searches to
identify any relevant, publicly avail
able information that the Investment
Manager had not considered in determining the value of the investments,
both during the year and subsequent to the year end. We did not identify
any material additional information that had not been considered by the
Investment Manager;
•
In addition to the above, we reviewed the Investment Manager’s
assessment of the uncertainty presented by the COVID-
19 pandemic on
a portfolio level as well as on an individual investment basis an
d
considered its completeness. This inclu
ded evaluating the significant
as
sumptions used by the Investment Manager in determining future cash
flows or maintainable earnings, for example. Where possibl
e, we
c
ompared significant assumptions to external data and benchmarks. We
did not identify any additional impacts of COVID-
19 on the investment
portfolio which required adjustments to valuations; and
•
We challenged the extent to which climate change considerations had
been reflected, as appropriate, including the potential impact on the
underlying assumptions and estimates.
Based on this work, we were satisfied that the assumptions used by the
Investment Manager were within an acceptable range and that the calculations
were mathematically accurate.
Calculation of incentive fees
See notes 5 and 15 of the consolidated financial statements for further
information on the incentive fees payable by the group. Incentive fees
comprise amounts accrued and payable to the Investment Manager to
compensate them for services provided in a way which aligns the
ir
remuneration with the group's investment performance. The incentive fee
calculations, which are undertaken in accordance with the investment
management agreement between the group and the Investment Manager
are complex, which increases the risk of error.
Incentive fees are calculated based on the fair value and cash flows of each
direct and secondary investment. This calculation is performed separately
for each direct and secondary investment, and also includes adjustments
for such items as fee rebates.
This means that some of the calculations can
be based on complex calculations with a number of data inputs; some of
which are unobservable, selected by management and therefore subjective
and potentially open to bias.
We focused on both the accuracy and o
ccurrence of the incentive fee
calculation due to the complexity of the calculation and also due to the
nature of the incentive fees, which means that there may be an incentive
for these to be overstated.
Our audit approach was based upon the specifics of the incentive fee
arrangements as set out in the investment management agreement and the
notes to the consolidated financial statements, and which are described in the
company's offering documents.
In assessing the accuracy and occurrence of the incentive fees:
•
We obtained a summary of incentive fees charged and examined the
of
fering documents and investment management agreement to ensure
that any incentive fees are being calculated and accrued only when the
contractual conditions existed for the incentive fee to be recognised;
•
We also ensured that all parameters of the incentive fee were included
within the calculation, as set out in the offering documents and investment
management agreement;
•
We performed controls testing over the occurrence of the investment
disposals, the valu
e of such disposals and the gains realised on such
disposals. This included ensuring that the returns achieved exceeded the
conditions in place for the incentive fee to be triggered; and
• We recalculated the incentive fee attributa
ble to the Investment Mana
ger
using the applicable methodology. We did not identify any material
differences.
Consideration of the impact of COVID-19
The directors and Investment Manager have considered the impact of
events that have been caused by the COVID-19 pandemic on the
current
operations of the group. The extent of the impact of COVID-
19 on future
performance is unclear and measurement of the effects as they relate to
the financial statements entail a significant degree of estimation
uncertainty.
In assessing the impact of COVID-
19, the directors and the Investment
Manager have made significant estimates and judgements in the valuation
of unlisted investments.
As a result of the uncertainty created by COVID-
19, we have determined
the directors’ and the Investment Manager
’s consideration of the impact of
COVID-19 to be a key audit matter.
Our assessment of the directors’ and the Investment Manager’s consideration
of the impact of COVID-
19 has been addressed as part of our procedures on
the valuation of unlisted investments.
Based on the procedures set out in our key audit matter addressing the
valuation of unlisted investments, we have not identified any matters to report
with respect to the directors’ and the Investment Manager’s consideration of
the impact of COVID-
19 and the disclosure of this within the financial
statements.
In addition to the above, we considered whether changes to working practices
caused by COVID-
19 had a significant adverse impact on the effectiveness of
the group’s operations and the con
trol environment at the Investment
Manager. We did not identify any significantly adverse impacts.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 47
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the consolidated
financial statements as a whole, taking into account the structure of the group, the accounting processes and controls, and
the industry in which the group operates.
Scoping was performed at the group level, irrespective of whether the underlying transactions took place within the company
or within the subsidiaries.
As the transactions relating to the company and the subsidiaries are all maintained and made available to us by Partners Group
(Guernsey) Limited (the "administrator"). Our testing was therefore performed on a consolidated basis using thresholds which
are determined with reference to the overall group materiality and the risks of material misstatement identified. As well as
being under our direction and supervision, audit work performed by our supporting firm is subject to our review.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent
of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstate-
ments, both individually and in aggregate on the consolidated financial statements as a whole.
Based on our professional judgement, we determined materiality for the consolidated financial statements as a whole as follows:
€23.7 million (2020: €20.8 million).Overall group materiality
2.25% of net assetsHow we determined it
We believe that net assets is the most appropriate benchmark because
this is the key metric of interest to shareholders. It is also a generally
accepted measure used for companies in this industry.
Rationale for benchmark applied
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality.
The range of materiality allocated across components was from €14.2 million - €23.7 million.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope
of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example
in determining sample sizes. Our performance materiality was 75% (2020: 75%) of overall materiality, amounting to €17.8
million (2020: €15.6 million) for the group financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range
was appropriate.
We agreed with the Audit & Risk Committee that we would report to them misstatements identified during our audit above
€1.2 million (2020: €1.04 million) as well as misstatements below that amount that, in our view, warranted reporting for qual-
itative reasons.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 48 | Annual Report 2021
Reporting on other information
The other information comprises all the information included in the Annual Report 2021 (the "Annual Report") but does not
include the consolidated financial statements and our auditor's report thereon. The directors are responsible for the other in-
formation.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form
of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
Responsibilities for the consolidated financial statements and the audit
Responsibilities of the directors for the consolidated financial statements
As explained more fully in the Directors' duties and responsibilities statement, the directors are responsible for the preparation
of the consolidated financial statements that give a true and fair view in accordance with International Financial Reporting
Standards, the requirements of Guernsey law and for such internal control as the directors determine is necessary to enable
the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the group's ability to continue
as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use
audit sampling to enable us to draw a conclusion about the population from which the sample is selected.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism
throughout the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or
error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and ap-
propriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group's internal control.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 49
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related dis-
closures made by the directors.
• Conclude on the appropriateness of the directors' use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the group's ability to continue as a going concern over a period of at least twelve months from the date of approval of
the consolidated financial statements. If we conclude that a material uncertainty exists, we are required to draw attention
in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report.
However, future events or conditions may cause the group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within
the group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences
of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Use of this report
This report, including the opinions, has been prepared for and only for the members as a body in accordance with Section 262
of the Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or assume re-
sponsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Report on other legal and regulatory requirements
Company Law exception reporting
Under the Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit;
• proper accounting records have not been kept; or
• the consolidated financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 50 | Annual Report 2021
Corporate governance statement
The Listing Rules require us to review the directors' statements in relation to going concern, longer-term viability and that part
of the corporate governance statement relating to the company's compliance with the provisions of the UK Corporate Gov-
ernance Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as
other information are described in the Reporting on other information section of this report.
The company has reported compliance against the 2019 AIC Code of Corporate Governance (the "Code") which has been
endorsed by the UK Financial Reporting Council as being consistent with the UK Corporate Governance Code for the purposes
of meeting the company's obligations, as an investment company, under the Listing Rules of the FCA.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement included within the Directors' report is materially consistent with the consolidated financial statements
and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to:
• The directors' confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or mitigated;
• The directors' statement in the consolidated financial statements about whether they considered it appropriate to adopt
the going concern basis of accounting in preparing them, and their identification of any material uncertainties to the group's
ability to continue to do so over a period of at least twelve months from the date of approval of the consolidated financial
statements;
• The directors' explanation as to their assessment of the group's prospects, the period this assessment covers and why the
period is appropriate; and
• The directors' statement as to whether they have a reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors' statement regarding the longer-term viability of the group was substantially less in scope than an
audit and only consisted of making inquiries and considering the directors' process supporting their statements; checking that
the statements are in alignment with the relevant provisions of the Code; and considering whether the statement is consistent
with the consolidated financial statements and our knowledge and understanding of the group and its environment obtained
in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the consolidated financial statements and our knowledge obtained
during the audit:
• The directors' statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the group's position, performance, business model and
strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems;
and
• The section describing the work of the Audit & Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors' statement relating to the company's
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the
Listing Rules for review by the auditors.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 51
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these
consolidated financial statements will form part of the ESEF-prepared annual financial report filed on the National Storage
Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard ('ESEF RTS'). This
auditor's report provides no assurance over whether the annual financial report will be prepared using the single electronic
format specified in the ESEF RTS.
John Luff
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants and Recognised Auditor
Guernsey, Channel Islands
21 March 2022
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 52 | Annual Report 2021
J
ohn L
u
f
f
12. Audited consolidated financial statements
Audited consolidated statement of comprehensive income
for the period from 1 January 2021 to 31 December 2021
In
thousands of EUR
Net income from financial assets at fair value through profit or loss
Private equity
Interest & dividend income
Revaluation
Withholding tax on direct private equity investments
Net foreign exchange gains / (losses)
Private debt
Interest income (including payment-in-kind)
Revaluation
Withholding tax on direct private debt investments
Net foreign exchange gains / (losses)
Private real estate
Revaluation
Private infrastructure
Revaluation
Net foreign exchange gains / (losses)
Net income from cash & cash equivalents and other income
Net foreign exchange gains / (losses)
Total net income
Operating expenses
Management fees
Incentive fees
Administration fees
Service fees
Other operating expenses
Other net foreign exchange gains / (losses)
Other financial activities
Interest
expense - credit facilities
Interest expense - related party loans
Other finance cost
Net gains / (losses) from hedging activities
Other income
Surplus / (loss) for period
Other comprehensive income for period; net of tax
Total comprehensive income for period
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 53
01.01.2020
31.12.2020
01.01.2021
31.12.2021
Notes
(183 )(1,631 )9
(23,147 )23,784 9
(9,912 )9,238
(9,711 )5,789 9
9 - (13 )
(2,558 )2,364 9
(124 ) (705 )
(124 )9
(4,818 )
(6,813 )9
(705 )
(2,294 )1,995 9
(236 )635
(236 )635
(26,385 )(56,865 )
(12,979 )(15,285 )20
(10,639 )(39,842 )15,20
(456 ) (414 )20
(250 )20 (250 )
(1,594 )(1,870 )
(509 )838
(219 )
(793 )
14
(18 ) (60 )20,21
(600 ) (1,109 )
01.01.2020
31.12.2020
01.01.2021
31.12.2021
Notes
Diluted surplus / (loss) per share for period (in EUR)
The earnings per share is calculated by dividing the surplus / (loss) for period by the
weighted average number of shares outstanding.
The above audited consolidated statement of comprehensive income should be read in
conjunction with the accompanying notes.
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 54 | Annual Report 2021
Audited consolidated statement of financial position
As at 31 December 2021
31.12.202031.12.2021Notes
In thousands of EUR
ASSETS
Financial assets at fair value through profit or loss
Financial assets at amortized cost
EQUITY AND LIABILITIES
The above audited consolidated statement of financial
position should be read in conjunction with the
accompanying notes.
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 55
10
Audited consolidated statement of changes in equity
for the period from 1 January 2021 to 31 December 2021
TotalReservesShare capital
In thousands of EUR
(46,331 )(46,331 )- Dividends declared
Equity at end of period
<>
for the period from 1 January 2020 to 31 December 2020
TotalReservesShare capital
In thousands of EUR
(30,081 )(30,081 )- Dividends declared
Equity at end of period
The above audited consolidated statement of changes in equity should be read
in conjunction with the accompanying notes.
