Princess Priv E Regulatory News (PEY)

PRINCESS PRIVATE EQUITY HOLDING LIMITED

HALF-YEARLY REPORT 2012

Half-yearly report for the period from 1 January 2012 to 30 June 2012

Princess Private Equity Holding Limited (Princess or the Company) is an investment holding company domiciled in Guernsey that invests in private equity and private debt. The portfolio includes direct, primary and secondary fund investments. Princess aims to provide shareholders with long-term capital growth as well as an attractive dividend yield in the mid to long term.

The shares are traded on the Frankfurt Stock Exchange (in the form of co-ownership interests in a global bearer certificate) and on the main market of the London Stock Exchange.

KEY FIGURES

INVESTMENT MANAGERS REPORT

NAV growth maintains positive momentum

Princess' net asset value (NAV) grew by 5.2% to EUR 9.03 per share in the first half of 2012, adjusted for the interim dividend of EUR 0.24 per share distributed to sharehol-ders in June. This performance builds upon the 25% NAV increase generated by the in-vestment company over the past two years.

Valuation developments contributed the most to NAV growth over the six-month review period (+5.3%), as the portfolio's underlying companies continued to show strong opera-tional improvements. Over the past twelve months, the 50 largest portfolio companies, representing approximately 32.0% of NAV, achieved weighted revenue and earnings (EBITDA) growth of 10.9% and 8.4%, respec-tively. Constructive value creation initiatives by the Investment Manager and its partners were a key determinant behind this perfor-mance.

Over the review period, several investments were marked up after being wholly or parti-ally exited above their previous carrying va-lue within the portfolio. These successful exits added to NAV growth over the first half of 2012, as did foreign exchange movements (+1.0%), with the portfolio's sizable US ex-posure benefiting from the US dollar's appre-ciation relative to the euro.

First interim dividend of EUR 0.24 paid to investors

On 22 June 2012, Princess paid to sharehol-ders a first interim dividend of EUR 0.24 per share, compared to the EUR 0.22 per share distributed in the corresponding period last year.

This translates into a dividend yield of 5.3% on the NAV per share as of 31 March 2102, and a yield of 8.3% on the half-year closing share price of EUR 5.65 on the Frankfurt Stock Exchange (Xetra).

NAV discount remains wide

Year-to-date Princess' share price increased by 0.7%, excluding the first interim dividend paid to shareholders in 2012. This performance nonetheless lagged behind the Company's NAV growth (+5.2%) over the corresponding period, which ultimately broadened its NAV discount by 3.6% to 37.4% over the six month review period.

The Investment Manager believes that the continued large discount neither reflects the high quality of the Princess portfolio, nor the active steps being taken by the Board and the Investment Manager, such as the payment of semi-annual dividends and the phased repositioning of the Company towards becoming a purely direct investment vehicle.

Strategy to accelerate direct investment transition

One of the key decisions taken by the Board during Princess' 2010 strategic review was to restructure the Company's portfolio from a fund of funds to a pure direct investment vehicle. To support the acceleration of this strategic transition, Princess in May allocated EUR 100 million to the recently formed Partners Group Direct Investments 2012 program. The rationale for this allocation was to ensure continued broad diversification within the portfolio, as well as Princess' participation in all the program's direct investments, at no additional management fee. The Company will also continue to invest directly into private equity and mezzanine direct investments to optimize the investment level.

The first investment for Princess via the Partners Group Direct Investments 2012 program was the investment in Global Blue, a provider of travel-related financial services headquartered in Switzerland. The deal is expected to close during the third quarter of the year. Through the program, Princess is also in the process of finalizing a direct investment into a US-based manufacturer and marketer of medical uniforms.

Away from the Partners Group Direct Investments 2012 program, Princess also closed a control buyout direct investment in Trimco International Holdings Limited (Trimco) at the end of April.

Founded in 1979, Trimco is an Asia-based provider of a full range of garment labels, tags and trimming products to blue-chip global apparel companies. To further broaden Trimco's footprint, an add-on acquisition in a UK-based label solution provider was completed shortly after the transaction closed.

Mature portfolio fosters strong distributions and boosts NAV

In the first six months of 2012, Princess re-ceived proceeds from realized investments of EUR 83.8 million, compared to EUR 58.7 million in the corresponding period last ye-ar. Indeed five of the 15 largest portfolio company holdings were exited over the peri-od, these being: nutritional products retailer General Nutrition Centers (GNC); Dutch cable operator Ziggo; German healthcare provider Ameos; US confectionary business Farley & Sathers Candy; and Lifeways Community Care, the UK-based specialist healthcare operator.

During the first quarter, Princess completed the full realization of its direct investment in GNC, which prior to being exited was Prin-cess' largest portfolio investment. The exit from GNC represented a return of more than 4x the cost of Princess' original direct invest-ment and an IRR above 35%. The direct in-vestment generated overall proceeds of EUR 18.2 million for Princess, with an extra EUR 1.7 million coming from an additional indirect holding in GNC.

Net liquidity position strengthened

By contrast, the Company received EUR 21.3 million in capital calls from third-party fund investments (compared to EUR 27.2 million in the first half of 2011). This was mainly to support new and follow-on investments by its partners. Accordingly, Princess' net liquidity position strengthened during the review period, as distributions from successful realizations ex-ceeded new third-party fund investments by EUR 62.5 million over the six-month period.

Princess deployed an extra EUR 18.1 million over the period for new direct investments, which included capital drawn to fund new deals in the pipeline. It also paid out a fur-ther EUR 16.7 million to fund the first interim dividend to shareholders. Accordingly, Prin-cess' investment level and net liquidity at the end of June 2012 were 96.9% and EUR 19.7 million (3.1% of NAV), respectively. An undrawn EUR 80 million multi-currency credit facility is also available to address short-term funding needs if and when requi-red.

Decrease in unfunded commitments to third-party funds

Unfunded commitments to third-party funds in the Princess portfolio further decreased by 13.0% in the first half of 2012 to EUR 125.2 million, from EUR 143.9 million as of the end of 2011. Around 29.0% of these unfunded commitments