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 56 | Annual Report 2021
Audited consolidated statement of cash flows
for the period from 1 January 2021 to 31 December 2021
01.01.2020
31.12.2020
01.01.2021
31.12.2021
Notes
In thousands of EUR
Operating activities
Adjustments:
(122,346 )(231,853 )Investment revaluation
(3,566 )(1,233 )Net result from interest income
(32 )(7,427 )Net result from dividend income
(15,555 )31,953 11Revaluation on forward hedges
(16,418 )(47,739 )(Increase) / decrease in receivables
(53,459 )(160,276 )9Purchase of private equity investments
(2,454 )(11,234 )9Purchase of private infrastructure investments
Financing activities
(88,000 )(42,000 )(Decrease) in credit facilities
(27,950 )(7,250 )(Decrease) in related party loans
(1,026 )(179 )Interest paid - credit facilities
(60 )(18 )Interest paid - related party loans
(30,081 )(46,331 )Dividends declared
(78,667 )
(21,528 )Net cash from / (used in) financing activities
(236 )635 Effects of foreign currency exchange rate changes on cash and cash equivalents
The above audited consolidated statement of cash flows should be read in conjunction
with the accompanying notes.
<>
14
14
21
21
14
21
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 57
Notes to the audited consolidated financial statements
for the period from 1 January 2021 to 31 December 2021
1 Organization and business activity
Company's registered office is Tudor House, St. Peter Port, Guernsey, GY1 6BD . The Company is a Guernsey limited liability
subsidiary Princess Direct Investments, L.P. Inc. ("the Sub-Subsidiary"). The Sub-Subsidiary, the Subsidiary, and the Company
form a group ("the Group"). Both of these subsidiaries are consolidated as they are deemed to provide investment-related
services to the Company.
The shares of the Company were listed on the Prime Standard of the Frankfurt Stock Exchange from 13 December 2006 until
5 December 2012 (date of delisting). The shares of the Company remain listed on the Main Market of the London Stock
Exchange, where they have been listed since 1 November 2007.
2 Basis of preparation
The audited consolidated financial statements comprise the financial statements of the Group. The audited consolidated
financial statements have been prepared on a going concern basis in accordance with International Financial Reporting Standards
("IFRS") and under the historical cost convention as modified by the revaluation of financial assets and financial liabilities at
fair value through profit or loss.
The preparation of audited consolidated financial statements, in conformity with IFRS, requires the use of estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the audited consolidated financial statements and the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best knowledge of current events and actions, actual results
may ultimately differ from those estimates. The areas where assumptions, judgments and estimates are significant to the
audited consolidated financial statements are disclosed in Note 4, 'Critical accounting estimates and judgments'.
The Directors of the Company have elected to prepare audited consolidated financial statements for Princess Private Equity
Holding Limited for the period ended 31 December 2021 as the parent of the Group and therefore, in accordance with Section
244(5) of The Companies (Guernsey) Law, 2008, they are not required to prepare individual accounts for the financial period for
Princess Private Equity Holding Limited in accordance with Section 243 of The Companies (Guernsey) Law, 2008.
3 Principal accounting policies
The accounting policies below have been applied consistently, except where otherwise noted, in dealing with items which are
considered material in relation to the Group's audited consolidated financial statements.
From 1 January 2021, the following existing revised IFRS and interpretations to existing standards were required to be adopted.
The Group has consequently adopted all relevant and below-mentioned standards since 1 January 2021:
Phase 2 amendments to IFRS 7 Financial instruments: Disclosures, IFRS 9 Financial instruments and IAS 39 Financial instruments:
Recognition and measurement (effective from 1 January 2021) - Interest rate benchmark reform.
There are no other standards, amendments to standards or interpretations that are effective for annual periods beginning on
1 January 2021 that have a material effect on the audited consolidated financial statements of the Group.
The following standards, or amendments to existing standards, which are mandatory for future accounting periods, but where
early adoption is permitted now, have not been adopted:
Amendments to IFRS 3 Business combinations (effective from 1 January 2022) - Reference to the Conceptual Framework;
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 58 | Annual Report 2021
Amendments to IAS 37 Provisions, contingent liabilities and contingent assets (effective from 1 January 2022) - Onerous
Contracts - Cost of Fulfilling a Contract;
Annual Improvements to IFRS Standards 2018-2020 Cycle (effective from 1 January 2022);
Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards (effective from 1 January 2022) -
Subsidiary as a first-time adopter;
Amendments to IFRS 9 Financial Instruments (effective from 1 January 2022) - Fees in the '10 per cent' test for derecognition
of financial liabilities;
Amendments to IAS 1 Presentation of Financial Statements (effective from 1 January 2023) - Classification of liabilities;
Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (effective from 1 January 2023) -
Definition of Accounting Estimates;
Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements
(effective from 1 January 2023) - Disclosure of Accounting Policies;
Amendments to IAS 12 Income Taxes (effective from 1 January 2023) - Deferred Tax related to Assets and Liabilities arising
from a Single Transaction.
The impact of these new accounting standards and interpretations is currently being assessed and it is expected that it will
not significantly affect the Group's results of operations or financial position.
Segmental reporting
IFRS 8 - Operating segments requires segments to be identified and presented following a "management approach" under
which segment information is presented on the same basis as that used for internal reporting and monitoring purposes.
Operating segments are reported in a manner consistent with internal reporting at Partners Group AG (the "Investment
Manager"). The Investment Manager is appointed by the Directors and has been identified as the chief operating decision
maker, responsible for allocating resources and assessing the performance of each operating segment. Operating segments
have been identified as: private equity, private debt, private real estate, private infrastructure and private resources. Only those
segments applicable within the reporting periods have been reflected in these audited consolidated financial statements.
Consolidation
The Directors of the Company have determined that the Company is an investment entity in accordance with IFRS 10 based
on the fact that it meets the relevant definition criteria. The Company:
• obtains funds from one or more investors for the purpose of providing those investors with investment management
services;
• commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment
income or both; and
• measures and evaluates the performance of substantially all of its investments on a fair value basis.
As a result, the Group does not consolidate any entities other than the Subsidiary and Sub-Subsidiary (the "Subsidiaries"), as
further described in Note 4, "Critical accounting estimates and judgments".
Inter-company transactions, balances and unrealized gains or losses on transactions between Group companies are eliminated
on consolidation.
A list of the Group's subsidiaries is set out in a subsequent note (Note 22). The consolidation is performed using the purchase
method. All Group companies have 31 December as the end of their reporting periods.
Net income from short-term investments and cash and cash equivalents
Income from bank deposits and interest income from short-term investments are included on an accruals basis using the
effective interest rate method. Gains and losses from short-term investments and gains and losses from cash and cash equivalents
also include the increase or decrease in the value of short-term investments purchased at a discount or a premium. All realized
and unrealized surpluses and losses are recognized in the audited consolidated statement of comprehensive income. Dividend
income is recognized when the right to receive payment is established.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 59
Expenditure
All items of expenditure are included in the audited consolidated financial statements on an accruals basis.
Foreign currency translation
(a) Functional and presentation currency
Items included in the financial statements of each of the Group's entities are measured using the currency of the economic
environment in which the entity operates (the "Functional Currency") that most faithfully represents the economic effect of
the underlying transactions, events and conditions. The Group's economic environment has been assessed and determined in
accordance with the primary and secondary indicators defined in IAS 21 - The Effects of Changes in Foreign Exchange Rates.
The audited consolidated financial statements are presented in Euros, which is the Company and Group's Functional Currency.
(b) Transactions and balances
Transactions in foreign currencies are translated into the Functional Currency using the exchange rates prevailing at the dates
of the transactions or valuations where items are remeasured. Foreign exchange gains and losses resulting from the settlement
of such transactions and from the translation at the end of the reporting period exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in the audited consolidated statement of comprehensive income.
Financial assets and financial liabilities at fair value through profit or loss
(a) Classification
The Group classifies its investments based on both the Group's business model for managing those financial assets and the
contractual cash flow characteristics of the financial assets. The portfolio of financial assets is managed and performance is
evaluated on a fair value basis. The Group is primarily focused on fair value information and uses that information to assess
the assets' performance and to make decisions. The Group has not taken the option to irrevocably designate any equity
securities as fair value through other comprehensive income. The contractual cash flows of the Group's debt securities are
solely principal and interest; however, these securities are neither held for the purpose of collecting contractual cash flows
nor held both for collecting contractual cash flows and for sale. The collection of contractual cash flows is only incidental to
achieving the Group business model's objective. Consequently, all investments are measured at fair value through profit or
loss.
Where the Group has hedged the value of non-Functional Currency investments against the Functional Currency the Group
does not use hedge accounting as defined in IFRS 9. Derivative financial instruments are classified as financial assets and
financial liabilities at fair value through profit or loss in accordance with IFRS 9. They are initially recognized in the audited
consolidated statement of financial position at fair value and are subsequently remeasured to fair value. As a result, the realized
gains/losses and the unrealized changes in fair value are recognized in the audited consolidated statement of comprehensive
income under the heading "Other financial activities". The fair values of various derivative instruments used for hedging
purposes, if any, are disclosed in the notes.
Financial assets and financial liabilities at fair value through profit or loss consist of interests which are acquired by the Group
(including all related securities) in (typically unlisted) direct private market investments ("Direct Investments") and all other
types of investments, which comprise investments in other investment vehicles ("Indirect Investments"). These are managed
and their performance is evaluated on a fair value basis in accordance with the Group's documented investment strategy. The
Group's policy is used by the Investment Manager and the Directors to evaluate the information about these financial assets
and liabilities on a fair value basis together with other related financial information.
In setting the Group's investment policy the Directors have determined their intention to focus on making investments in
entities that adopt an internationally recognized standard of accounting.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 60 | Annual Report 2021
(b) Recognition and derecognition
All transactions relating to financial assets and financial liabilities at fair value through profit or loss are recognized on the
settlement date or when all risks and rewards of ownership have been transferred.
Any distributions, including return of principal of investment, received from the underlying Direct and Indirect Investments
are recognized when the Group's right to receive payment has been established.
Financial assets and financial liabilities at fair value through profit or loss are derecognized when the right to receive cash flows
has expired or where substantially all risks and rewards of ownership have been transferred.
Cash and payment-in-kind ("PIK") interest relating to debt investments held at fair value through profit or loss are recognized
on an accruals basis within interest income (including PIK) in the audited consolidated statement of comprehensive income
when the Group's right to receive payment is established.
(c) Measurement
As a matter of principle, financial assets and financial liabilities at fair value through profit or loss are initially recognized at fair
value. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured
at fair value. Gains and losses arising from changes in the fair value of the financial assets or financial liabilities at fair value
through profit or loss are presented in the audited consolidated statement of comprehensive income within net income from
financial assets at fair value through profit or loss in the period in which they arise.
Distributions from Indirect Investments held at fair value through profit or loss are recognized in the audited consolidated
statement of financial position when the Group's right to receive payment is established. Distributions received from Indirect
Investments are recognized first as a repayment of the original capital contributed to the Indirect Investments which is
substantially in keeping with the distribution arrangements prescribed by the constituent documents of the Indirect Investments.
On repayment of any of the original capital contributed in full to the Indirect Investments, all subsequent distributions are
recognized in the audited consolidated statement of comprehensive income within revaluation.
Any interest and dividend distributions derived from Direct Investments are recognized when the Group's right to receive
payment is established and included within interest and dividend income in the audited consolidated statement of comprehensive
income.
(d) Fair value estimation
The fair values of financial instruments whose principal markets are actively traded exchange markets are based on quoted
market prices at the end of the reporting period. The quoted market price used for financial assets held by the Group is the
price within the bid-ask spread which is most representative of fair value at the end of the reporting period.
In assessing the fair value of non-traded financial instruments, the Group uses a variety of market and income methods such
as time of last financing, earnings and multiple analysis, discounted cash flow method and third-party valuation and makes
assumptions that are based on market conditions and expected market participant assumptions existing at the end of each
period. Quoted market prices or dealer quotes for specific similar instruments are also used for long-term debt where appropriate.
Other information used in determining the fair value of non-traded financial instruments includes latest financial reports,
subsequent cash flows and internally performed monitoring of triggering events (such as exits and IPOs) as well as pricing
movements in comparable investments together with techniques, such as option pricing models and estimated discounted
value of future cash flows.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 61
Short-term investments
Short-term investments consist of investments in treasury bills and money-market funds with a stated maturity between three
and twelve months at the date of acquisition. Short-term investments are classified and subsequently measured at fair value
through profit or loss.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the audited consolidated statement of financial position
where there is currently a legally and contractually enforceable right to offset the recognized amounts and there is an intention
to settle on a net basis, or realize the asset and settle the liability simultaneously. A current legally and contractually enforceable
right to offset must not be contingent on a future event. Furthermore, it must be legally and contractually enforceable in (i) the
normal course of business; (ii) the event of default; and (iii) the event of insolvency or bankruptcy of the Group and all of the
counterparties.
Cash and cash equivalents
Cash and cash equivalents consist of cash at bank and term deposits with original maturity of three months or less from the
date of acquisition. Cash and cash equivalents are stated at the carrying amount as this is a reasonable approximation of fair
value. Bank overdrafts are included within liabilities falling due within one year in the audited consolidated statement of financial
position. Cash and cash equivalents may include unrestricted variation margin balances received from counterparties as collateral
on derivative asset positions, which are due back to those counterparties on settlement of the derivatives.
Other short-term receivables and long-term receivables
Other short-term receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in
an active market. They are classified as current assets unless the maturities are more than twelve months after the end of the
reporting period, where they are classified as non-current assets. Other short-term receivables are stated at the
contractual amount less impairment, if any, as this is a reasonable approximation of fair value. Other short-term receivables
may include variation margin balances paid to counterparties on derivative liability positions, which are due back from those
counterparties on settlement of the derivatives.
Other long-term receivables also include amounts receivable by the Group at the reporting date which represent distributions
from underlying investments that are held through special purpose vehicles that could be subject to corporate tax in jurisdictions
different to that of the Group. In certain cases, all distributions received from underlying investments must be retained in such
vehicles until the investment is fully realized in order to benefit from such structuring. It has been determined that future
payments may need to be made by the special purpose vehicles to tax authorities in the jurisdictions in which these are based,
and as such not all of the amounts paid by the underlying investment may be recoverable in full by the Group should the
distributions be taxed. As a result, these long-term receivable balances are assessed for taxes owing and the resulting revaluation
of these long-term receivables is recorded under "revaluation of long-term receivables" in the audited consolidated statement
of comprehensive income. These underlying investments and related calls and distributions have been accounted for on a
look-through basis.
Deferred receivables
Deferred receivables meet the definition of a financial asset as they represent a contractual right to receive cash for a specified
amount at a specified date. Deferred receivables which represent a financial asset are initially measured at fair value. Subsequently
these are measured at amortized cost using the effective interest rate method. At the end of the reporting period, the Group
shall measure the loss allowance on outstanding balance at an amount equal to the lifetime expected credit losses if the credit
risk has increased significantly since initial recognition. If however, the credit risk has not increased significantly since initial
recognition, the Group shall measure the loss allowance at an amount equal to 12-month expected credit losses. They are
classified as assets falling due within one year unless the maturities are more than 12 months after the end of the reporting
period where they are classified as assets falling due after one year. A deferred receivable is derecognized when the obligation
to receive the specifically identified cash flows has been fulfilled, expired, or there are no reasonable expectations of recovering
those cash flows in its entirety or a portion thereof.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 62 | Annual Report 2021
Accruals and other short-term payables
Accruals and other short-term payables are non-derivative financial liabilities with fixed or determinable payments that are
not quoted in an active market. They are classified as liabilities falling due within one year unless the maturities are more
than twelve months after the end of the reporting period where they are classified as liabilities falling due after one year.
Accruals and short-term payables are recognized initially at fair value and subsequently measured at amortized cost using the
effective interest method. Accruals and other short-term payables may include variation margin balances received as cash
from counterparties on derivative asset positions, which are payable back to those counterparties on the settlement of the
derivatives.
Borrowings
Borrowings consist of credit facilities and loans received either from financial institutions or from related parties. Such borrowings
are initially recognized at fair value and subsequently measured at amortized cost using the effective interest rate method.
Borrowings are derecognized when the obligation specified in the contract is discharged, canceled or expired. In the audited
consolidated statement of financial position borrowings are classified as liabilities falling due within one year unless the maturities
are more than twelve months after the end of the reporting period where they are classified as liabilities falling due after one
year.
Deferred payments
Deferred payments meet the definition of a financial liability as they are a contractual obligation for a specified amount at a
specified date. Deferred payments are initially recognized at fair value and subsequently measured at amortized cost using
the effective interest method. They are classified as liabilities falling due within one year unless the maturities are more
than twelve months after the end of the reporting period where they are classified as liabilities falling due after one year. A
deferred payment is derecognized when the obligation under the liability is paid or discharged.
Equity
Shares are classified as equity. Where any group company purchases the Company's equity share capital (treasury shares), the
consideration paid, including any directly attributable incremental costs, is deducted from equity attributable to the Company's
equity holders until the shares are canceled or reissued. Where such shares are subsequently reissued, any consideration
received, net of any directly attributable incremental transaction costs, is included in equity attributable to the Company's
equity holders.
4 Critical accounting estimates and judgments
There is significant subjectivity in the valuation of Direct and Indirect Investments with very little transparent market activity
to provide support for fair value levels at which willing buyers and sellers would transact. In addition there is subjectivity in
the cash flow modeling due to the fact that the underlying investments, in many cases, require funding based on the future
development of their investments. The estimates and judgments employed therein are therefore continually evaluated and
are based on historical experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting
estimates will, by definition, seldom equal the related actual results.
Unlisted investments
For the valuation of such investments the Investment Manager reviews the latest information provided by underlying investments
and other business counterparties, which frequently does not coincide with the valuation date, and applies widely recognized
market and income valuation methods to such information such as time of last financing, earnings and multiple analysis,
discounted cash flow method and third-party valuation as well as market prices to estimate a fair value as at the end of the
reporting period.
Critical
judgments
In order to determine the underlying assumptions of such methods significant judgment is required. The areas of such judgment
include, but are not limited to:
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 63
• Selection of valuation technique;
• Selection of a set of comparable listed companies;
• Selection of performance measures of such listed companies in order to determine comparable trading multiples;
• Selection of recent transactions for the sales comparison method; and
• Identification of uncertain tax positions.
As part of the fair valuation of such investments, the Investment Manager uses observable market data (whenever possible),
unobservable data and cash flow data to consider and determine the fair values of the underlying investments. Furthermore
the Investment Manager considers the overall portfolio against observable data and general market developments to determine
if the valuations attributed appear to be fair based on the current market environment. The Investment Manager makes practical
efforts to obtain the latest available information pertaining to the underlying unquoted investments.
The Investment Manager adheres to fair value assessment procedures that are determined independently of its investment
committee as part of the continuous evaluation of the fair value of the underlying unquoted investments.
Critical
estimates
The Group estimates the fair value of an investment as at the valuation date based on an assessment of relevant applicable
indicators of fair value. Such indicators may include, but are not limited to:
• Determination of adjustments to comparable trading multiples based on qualitative factors;
• Determination of future cash flows;
• Determination of applicable discount rates considering own and counterparties' credit risk;
• Determination of applicable capitalization rates for the income method;
• Determination of price within the bid-ask spread for investments with available broker quotes;
• An underlying investment's most recent reporting information, including a detailed analysis of underlying company
performance and investment transactions with the Indirect Investments between the latest available reporting information
of the underlying investment and the end of the reporting period of the Group;
• Review of a Direct Investment's most recent accounting and cash flow reports and models, including data supplied by both
the sponsor and the company and any additional available information between the date of these reports and the end of
the reporting period of the Group;
• Review of recent transaction prices and merger and acquisition activity for similar Direct Investments;
• Review of the Indirect Investment's application of generally accepted accounting principles and the valuation method
applied for its underlying investments, such as discounted cash flow and multiple analysis, which are based on available
information;
• Review of current market environment and the impact of it on the Direct and Indirect Investments; and
• Determination of the impact of uncertain tax positions on the valuation.
The variety of valuation bases adopted, quality of management information provided by the underlying Indirect Investments and
the lack of liquid markets for the investments held mean that there are inherent difficulties in determining the fair values of
these investments that cannot be eliminated. There are significant estimates and assumptions that are used in establishing the
fair value of financial assets and liabilities. As a result, the actual amounts realized on the sale of these instruments may differ
from the fair values reflected in these audited consolidated financial statements and these differences may be significant as a
result of the judgments and estimates applied. The output of the above estimation of the fair value of investments is a significant
factor in the calculation of estimated incentive fee accruals and any rebates.
Cash flow modeling
In addition to the review of historical data within the cash flow modeling, the Investment Manager also takes into account
current portfolio data together with the expected development of the market environment based on observable market
information and subjects this to simulations and stress-testing with consideration of certain scenarios which could occur and
their potential impact on the Group and its investment commitment and funding strategy.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
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The results of such observations are included within the investment models to provide an insight into future expected cash
flows and the liquidity requirements of the Group.
Critical
estimates
As at the end of the reporting period, the Group estimates the cash flow requirements based on an assessment of all applicable
indicators, which may include but are not limited to the following:
• Historical statistical data: external and internal data serve as the statistical basis of the quantitative model;
• Current portfolio company information: the model is updated to take into account current data from the Group's Direct
and Indirect Investments;
• Input from the Investment Manager's investment professionals: quantitative and qualitative inputs from the general market
environment and specific portfolio in the model;
• Monte-Carlo simulations and stress-tests: stochastic behavior of private market cash flows combined with valuations and
tailor-made scenario analyses provide the basis for commitment decisions and quantitative risk management; and
• Use of borrowings and anticipated usage of such borrowings for anticipated drawdowns in relation to unfunded commitments
to Direct and Indirect Investments.
There are judgments made, based on assumptions concerning the future, and uncertainty in the estimates in the cash flow
modeling method and as such the Investment Manager, on instruction from the Board of Directors, continuously compares
these assumptions against actual market and business developments and revises the cash flow model accordingly.
Investment entity status of Subsidiaries
The assessment whether to consolidate the Subsidiaries which relate to the Group's investment activities requires judgment
as to whether those Subsidiaries meet the definition of an Investment Entity in IFRS 10 and provide services that relate to
the Company's investment activities. Management has assessed the amendment to IFRS 10 (effective 1 January 2016) and
concluded that each of the Subsidiaries does not meet the definition of an Investment Entity in accordance with IFRS, primarily
because each of the Subsidiaries has a single investor, which is a related party. Each of the Subsidiaries' primary services is to
provide investment-related services to the parent company, including but not limited to providing investment management
services to the Company and acting as guarantor to the Company of its short-term credit facility.
5 Expenses
Management fees
With effect from 1 July 2020, Partners Group AG has taken over the appointment as the Investment Manager to the Company
from Princess Management Limited. Under the Investment Management Agreement (“IMA”) between the Company and
Investment Manager, the Company pays quarterly management fees to the Investment Manager in arrears. The quarterly
management fees are calculated as 0.375% of the private equity asset value which is the higher of (i) the net asset value of
the Company and (ii) the value of the assets less any temporary investments of the Company, plus the amount of the Company's
unfunded commitments to make investments.
The below highlights the changes in management fees calculation basis effective 1 July 2020:
(i) The private equity asset value excludes the unfunded commitments of primary and secondary investments; and
(ii) The management fees are reduced or offset by the amount that would have been charged had the rate in relation to the
loan master fund investment been 0.6% per annum.
Administration fees
The administration fees are paid quarterly in advance pursuant to the administration agreement between the Company and
Partners Group (Guernsey) Limited (the "Administrator"). The quarterly administration fees are calculated as 0.0125% of the
first USD 1 billion of net assets and 0.005% of the amount by which such net assets exceed USD 1 billion.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 65
Service fees
In connection with the appointment of Partners Group AG as Investment Manager to the Company, Princess Management
Limited transferred all its rights, obligations and liabilities to the Investment Manager under the Novation and Amendment of
the Investor Relations Agreement. For the services provided, the Company pays the Investment Manager a quarterly
compensation of EUR 62,500 excluding value added tax, if any, including any overhead, travel, out-of-pocket, information
technology, and other infrastructure expenses in connection with the provision of services under the agreement.
Incentive fees
In accordance with the IMA, the Investment Manager is entitled to receive a share of the realized profits of the Company,
otherwise referred to as incentive fees. In accordance with the IMA, incentive fees are calculated on each reporting date,
taking into account the required performance conditions and distribution arrangements of the Company.
Distributions of cash proceeds derived from each secondary investment are distributed to the Company or due to the Investment
Manager as incentive fees in the following order of priority: (i) the Company receives 100% of all distributions derived from
the relevant secondary investment ("relevant distributions") until it has received relevant distributions equal to its acquisition
cost in respect of the relevant secondary investment plus an amount (the "preferred return") calculated at the rate of 8% per
annum compounded annually on the amount outstanding in respect to the relevant secondary investment from time to time,
taking into account the timing of the relevant cash flows; (ii) thereafter, incentive fees equal to 100% of further relevant
distributions received by the Company are due and payable to the Investment Manager until such time as the Investment
Manager has received 10% of the sum of the preferred return distributed to the Company and the incentive fees due and
payable to the Investment Manager; and (iii) thereafter, additional incentive fees equal to 10% of further relevant distributions
received by the Company are due and payable to the Investment Manager.
Distributions of cash proceeds derived from each Direct Investment are distributed to the Company or due to the Investment
Manager as incentive fees in the following order of priority: (i) the Company receives 100% of all distributions derived from
the relevant Direct Investment ("relevant distributions") until it has received relevant distributions equal to its acquisition cost
in respect of the relevant Direct Investment plus an amount (the "preferred return") calculated at the rate of 8% per annum
compounded annually on the amount outstanding in respect to the relevant Direct Investment from time to time, taking into
account the timing of the relevant cash flows; (ii) thereafter, incentive fees equal to 100% of further relevant distributions
received by the Company are due and payable to the Investment Manager until such time as the Investment Manager has
received 15% of the sum of the preferred return distributed to the Company and the incentive fees due and payable to the
Investment Manager; and (iii) thereafter, additional incentive fees equal to 15% of further relevant distributions received by
the Company are due and payable to the Investment Manager.
Incentive fees are calculated on an annual basis based on the value of each direct and secondary investment as measured at
the reporting date, whether or not such investments are made through a pooling vehicle. This calculation is performed separately
for each direct and secondary investment.
The foreign currency exchange fluctuations are included in this calculation.
The change in incentive fees is accounted for on an accruals basis and is presented separately in the audited consolidated
statement of comprehensive income.
Audit fees
During the reporting period, the Company paid audit fees in the amount of EUR 122,648 (2020: EUR 117,448).
6 Taxation
The Company and the Subsidiaries are exempt from taxation in Guernsey under The Income Tax (Exempt Bodies) (Guernsey)
Ordinance, 1989 and are each liable for the payment of an annual fixed rate of GBP 1,200 per annum for the granting of the
exemption.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 66 | Annual Report 2021
The Group may incur withholding taxes imposed by certain countries on income from underlying investments. Such income
is recognized gross of withholding taxes in the audited consolidated statement of comprehensive income.
7 Dividends
During the reporting period, the Board of Directors of Princess Private Equity Holding Limited declared two interim dividends,
each of EUR 0.335 per ordinary share, which were paid on 24 June 2021 and 17 December 2021 respectively, in total
amounting to EUR 46.3 million (2020: paid two interim dividends of EUR 0.145 and EUR 0.29 per ordinary share, in total
amounting to EUR 30.1 million).
8 Segment calculation
The Investment Manager makes strategic allocations of assets between segments on behalf of the Group. The Group has
determined the operating segments based on the internal reporting provided by the Investment Manager to the Board of
Directors on a regular basis.
The Investment Manager considers that the investment portfolio of the Group may consist of up to five sub-portfolios, which
are managed by specialist teams within the Investment Manager. Only those segments applicable within the reporting period
have been reflected in these audited consolidated financial statements and the notes below. There were no changes in the
reportable segments during the period.
The Investment Manager assesses the performance of the reportable segments based on the net income from and capital
appreciation of the financial assets at fair value through profit or loss by segment, based on the fair value methodologies
adopted by the Group. This measurement basis excludes any additional general income and expenses which are not allocated
to segments but are managed by the Administrator on a central basis.
Total assets allocated to reportable segments are those financial instruments presented in the audited consolidated statement
of financial position by segment, and the Group's other assets, receivables, liabilities, and cash are not considered to be segment
assets or liabilities and are managed centrally by the Administrator. Hedging gains and losses are attributable to hedging
activities of the Group and managed on a central basis by the Investment Manager and Administrator and the Group's
management and incentive fees paid are not considered to be segment expenses.
The segment information provided by the Investment Manager with respect to reportable segments for the period is as follows:
01.01.2020
31.12.2020
01.01.2021
31.12.2021
In thousands of EUR
Private equity
1,2287,575Interest & dividend income
129,043233,001Revaluation
(183)(1,631)Withholding tax on direct private equity investments
(23,147)23,784Net foreign exchange gains / (losses)
106,941262,729Total net income private equity
106,941262,729Segment result private equity
Private debt
2,3701,085Interest income (including payment-in-kind)
(9,711)5,789Revaluation
(13)-Withholding tax on direct private debt investments
(2,558)2,364Net foreign exchange gains / (losses)
(9,912)9,238Total net income private debt
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 67
01.01.2020
31.12.2020
01.01.2021
31.12.2021
In thousands of EUR
(9,912)9,238Segment result private debt
Private real estate
(705)(124)Revaluation
(705)(124)Total net income private real estate
(705)(124)Segment result private real estate
Private infrastructure
3,719(6,813)Revaluation
(2,294)1,995Net foreign exchange gains / (losses)
1,425(4,818)Total net income private infrastructure
1,425(4,818)Segment result private infrastructure
Non-attributable
(236)635Net foreign exchange gains / (losses)
(236)635Total net income non-attributable
(26,621)(56,230)Segment result non-attributable
13,607(32,784)Other financial activities not allocated
84,735178,011Surplus / (loss) for period
<>
9 Financial assets at fair value through profit or loss
9.1 PRIVATE EQUITY
31.12.202031.12.2021
In thousands of EUR
822,801821,209Balance at beginning of period
53,459160,276Purchase of Direct and Indirect Investments
(160,902)(384,181)Distributions from and proceeds from sales of Direct and Indirect Investments
138148Accrued cash and payment-in-kind interest
129,043233,001Revaluation
(183)(1,631)Withholding tax on direct private equity investments
(23,147)23,784Net foreign exchange gains / (losses)
821,209852,606Balance at end of period
(22,597)(7,443)Movement in unrealized gains / (losses) still held at end of period
<>
The balance at the beginning of the period includes investments classified as level 1, in accordance with IFRS 13, with a fair
value of EUR 9,320,151 (2020: EUR 7,764,394). The balance at the end of the period includes investments classified as level
1, in accordance with IFRS 13, with a fair value of EUR 29,411,444 (2020: EUR 9,320,151). During the reporting period, certain
investments with a fair value of EUR 23,819,422 were transferred out of level 2 into level 1 (2020: EUR 2,166,923, EUR
9,320,151 and EUR 23,576,750 were transferred out of level 1 into level 2, out of level 3 into level 1 and out of level 3 into
level 2, respectively).
PRINCESS PRIVATE EQUITY HOLDING LIMITED
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9.2 PRIVATE DEBT
31.12.202031.12.2021
In thousands of EUR
70,31651,605Balance at beginning of period
(128)134,583Purchase of Direct and Indirect Investments
(7,512)(29,478)Distributions from and proceeds from sales of Direct and Indirect Investments
1,211663Accrued cash and payment-in-kind interest
-(2,755)Interest received
(9,711)5,789Revaluation
(13)-Withholding tax on direct private debt investments
(2,558)2,364Net foreign exchange gains / (losses)
51,605162,771Balance at end of period
(9,042)(3,451)Movement in unrealized gains / (losses) still held at end of period
<>
Purchase of Direct and Indirect Investments represents capital calls from underlying investments made by the Group. The
amounts invested may be negative for certain investments and this may occur where either the Group has invested into
underlying investments and received rebates on fees charged within such underlying investments, or where an underlying
third-party investment has returned monies to the Group which have been previously called but unutilized.
9.3 PRIVATE REAL ESTATE
31.12.202031.12.2021
In thousands of EUR
2,7331,329Balance at beginning of period
-(26)Purchase of Direct and Indirect Investments
(699)(426)Distributions from and proceeds from sales of Direct and Indirect Investments
(705)(124)Revaluation
1,329753Balance at end of period
(1,404)(576)Movement in unrealized gains / (losses) still held at end of period
<>
Purchase of Direct and Indirect Investments represents capital calls from underlying investments made by the Group. The
amounts invested may be negative for certain investments and this may occur where either the Group has invested into
underlying investments and received rebates on fees charged within such underlying investments, or where an underlying
third-party investment has returned monies to the Group which have been previously called but unutilized.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 69
9.4 PRIVATE INFRASTRUCTURE
31.12.202031.12.2021
In thousands of EUR
25,50229,274Balance at beginning of period
2,45411,234Purchase of Direct and Indirect Investments
(107)(579)Distributions from and proceeds from sales of Direct and Indirect Investments
3,719(6,813)Revaluation
(2,294)1,995Net foreign exchange gains / (losses)
29,27435,111Balance at end of period
1,426(4,817)Movement in unrealized gains / (losses) still held at end of period
<>
10 Accruals and other short-term payables
As at the end of the reporting period, accruals and other short-term payables mainly include accrued incentive fees and
quarterly management fees accrued in arrears in the amounts of EUR 17,530,726 and EUR 3,820,259 respectively (2020:
accrued incentive fees, declared interim dividends due to shareholders, and quarterly management fees accrued in arrears in
the amounts of EUR 19,524,906, EUR 4,311,576, and EUR 3,500,726 respectively).
11 Foreign exchange forward / option contracts
31.12.202031.12.2021
In thousands of EUR
Foreign exchange forward contracts
4,339(10,169)Unrealized gains / (losses)
11,216(21,784)Realized gains / (losses)
15,555(31,953)Total gains / (losses) from forward contracts
<>
All contracts captured in the table below may be settled on a gross basis.
Fair value (in
thousands of
EUR)
Value dateVolume of currency
bought (in thousands)
Volume of currency
sold (in thousands)
Open foreign exchange
forward/option contracts
As at 31.12.2021
(1,274)20.01.2022EUR 49,182USD 57,300Foreign exchange forward contract
(1,269)20.01.2022EUR 49,099USD 57,200Foreign exchange forward contract
(1,081)20.01.2022EUR 24,575INR 2,172,000Foreign exchange forward contract
(263)20.01.2022EUR 41,169GBP 34,890Foreign exchange forward contract
(574)24.02.2022EUR 58,996USD 67,700Foreign exchange forward contract
(573)24.02.2022EUR 58,997USD 67,700Foreign exchange forward contract
(125)16.03.2022EUR 25,681CHF 26,750Foreign exchange forward contract
33916.03.2022EUR 25,251ILS 88,350Foreign exchange forward contract
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 70 | Annual Report 2021
61216.03.2022EUR 88,214USD 99,600Foreign exchange forward contract
As at 31.12.2020
(378)27.01.2021EUR 33,117GBP 30,000Foreign exchange forward contract
(338)27.01.2021USD 39,800EUR 32,853Foreign exchange forward contract
(263)27.01.2021EUR 17,188GBP 15,630Foreign exchange forward contract
2,16027.01.2021EUR 51,914USD 60,900Foreign exchange forward contract
2,37027.01.2021EUR 78,675USD 93,400Foreign exchange forward contract
29428.01.2021EUR 21,245INR 1,877,000Foreign exchange forward contract
3124.02.2021EUR 19,300USD 23,600Foreign exchange forward contract
1,54724.02.2021EUR 51,189USD 60,800Foreign exchange forward contract
6017.03.2021EUR 9,120USD 11,100Foreign exchange forward contract
47717.03.2021EUR 82,094USD 100,000Foreign exchange forward contract
<>
12 Share capital, treasury shares, and reserves
12.1 CAPITAL
31.12.202031.12.2021
In thousands of EUR
Issued and fully paid
696969,151,168 ordinary shares of EUR 0.001 each out of the bond conversion
6969Total issued and fully paid shares
<>
At the annual general meeting held in June 2021, the shareholders renewed the authority granted to the Directors to purchase
up to 14.99% of the issued share capital of the Company (2020: at the annual general meeting held in May 2020, the
shareholders renewed the authority granted to the Directors to purchase up to 14.99% of the issued share capital of the
Company).
During the reporting period, the Company did not buy back shares (2020: none). As disclosed in the table above, no shares
were canceled during the reporting period and no shares were held as treasury shares at the end of the reporting period (2020:
none).
The total authorized shares consist of 200,100,000 ordinary shares of EUR 0.001 each (total value EUR 200,100) (2020:
200,100,000 ordinary shares of EUR 0.001 each).
12.2 RESERVES
The Directors have decided to present Reserves and Retained earnings as one reserve, both of which are distributable reserves
and similar in nature. This presentation remains consistent for the reporting period.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 71
13 Commitments to Direct and Indirect Investments
31.12.202031.12.2021
In thousands of EUR
106,623116,600Unfunded commitments translated at the rate prevailing at end of period
<>
14 Short-term credit facility
The Company entered into a multi-currency revolving credit facility with an international financial institution. The purpose of
the facility is to provide funding for the acquisition of underlying investments and other working capital requirements.
The facility, in relation to the Company, is secured, inter alia, by way of a pledge over the shares in Princess Private Equity
Subholding Limited, a wholly owned subsidiary of the Company and a pledge over the bank accounts and the inter-company
loans within the Group.
The Company must maintain a total net asset value of at least EUR 350,000,000 and a total asset ratio (total debt plus current
liabilities as a percentage of restricted net asset value, as defined in the credit facility agreement) not greater than 25%.
As at the end of the reporting period and the previous reporting period, no event of default has occurred.
27 July 2011Date of entering the agreement
9 December 2021Amendment date
13 December 2024Date of termination of the agreement
EUR 80,000,000Total Lending commitment
LIBOR in relation to any loan in USD;
EURIBOR in relation to any loan in EUR; or
SONIA + credit adjustment spread in relation to any loan in GBP
Basis of the interest on principal drawn is: Margin +
<>
During 2021, the LIBOR has been replaced with the SONIA in relation to any loan in GBP. The USD LIBOR will be replaced
with the SOFR plus a credit adjustment spread not later than 1 July 2023.
31.12.202031.12.2021
In thousands of EUR
Short-term credit facility
47,500-Balance at beginning of period
40,50067,000Increase in credit facility
(88,000)(42,000)(Decrease) in credit facility
-25,000Balance at end of period
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 72 | Annual Report 2021
15 Incentive fees
31.12.202031.12.2021
In thousands of EUR
26,91319,525Balance at beginning of period
10,63939,842Change in incentive fees attributable to Investment Manager
(18,027)(41,837)Incentive fees paid/payable
19,52517,530Balance at end of period
59,28855,518Incentive fees accrued
(39,763)(37,988)Incentive fees rebates accrued
19,52517,530Total net incentive fees
<>
The incentive fee balance as at the end of each period presented above represents a net amount which consists of incentive
fees accrued and incentive fee rebates accrued. Both net incentive fee balance as well as gross incentive fees accrued and
incentive fee rebates accrued as at the end of each period are presented separately.
16 Deferred receivables on investments
31.12.202031.12.2021
In thousands of EUR
9,0065,690Deferred receivables on investments
<>
As at the end of the reporting period, other long-term receivables of EUR 5,690,467 (2020: EUR 9,005,931) pertain to the
deferred sales proceeds, to be received on or before 2 June 2023, arising from the sale of one of its underlying investments.
17 Earnings per share and net assets per share
Basic earnings per share are calculated by dividing the surplus or loss for the financial period attributable to the shareholders
by the weighted average number of shares outstanding during the reporting period. Diluted earnings per share are calculated
by adjusting the weighted average number of shares outstanding to assume conversion of all dilutive potential shares, if any.
There were no dilutive effects on the Company's shares during 2021 and 2020.
The net asset value per share is calculated by dividing the net assets in the audited consolidated statement of financial position
by the number of shares outstanding at the end of the reporting period.
31.12.202031.12.2021
In thousands of EUR
923,3341,055,014Net assets of the Group
69,151,168.0069,151,168.00Outstanding shares at the end of the reporting period
13.3515.26Net assets per share at period end
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 73
18 Financial risk management
The Group's activities expose it to a variety of financial risks, including the effects of changes in debt and equity market prices,
foreign currency exchange rates and interest rates. There is also counterparty risk from bank balances and derivatives (and
money market instruments if held by the Group). That would be the risk that counterparty to a financial instrument will fail to
discharge an obligation or commitment it has entered into with the Group. The Group's overall risk management policy focuses
on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance of
the Group. The Group may use derivative financial instruments such as foreign currency exchange forward or option contracts
to hedge certain financial risk exposures.
Following a prolonged period of uncertainty, the global economy and financial markets are showing strong signs of recovery
as global vaccination campaigns progress. As the market has regained confidence, investment activity has picked up significantly
across private markets. However as the pandemic is not yet behind us, operations, financial condition, liquidity and cash flows
of the Group and its underlying portfolio companies and industries will continue to be impacted for an indefinite period of
time. Based on current information, the Group is not aware of any material unrecorded impact on the audited consolidated
financial statements arising from the COVID-19 outbreak. In addition, there is no indication that the going concern assumption
of the Group is inappropriate.
The European Union and Britain agreed upon a post-Brexit trade deal on 24 December 2020. There have been economic
consequences on investments with UK exposure, which have implications for all aspects of financial risk management. Exposure
to increased foreign currency volatility resulting from Brexit is disclosed in section 17.1. These broader economic consequences
(immaterial given the Group's low exposure to the UK) include the impact on interest rate risk, credit risk, liquidity risk, capital
risk, and market price risk.
The discontinuation of non-USD interbank offered rates ("IBORs") and transition to alternative reference rates was completed
at the end of 2021. Partners Group did not experience any significant disruption to its processes from the ongoing transition,
nor was there any significant impact on the risks that were previously identified in the Group, including interest rate risk, credit
risk, liquidity risk, capital risk and market price risk. As part of the transition to using alternative reference rates, Partners Group
had regularly performed risk assessments on the resulting potential impact on its assets under management, balance sheet,
investments, valuations, and investors. As at the end of the reporting period, the overall risk is assessed to be limited, with
identified changes required to systems, processes, and models. The impacted underlying agreements with relevant counterparties
in relation to the transition to the use of alternative reference rates have been updated as at the end of 2021.
This transition project is considering changes to systems, processes, and risk management, as well as managing any related tax
and accounting implications also with respect to the USD LIBOR transition. As at the end of the reporting period, changes
required to systems and processes have been identified and will be implemented upon transition to the alternative benchmark
rate expected at the latest in 2023.
18.1 FOREIGN CURRENCY EXCHANGE RISK
The Group holds assets and liabilities denominated in currencies other than its Functional Currency. The value of assets and
liabilities denominated in other currencies will fluctuate due to changes in exchange rates. The main currency risk for the Group
results from assets and liabilities held in other currencies where a change of exchange rates can have a material impact on the
value of assets and liabilities. The Group's global portfolio committee meets on a quarterly basis to review the implementation
of the Group's hedging strategy, through the use of derivative financial instruments such as foreign currency
exchange forward and option contracts to hedge certain exposures at its discretion. Furthermore, the Group's risk management
team reviews the foreign currency exchange risk on a daily basis and adjusts the actual hedging positions if necessary.
The annual volatility analysis uses cross-currency rates from 1 January 2001 to the relevant period end in order to incorporate
long-term rate volatility trends. The analysis is based on the assumption that the non-Functional Currency fluctuates by the
annual volatility percentage, with all other variables held constant, and the amount by which the value of applicable net assets
would correspondingly fluctuate higher or lower is presented below. The foreign currency exposures below are presented net
of any foreign currency hedging instruments outstanding as at the end of the respective period.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 74 | Annual Report 2021
31.12.202031.12.2021
In thousands of EUR
54Net assets denominated in AUD
12,2402,928Net assets denominated in CHF
(1,173)5,232Net assets denominated in GBP
17Net assets denominated in SEK
48,54779,258Net assets denominated in USD
(3,259)(3,389)Net assets denominated in INR
-(24,972)Net assets denominated in ILS
9.16%9.04%Applicable annual volatility AUD
6.38%6.28%Applicable annual volatility CHF
7.80%7.68%Applicable annual volatility GBP
5.58%5.51%Applicable annual volatility SEK
9.54%9.42%Applicable annual volatility USD
9.25%9.15%Applicable annual volatility INR
8.30%8.67%Applicable annual volatility ILS
5,0205,578Fluctuation of net assets and corresponding results depending on above-mentioned volatility
<>
Certain Indirect Investments held within the Group's portfolio contain exposure to underlying portfolio investment denominated
in ILS, while such Indirect Investments' functional and reporting currency is a currency other than ILS. Where the ILS is
considered to be significant to the Group, it is hedged against the Group's Functional Currency. As a result, the table above
contains net assets denominated in ILS, which are reflective of the notional value ILS amount sold as part of the respective
hedging transations, translated into the Group's Functional Currency at the applicable foreign currency exchange rate at the
end of the reporting period.
18.2 INTEREST RATE RISK
The Group may invest in interest-bearing mezzanine and senior debt investments that are exposed to cash flow interest rate
risk due to changes in market interest rates. The interest on mezzanine and senior debt investments is partially based on LIBOR
and alternative reference rates ("ARR"). A decrease in the market interest rates can lead to a decrease in the interest income
of the Group. The overall interest rate risk is considered to be limited as only a small part of the portfolio depends on variable
interest rates.
Cash and cash equivalents are only short-term and therefore interest rate exposure is limited. Excess cash balances may be
placed into instruments with fixed interest rates when necessary. As at 31 December 2021, there were no term deposits
(2020: nil).
The interest rates quoted against the general market are analyzed as part of the Group's liquidity monitoring process to ensure
that these are competitive and action is taken when appropriate.
Other than as stated herein, the income and operating cash flows are substantially independent from changes in market interest
rates.
A change of 25 basis points in interest rates at the reporting date would have resulted in either an increase or a (decrease)
in surplus or loss by the amounts stated below. This analysis assumes that all other variables, in particular foreign currency
rates, remain constant and is performed on the same basis for each relevant reporting period.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 75
The risk exposures of the Group to variable rate instruments are presented in 'Variable Rate Instruments'. The sensitivity of
the Group's variable rate instruments to movements in interest rates is presented as at the end of each relevant reporting
period.
18.3 VARIABLE RATE INSTRUMENTS
31.12.202031.12.2021
In thousands of EUR
30,18512,795Mezzanine and senior debt investments
31,51540,159Cash and cash equivalents
-(25,000)Credit facility
61,70027,954Total variable rate instruments
<>
As at 31 December 2021, the Group holds EUR 7,990,529 in private debt financial assets where the interest on principal
drawn is calculated using the USD LIBOR and will be replaced with the SOFR or an alternative benchmark rate at the latest
in 2023.
18.4 SENSITIVITY ANALYSIS REPORTING PERIOD
25bp decrease25bp increase
In thousands of EUR
(70)70Impact on variable rate instruments
<>
18.5 SENSITIVITY ANALYSIS PREVIOUS REPORTING PERIOD
25bp decrease25bp increase
In thousands of EUR
(154)154Impact on variable rate instruments
<>
18.6 CREDIT RISK
Whilst the Group intends to diversify its portfolio of investments, the Group's investment activities may result in credit risk
relating to investments in which the Group has direct or indirect (through underlying investments and investments in subsidiaries)
exposure. A negative credit development or a default of an investment in which the Group has direct or indirect exposure will
lead to a lower net asset value and to lower dividend and interest income from assets within the private debt operating segment
or where the Group holds a direct interest. In addition, the Investment Manager regularly conducts a concentration risk analysis
on the underlying investments and has concluded that no action needs to be taken.
It is expected that investments will include those made in private debt funds. Many of the private debt funds may be wholly
unregulated investment vehicles. In addition, certain of the private debt funds may have limited or no operational history and
have no proven track record in achieving their stated investment objective. The investment risk is managed by an investment
strategy that diversifies the investments in terms of geography, financing stage, industry or time.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 76 | Annual Report 2021
Derivative counterparties and cash transactions are typically limited to high credit quality financial institutions, which are
governed by an internal rating system calculated based on publicly available data and takes into account the ratings assigned
by credit rating agencies such as Moody's and Standard & Poor's. However, in certain rare circumstances, the Investment
Manager's best execution committee has the authority to approve such transactions with specific counterparties who do not
have ratings as a one-off authorization, with considerations related to best execution price, liquidity and availability of other
counterparties. The Investment Manager ensures that surplus cash is invested in temporary investments. In addition, where
the Group holds significant amounts of cash the Investment Manager may seek to diversify this exposure across multiple
financial institutions.
The Group may also invest in mezzanine and senior debt facilities of private market investment backed underlying investments.
These underlying investments' financial performance is monitored on a monthly basis and classified by an internal rating system,
which consists of five categories: too early, with issues, on plan, above plan and outperformer. When assessing the investment
the Investment Manager takes into account a number of factors, including the financial position and actual versus expected
performance. The term "too early" is used during the period just after the initial investment when there is insufficient information
to assess the actual performance of the underlying investment. If an underlying investment's performance is classified as "with
issues", the mezzanine or senior debt facility will be closely and regularly monitored by the Investment Manager, with regular
communications being held with the manager of the underlying investment so that the actual value can be assessed and, if
necessary, written down. The amount of any unrealized loss is disclosed herein and the change of credit quality, if any, is
reflected in the fair value of the instrument.
The Group provides mezzanine and senior debt facilities to private companies which are represented as debt instruments. No
collateral is received from the underlying companies. The credit quality of these investments is based on the financial performance
of the individual portfolio company. For those assets that are not past due, it is believed that the risk of default is small and
the capital repayments and interest payments will be made in accordance with the agreed terms and conditions.
As part of the quarterly fair value assessment the Investment Manager takes into consideration any breaches in covenants
and any changes in general market conditions.
The Group has no significant concentration of credit risk other than as detailed herein.
The table 'Rating of Mezzanine and Senior Debt Investments' presents the classification of the Group's mezzanine and senior
debt investments in the categories described above at the end of each reporting period presented. The tables 'Duration of
Credit Risk Reporting Period' and 'Duration of Credit Risk Previous Reporting Period' present the duration of credit risk of
the Group as at the end of each period, respectively.
18.7 RATING OF MEZZANINE AND SENIOR DEBT INVESTMENTS
31.12.202031.12.2021
In thousands of EUR
--Too early
15,0198,146With issues
15,1664,649On plan
--Above plan
--Outperformer
30,18512,795Total
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 77
18.8 DURATION OF CREDIT RISK REPORTING PERIOD
Past due more
than 1 year
Past due less
than 1 year
Not past due
In thousands of EUR
---Derivative assets
--40,159Cash and cash equivalents
--11,713Other short-term receivables
--2,827Other long-term receivables
--5,690Deferred receivables on investments
--12,795Mezzanine and senior debt investments
<>
As at the end of the reporting period, the Group held cash of EUR 40,158,933 with two international Swiss-based banking
groups which at that date had ratings of Baa1 (Moody's) and Aaa (Moody's).
18.9 DURATION OF CREDIT RISK PREVIOUS REPORTING PERIOD
Past due more
than 1 year
Past due less
than 1 year
Not past due
In thousands of EUR
--5,960Derivative assets
--31,515Cash and cash equivalents
--8,766Other short-term receivables
--2,628Other long-term receivables
--9,006Deferred receivables on investments
--30,185Mezzanine and senior debt investments
<>
As at the end of the previous reporting period, the Group held cash of EUR 31,514,763 with two international Swiss-based
banking groups which at that date had ratings of Baa1 (Moody's) and Aaa (Moody's).
18.10 LIQUIDITY RISK
Liquidity risk arises where the Group may not be able to meet the obligations as and when these fall due for settlement.
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding
through an adequate amount of committed credit facilities and the ability to close out market positions.
As the unfunded commitments can be drawn at any time, there may be periods when the Group appears to have inadequate
liquidity to fund its investments or settle other amounts payable by the Group due to either changes in foreign currency
exchange rates that have an impact on the fair value of hedges and unfunded commitments to underlying investments or the
receipt of recallable distributions from underlying investments that increase the unfunded commitments to such investments
without a corresponding increase in unfunded commitments due from investors. The liquidity risk is managed through the use
of quantitative models by the Investment Manager's internal risk committee on a quarterly basis. If the risk committee concludes
that there is a risk of insufficient liquidity to fund investments, actions are taken into consideration such as entering into a
credit facility, reducing the amount of listed private equity, if any, or the selling of investments on the secondary market.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 78 | Annual Report 2021
The Group's financial instruments include investments in unlisted securities, which are not traded in an organized public market
and may generally be illiquid. As a result, the Group may not be able to quickly liquidate its investments in these instruments
at an amount close to fair value in order to respond to its liquidity requirements or to specific events such as deterioration in
their creditworthiness. In the event of the risk of insufficient liquidity extending over a time horizon of at least twelve months
into the future, the Group can seek additional liquidity by means of third-party financing or, alternatively, disposal of investments
in the secondary market.
During the previous reporting period, the Group has put additional measures in place in order to assess its short-term and
long-term liquidity risk in response to the COVID-19 outbreak. The assessment is primarily based on bottom-up inputs on the
cash needs for both Direct and Indirect Investments, where applicable. For lead Direct Investments, the Group has worked
closely with the management of the respective companies to receive such inputs. For Indirect Investments, the inputs are
based on the Group's interactions with its governing bodies. Additional cash needs are also considered, such as the potential
impact arising from foreign currency hedging, fees and expenses of the Group. The liquidity risk of its underlying Partners
Group investments, where applicable, has been assessed by means of forward-looking liquidity indicators such as the
forward-looking unfunded commitment ratio and forward-looking overcommitment ratio, after considering their anticipated
cash needs and cash sources. Additional actions have been put in place if potential liquidity constraints are showing up. Such
measures include increase of existing borrowing limits, set-up of new credit facilities or increase of cash and cash equivalents'
buffers.
The tables 'Liquidity Risk Reporting Period' and 'Liquidity Risk Previous Reporting Period' present the maturity bands of the
Group's assets and liabilities at the end of each period, respectively.
18.11 LIQUIDITY RISK REPORTING PERIOD
More than 12
months
3 to 12 monthsLess than 3
months
In thousands of EUR
--(116,600)Unfunded commitments to Direct and Indirect Investments
-(17,530)(34,878)Liabilities falling due within one year
--(4,208)Derivative liabilities
--51,872Current assets
2,827--Other long-term receivables
5,690--Deferred receivables on investments
--55,000Undrawn credit facility
8,517(17,530)(48,814)Total
<>
18.12 LIQUIDITY RISK PREVIOUS REPORTING PERIOD
More than 12
months
3 to 12 monthsLess than 3
months
In thousands of EUR
--(106,623)Unfunded commitments to Direct and Indirect Investments
-(19,525)(18,433)Liabilities falling due within one year
--5,960Derivative assets
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 79
More than 12
months
3 to 12 monthsLess than 3
months
In thousands of EUR
--40,281Current assets
2,628--Other long-term receivables
9,006--Deferred receivables on investments
--80,000Undrawn credit facility
11,634(19,525)1,185Total
<>
18.13 OVERCOMMITMENT TO INVESTMENTS
As a result of maintaining a substantially full investment level over time, the Group may be subject to the risk of a shortfall of
liquidity available to meet its obligations in extreme events when distribution from investments is delayed or drawdowns from
commitments to funds are accelerated significantly beyond the expected values. To mitigate this risk, the development of
liquidity available and the outlook for the net cash flows of the Group based on a quarterly assessment utilizing quantitative
cash flow forecast models and prevailing market inputs are continuously monitored, and the Group may employ appropriate
measures such as re-investing distributions received from an investment to fund capital calls from other investments.
18.14 CAPITAL RISK MANAGEMENT
The Group's objective when managing capital is to safeguard its ability to continue as a going concern and to maintain a strong
capital base so as to retain investor, creditor and market confidence with regards to its investment objectives. The Group's
capital is represented by its total equity. The Board of Directors also monitors and manages where appropriate the level of
discount between the market price of its equity and the Group's net asset value per share in open-market transactions.
As party to a credit facility contract, the Group is required to meet certain covenants and monitors its compliance with these
externally imposed restrictions. The covenants and the Group's compliance with them are described in the 'Short-term credit
facility' note (Note 14).
18.15 MARKET PRICE RISK
Financial assets at fair value through profit or loss held directly or indirectly bear risks of capital losses. This risk is moderated
through a careful selection of investments within specified limits. The Group's investments are monitored on a regular basis
and their performance is reviewed on a quarterly basis. The Group's performance is measured against MSCI Daily Total Return
Net World Local Index which is used as its primary reference index. The Group checks on a regular basis the weightings of
the index, its composition, price development and volatility in order to incorporate long-term price volatility trends.
The annual volatility of the reference index is shown for the period from 1 January 2001 to the end of the relevant reporting
period. Under the assumption that the financial assets at fair value through profit or loss fluctuate by the annual volatility
percentage, with all other variables held constant, the fair value of such assets, if any, would fluctuate in direct proportion as
presented below.
31.12.202031.12.2021
In thousands of EUR
903,4171,051,241Financial assets at fair value through profit or loss
903,4171,051,241Total assets subject to market risk
14.39%14.21%Annual expected volatility
130,002149,381Potential impact on audited consolidated financial statements
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 80 | Annual Report 2021
18.16 OFFSETTING FINANCIAL INSTRUMENTS
The Group is typically subject to master netting arrangements which are entered into with one or more derivative counterparties
for all derivative assets and liabilities held with these counterparties. The Group may be required to maintain variation margin
balances for the purpose of providing or receiving collateral on derivative positions.
The Group and its counterparties have elected, where possible, to settle payment obligations between them on a net basis;
however, in the event of an early termination in accordance with the terms of the master netting arrangement, the non-defaulting
party can choose an early termination date for close-out netting of all outstanding transactions between the parties. Under
the terms of the master netting arrangements, an early termination event may include the following:
• Failure by a party to make payment when due;
• Failure by a party to perform any obligation required by the agreement (other than payment) if such failure is not remedied
within 20 business days after such failure;
• Bankruptcy of a party.
The Group's financial assets and liabilities subject to offsetting, enforceable master netting arrangements and similar agreements
are presented by type of financial instrument.
Amounts in "D" below relate to amounts subject to set-off that do not qualify for offsetting under "B" below. This includes
amounts which are subject to set-off against the financial asset or financial liability disclosed in "A" which have not been offset
in the audited consolidated statement of financial position.
18.17 OFFSETTING REPORTING PERIOD
Financial liabilities subjected to offsetting, enforceable master netting arrangements, and similar agreements:
E=C-DDC=A-BBA
in thousands of EUR
Net
amount
Related amounts not set-off in the
audited consolidated statement of
financial position
Net amounts of
financial
liabilities presented
in the audited
consolidated
statement of
financial position
Gross amounts of
recognized
financial assets
set-off in the
audited
consolidated
statement of
financial position
Gross amounts
of recognized
financial
liabilities
31.12.2021
Financial
Instrument
Collateral
Cash/(Bank
Overdrafts)
Financial
Instruments
Derivative liabilities
181900--1,081-1,081Counterparty B
-235--235338573Counterparty I
--87-87612699Counterparty J
162,790--2,806-2,806Counterparty Q
Credit Facility
Drawn
25,000---25,000-25,000Counterparty B
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 81
18.18 OFFSETTING PREVIOUS REPORTING PERIOD
Financial assets subjected to offsetting, enforceable master netting arrangements, and similar agreements:
E=C-DDC=A-BBA
in thousands of EUR
Net
amount
Related amounts not set-off in the audited
consolidated statement of financial position
Net amounts of
financial assets
Gross amounts of
recognized financial
Gross amounts
of recognized
financial assets
31.12.2020
presented in the
audited
consolidated
statement of
financial position
liabilities set-off in
the audited
consolidated
statement of
financial position
Financial
Instrument
Collateral
Cash/(Bank
Overdrafts)
Financial
Instruments
Derivative
assets
-4,884--4,884-4,884Counterparty I
-1,076--1,0769792,055Counterparty
Q
<>
18.19 STRUCTURED ENTITIES
IFRS 12 'Disclosure of interests in other entities' requires the Group to disclose details regarding structured entities invested
into by the Group. A structured entity in accordance with IFRS 12 is an entity that has been designed so that voting or similar
rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative
tasks only and the relevant activities are directed by means of contractual arrangements. A structured entity often has some
or all of the following features or attributes:
• Restricted activities.
• A narrow and well-defined objective, such as to provide a source of capital or funding to an entity or provide investment
opportunities for investors by passing on risks and rewards associated with the assets of the structured entity to investors.
• Insufficient equity to permit the structured entity to finance its activities without subordinated financial support.
• Financing in the form of multiple contractually linked instruments to investors that create concentrations of credit or other
risks (tranches).
The Group considers all Indirect Investments held to be structured entities. Indirect Investments are included within the line
item 'Financial assets at fair value through profit or loss' in the audited consolidated statement of financial position. Unrealized
gains/losses arising from such Indirect Investments are accounted for within the line item 'Revaluation' in the audited consolidated
statement of comprehensive income. The risk concentration of the Indirect Investments is disclosed with respect to geographic
region and investment strategy. The net asset value of each line represents the fair value of the respective Indirect Investments
as well as the maximum exposure to loss resulting from such investments.
18.20 STRUCTURED ENTITIES REPORTING PERIOD
31.12.2021
NAV in thousands of EUR
Region & Strategy
North America
237,871Buyout
151,659Special situations
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 82 | Annual Report 2021
31.12.2021
NAV in thousands of EUR
4,169Venture capital
Western Europe
85,320Buyout
753Real estate
2,660Venture capital
14,474Infrastructure
Rest of World
9,428Buyout
17,050Venture capital
<>
18.21 STRUCTURED ENTITIES PREVIOUS REPORTING PERIOD
31.12.2020
NAV in thousands of EUR
Region & Strategy
North America
368,735Buyout
24,637Special situations
5,470Venture capital
Western Europe
100,992Buyout
1,329Real estate
68,432Venture capital
2,557Infrastructure
Rest of World
9,824Buyout
8,915Venture capital
<>
19 Fair value measurement
IFRS 13 'Fair value measurement' requires the Group to classify fair value measurements using a fair value hierarchy that
reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
• Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
• Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,
as observable prices or firm broker quotes) or indirectly (that is, derived from observable prices including discount adjustments
to quoted prices in the case of regulatory restrictions to sell such securities) (level 2); and
• Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 83
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the
basis of the lowest level of input that is significant to the fair value measurement in its entirety. For this purpose the significance
of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs
that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the
significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific
to the asset or liability.
The determination of what constitutes "observable" requires significant judgment by the Group. The Group considers the
observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively involved in the relevant market.
In the event that the Group holds any quoted investments, including any shares received as a result of an IPO or listed private
market investments, these are valued based on quoted market prices in active markets and therefore classified as level 1.
Any derivatives used for hedging and short-term investments valued using market dealer quotes can be redeemed at the fair
value measured and are therefore classified as level 2.
Level 3 investments comprise unquoted investments which are valued using widely recognized valuation methods based on
the latest information provided by underlying investments and other business partners. Such information may or may not
coincide with the reporting date of the Group or the valuation date of those investments. This is further detailed in the 'Critical
accounting estimates and judgments' note (Note 4).
The reconciliation of each class of financial instrument classified as level 3 is presented in the 'Financial assets at fair value
through profit or loss' note (Note 9).
Transfers between levels 1, 2 and 3, if any, are deemed to have occurred at the end of the relevant reporting period.
The Group's classification of financial assets and liabilities measured at fair value in the fair value hierarchy described above
is presented as at the end of the relevant reporting period.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 84 | Annual Report 2021
19.1 FAIR VALUE ESTIMATION REPORTING PERIOD
Total balanceLevel 3Level 2Level 1
In thousands of EUR
Assets
11,71311,713--Other short-term receivables
----Derivatives used for hedging
888,470856,5702,48929,411
Financial assets at fair value through profit or loss - equity
securities
162,771162,771--
Financial assets at fair value through profit or loss - debt
investments
1,062,9541,031,0542,48929,411Total assets
Liabilities
(4,208)-(4,208)-Derivatives used for hedging
(4,208)-(4,208)-Total liabilities
<>
During the reporting period, certain investments with a fair value of EUR 23,819,422 were transferred out of level 2 into level
1 due to expiry of lock-up discount.
19.2 FAIR VALUE ESTIMATION PREVIOUS REPORTING PERIOD
Total balanceLevel 3Level 2Level 1
In thousands of EUR
Assets
8,7668,766--Other short-term receivables
5,960-5,960-Derivatives used for hedging
851,812816,74825,7449,320
Financial assets at fair value through profit or loss - equity
securities
51,60551,605--
Financial assets at fair value through profit or loss - debt
investments
918,143877,11931,7049,320Total assets
Liabilities
----Derivatives used for hedging
----Total liabilities
<>
During the previous reporting period, certain investments with a fair value of EUR 2,166,923, EUR 9,320,151 and EUR
23,576,750 were transferred out of level 1 into level 2, out of level 3 into level 1 and out of level 3 into level 2 respectively.
19.3 FINANCIAL STATEMENT LINE ITEMS NOT HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
All assets and liabilities presented in the audited consolidated statement of financial position, except for those measured at
fair value in accordance with IFRS 13, are measured at either amortized cost or their face value, both of which are deemed to
be a reasonable approximation of their fair values.
In conjunction with the fair value hierarchy disclosed in the 'Fair value measurement' note (Note 19):
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 85
• Cash and cash equivalents as well as bank overdrafts are measured at values that would be reflective of level 1 prices.
These include cash in hand, deposits held with banks, other short-term investments in active markets and bank overdrafts.
• Other receivables are measured at values that would be reflective of level 3 prices. These include contractual amounts for
settlement of trades and other obligations due to the Group.
• Accruals and other short-term payables represent the contractual amounts and obligations due by the Group for settlement
of trades and expenses and are measured at values that would be reflective of level 2 prices, except for incentive fee
accruals due by the Group which are reflective of level 3 prices.
• Deferred payments are measured at values that would be reflective of level 2 prices. These consist of payments for financial
assets purchased and receivables for financial assets sold, for which it was agreed with the contractual counterparty to
defer one or more payment installments.
• Borrowings include credit facilities and loan granted to the Group and are measured at values that would be reflective of
level 2 prices.
• Equity is a residual amount calculated by subtracting the total liabilities of the Group from the total assets of the Group.
As the lowest level of input that is significant to the fair value measurement of the inputs into this equation is level 3, the
values at which equity is measured would be reflective of level 3 prices.
19.4 SIGNIFICANT UNOBSERVABLE VALUATION INPUTS
Level 3 investments may consist of Direct and Indirect equity and debt Investments. Level 3 Indirect Investments are generally
valued at the Indirect Investments' net asset values last reported by the Indirect Investments' governing bodies. When the
reporting date of such net asset values does not coincide with the Group's reporting date, the net asset values are adjusted
as a result of cash flows to/from an Indirect Investment between the most recently available net asset value reported and the
end of the relevant reporting period. The valuation may also be adjusted for further information gathered through an ongoing
investment monitoring process. This monitoring process includes, but is not limited to, binding bid offers, non-public information
on developments of portfolio companies held by Indirect Investments, syndicated transactions which involve such companies
and the application of reporting standards by Indirect Investments which do not apply the principle of fair valuation.
The main inputs into the Group's valuation models for Direct equity and debt Investments include: EBITDA multiples (based
on budgeted/forward looking EBITDA or historical EBITDA of the issuer and EBITDA multiples of comparable listed companies
for the equivalent period), discount rates, capitalization rates, price to book as well as price to earnings ratios and enterprise
value to sales multiples. The Group also considers the original transaction prices, recent transactions in the same or similar
instruments and completed third-party transactions in comparable instruments and adjusts the model as deemed necessary.
Further inputs consist of external valuation appraisals and broker quotes.
In order to assess level 3 valuations in accordance with the constituent documents, the performance of the Direct and Indirect
Investments held is reviewed on a regular basis. The appropriateness of the valuation model inputs, as well as the valuation
result, is considered using various valuation methods and techniques generally recognized within the industry. From time to
time, the Group may consider it appropriate to change the valuation model or technique used in the fair valuation depending
on the individual investment circumstances, such as its maturity, stage of operations or recent transaction.
The Group utilizes comparable trading multiples in arriving at the valuation for the Direct Investments. Comparable companies'
multiple techniques assume that the valuation of unquoted Direct Investments can be assessed by comparing performance
measure multiples of similar quoted assets for which observable market prices are readily available. Factors considered in the
determination of appropriate comparable public companies include industry, size, development stage, and strategy. Consequently,
the most appropriate performance measure for determining the valuation of the relevant Direct Investment is selected (these
include but are not limited to EBITDA, price to earnings ratio for earnings or price to book ratio for book values). Trading
multiples for each comparable company identified are calculated by dividing the enterprise value or market capitalization of
the comparable company by the defined performance measure. The relevant trading multiples might be subject to adjustment
for general qualitative differences such as liquidity, growth rate or quality of customer base between the valued Direct
Investment and the comparable company set. The indicated fair value of the Direct Investment is determined by applying the
relevant adjusted trading multiple to the identified performance measure of the valued company.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
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The valuation of a Direct Investment may alternatively be derived using the discounted cash flow method by discounting its
expected future cash flows to a present value at a rate of expected return that represents the time value of money and reflects
its relative risks. Direct Investments can be valued by using the "cash flow to investor" method (a debt instrument valuation),
or indirectly, by deriving the enterprise value using the "free cash flow to company" method and subsequently subtracting the
Direct Investment's net debt in order to determine the equity value of the relevant Direct Investment. The expected future
cash flows are determined based on agreed investment terms or expected growth rates. In addition, based on the current
market environment, an expected return of the respective Direct Investment is projected. The future cash flows are discounted
to the date of the relevant reporting period end in order to determine the fair value.
Direct debt Investment valuations are derived by applying widely acceptable valuation methods suitable for debt investments
which include, but are not limited to, using reliable broker quotes and the comparable debt approach.
Reliable broker quotes for Direct debt Investments are provided by a reputable financial information provider. These quotes
are applied on the nominal value of such investments to derive the fair value. The comparable debt approach arrives at the
valuation of a Direct debt Investment by discounting its expected future cash flows to a present value with a benchmark rate
derived from observable pricing levels of comparable debt instruments. Factors considered in the determination of such
comparable instruments include, but are not limited to, industry, coupon, duration and maturity date.
The Group utilizes the sales comparison method in arriving at the valuation for Direct real estate Investments. The sales
comparison method compares a Direct real estate Investment's characteristics with those of comparable properties which
have recently been traded in the market. Factors considered in the determination of such comparable assets include, but are
not limited to, size, location, development stage and property type. Consequently, the most appropriate measure for determining
the valuation of the relevant Direct real estate Investment is selected (amongst others, price per room, price per square foot,
price per square meter). The comparable price per unit might be subject to adjustment for general qualitative differences which
include, but are not limited to, quality of property and access to public transportation. The indicated fair value of the Direct
real estate Investment is determined by applying the relevant price per unit to the respective Direct real estate Investment.
The sales comparison method is most appropriate for Direct real estate Investments where the investment's size (e.g. number
of rooms, square feet, square meters) is known and similar properties have recently traded in the market.
The income method compares a Direct real estate Investment's net operating income to capitalization rates recently observed
in the market to determine the present value. The capitalization rates from recent sales of comparable properties utilized in
this method might be subject to adjustment for general qualitative differences which include, but are not limited to, quality of
property, tenant mix and access to public transportation. Factors considered in the determination of such comparable properties
include, but are not limited to, size, location, development stage and property type. The indicated fair value of the Direct real
estate Investment is determined by applying the relevant capitalization rate to the Direct real estate Investment's net operating
income. This method is most appropriate for income-generating Direct real estate Investments where the net operating income
is known and similar properties have recently traded in the market.
The valuation of level 3 Direct equity Investments derived using an unobservable input factor is directly affected by a change
in that factor. The change in valuation of level 3 Direct equity Investments may vary between different Direct Investments of
the same category as a result of individual levels of debt financing within such an investment.
No interrelationship between unobservable inputs used in the Group's valuation of its level 3 investments has been identified.
The Group presents investments whose fair values are measured in whole or in part using valuation techniques based on
assumptions that are not supported by prices or other inputs from observable current market transactions in the same instrument
and the effect of changing one or more of those assumptions behind the valuation techniques adopted based on reasonable
possible alternative assumptions.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 87
If presented, the category "Direct Investments" may include certain Indirect Investments where there is full visibility of the
underlying portfolio and hence a full revaluation is performed on such investments as if they were Direct Investments. If
presented, the category "Direct Investments" may include certain investments using the valuation technique "Reported fair
value". Such Direct Investments invest solely into underlying Indirect Investments, hence their fair value is based on reported
fair value rather than a Direct Investment valuation.
The sensitivity analysis presents the potential change in fair value for each category of investments in absolute values. For a
5% movement in the significant unobservable input employed in the relevant valuation model, the corresponding incremental
change in valuation of the investment is calculated.
With respect to Direct real estate equity Investments, the sensitivity analysis as performed for Direct equity Investments, with
changes in the relevant unobservable valuation inputs, would not translate into meaningful valuation movements. The reasons
for this conclusion include, but are not limited to, the fact that variations in property location, quality and business plan result
in comparisons across properties that are not meaningful. Unobservable inputs for a specific region will vary greatly based on
the property's micro location, building finishes and amenities and leasing strategy. One-to-one comparisons are not possible
even for buildings that are physically close to each other due to the differences in property features and occupancy.
A sensitivity analysis is generally not performed for Direct Investments that have been acquired within the last three months
of the relevant reporting period and where the acquisition cost was deemed to be fair value in accordance with IFRS 13 as
insufficient time has passed to determine a reliable sensitivity range based on valuation inputs that would be considered
appropriate by market participants.
PRINCESS PRIVATE EQUITY HOLDING LIMITED
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19.5 SIGNIFICANT UNOBSERVABLE VALUATION INPUT TABLE REPORTING PERIOD
SensitivityRange (weighted
average)
Unobservable inputValuation techniqueFair value at
31.12.2021
Type of
security
Fair value in thousands of EUR
Direct Investments
(36,910)36,9103.56x - 22.30x
(16.07x)
Enterprise value to
EBITDA multiple
Market comparable
companies
439,797Direct equity
Investments
n.a.n.a.n.a.Recent transaction priceRecent
financing/transaction
99,742
(235)23513.00% - 13.00%
(13.00%)
Discount factorDiscounted cash flow20,637
n.a.n.a.n.a.Recent transaction priceExit price15,831
(216)2163.50x - 3.50x
(3.50x)
Enterprise value to sales
multiple
Market comparable
companies
4,669
n.a.n.a.n.a.Indicative quotes for an
inactive market
Broker quotes12,640Direct debt
Investments
n.a.n.a.3.56x - 3.56x
(3.56x)
Enterprise value to
EBITDA multiple
Market comparable
companies
156
Indirect
Investments
(21,502)21,502n.a.Reported net asset valueAdjusted reported net
asset value
430,033
208(208)n.a.Fair value adjustmentsAdjusted reported net
asset value
(4,162)
<>
n.a. - not meaningful as outlined in the note above
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 89
19.6 SIGNIFICANT UNOBSERVABLE VALUATION INPUT TABLE PREVIOUS REPORTING PERIOD
SensitivityRange (weighted
average)
Unobservable inputValuation techniqueFair value at
31.12.2020
Type of
security
Fair value in thousands of EUR
Direct Investments
(37,725)37,7257.10x - 24.00x
(16.07x)
Enterprise value to
EBITDA multiple
Market comparable
companies
441,950Direct equity
Investments
(144)14413.00% - 13.00%
(13.00%)
Discount factorDiscounted cash flow26,717
n.a.n.a.n.a.Recent transaction priceRecent financing/
transaction
11,760
n.a.n.a.n.a.Recent transaction priceExit price360
n.a.n.a.n.a.Indicative quotes for an
inactive market
Broker quotes22,417Direct debt
Investments
(207)20722.43% - 22.43%
(22.43%)
Discount factorDiscounted cash flow7,492
(14)149.00x - 9.00x
(9.00x)
Enterprise value to
EBITDA multiple
Market comparable
companies
276
Indirect
Investments
(17,861)17,861n.a.Reported net asset valueAdjusted reported net
asset value
357,215
(8)8n.a.Fair value adjustmentsAdjusted reported net
asset value
166
<>
n.a. - not meaningful as outlined in the note above
20 Related party transactions and balances
A related party to the Group is an entity which has the ability to directly or indirectly control the Group, or vice versa, or to
exercise significant influence over the Group in making financial and operating decisions or is a member of the key management
team, including their immediate families, of the Group or its Board of Directors. Entities are also related where they are members
of the same group. In this regard, the following are considered related parties in the context of these audited consolidated
financial statements: Partners Group Holding AG, all entities owned and controlled by Partners Group Holding AG, all entities
advised by Partners Group AG, and each of their key management.
The following represents the transactions and balances of the Group with related parties:
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Page 90 | Annual Report 2021
20.1 TRANSACTIONS
31.12.202031.12.2021
In thousands of EUR
12,97915,285Management fee expenses
6,68615,285Partners Group AG (from 1 July 2020)
6,293-Princess Management Limited (until 30 June 2020)
414456Administration fee expenses
414456Partners Group (Guernsey) Limited
250250Service fee expenses
-250Partners Group AG
250-Princess Management Limited
10,63939,842Incentive fee expenses
8,93239,842Partners Group AG (from 1 July 2020)
1,707-Princess Management Limited (until 30 June 2020)
18,02741,837Incentive fee paid
2,56741,837Partners Group AG (from 1 July 2020)
15,460-Princess Management Limited (until 30 June 2020)
6018Setup and interest expenses on bridge loans and credit facilities provided through
6018Partners Group Finance CHF IC Ltd
268268Directors' fee expenses:
31,54793,203Invested amounts and distributions from / (to) Partners Group advised products (investment
side), net
<>
Commitments made during the reporting period to Partners Group advised products amounted to EUR 318,609,839 (2020:
EUR 51,901,369).
20.2 PERIOD-END BALANCES
31.12.202031.12.2021
In thousands of EUR
6727,476Other short-term receivables
6727,425Partners Group affiliated entities
-51Receivable from Investments
-(9,609)Accruals and other short-term payables
-(9,588)Partners Group affiliated entities
-(21)Payable to Investments
19,525(17,530)Accrued incentive fee
(19,525)(17,530)Partners Group AG
715,078972,908Commitments to Partners Group advised products (investment side)
656,073771,342Fair value of investments advised by Partners Group or related parties
<>
PRINCESS PRIVATE EQUITY HOLDING LIMITED
Annual Report 2021 | Page 91
21 Related party loan
During the reporting period, a related party of the Company (the "Loan Provider") provided loan facilities to the Company in
the amount of EUR 7,250,000 (2020: EUR 27,950,000). Under the loan agreements entered into between the Company and
the Loan Provider, the maximum loan amounts to be drawn by the Company were EUR 7,250,000 (2020: EUR 27,950,000).
The Company was due to pay annual interest on the loan amounts outstanding at a rate of the applicable currency's one to
three month inter-bank borrowing rate plus 190 basis points (2020: 190 basis points) and plus, but only if negative, the absolute
value of the applicable rate for the period. The CHF LIBOR rate on loan amounts drawn since 9 December 2021 has been
replaced with the Swiss average overnight rate ("SARON").
31.12.202031.12.2021
In thousands of EUR
--Balance at beginning of period
27,9507,250Increase during period
(27,950)(7,250)(Decrease) during period
--Balance at end of period
<>
22 Group entities - significant subsidiaries
Princess Private Equity Subholding Limited
Incorporated in Guernsey
Ownership interest as at 31 December 2021 and 31 December 2020: 100%
Activity: Investment services company
Princess Direct Investments, L.P. Inc.
Incorporated in Guernsey
Ownership interest as at 31 December 2021 and 31 December 2020: 100%
Activity: Investment services partnership
23 Events after reporting date
Although the conflict between Russia and Ukraine increases the level of geo-political risk the Company has negligible direct
exposure to the region, but with the Company's Investment Manager the Board is closely monitoring the situation, taking into
account potential supply chain disruptions and second order effects.
The Board of Directors is of the opinion that no other events took place between the end of the reporting period and the date
of approval of these audited consolidated financial statements that would require disclosure in or adjustments to the amounts
recognized in these audited consolidated financial statements.
24 Approval of these financial statements
The Board of Directors approved these audited consolidated financial statements on 21 March 2022.
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20211231 362 E A Cv 2022-03-21 23:22
Administrator
Partners Group (Guernsey) Limited
Registered Office
Princess Private Equity Holding Limited
Tudor HouseTudor House
Le Bordage Le Bordage
St. Peter Port St. Peter Port
Guernsey, GY1 6BD Guernsey, GY1 6BD
Channel Islands Channel Islands
Info: www.princess-privateequity.net
Registered number: 35241
Investor Relations
Partners Group AG
Andreea Mateescu
Zugerstrasse 57
6341 Baar-Zug
Switzerland
Independent Auditor
PricewaterhouseCoopers CI LLP
Royal Bank Place
1 Glategny Esplanade
St Peter Port
Guernsey, GY1 4ND
Channel Islands +41417846673
princess@partnersgroup.com
Investment Manager
Princess Management Limited (until 30 June
2020)
Tudor House
Le Bordage
St. Peter Port
Guernsey, GY1 6BD
Channel Islands
Partners Group AG (from 1 July 2020)
Zugerstrasse 57
CH-6341 Baar-Zug
Switzerland
www.partnersgroup.com
PRINCESS PRIVATE EQUITY HOLDING LIMITED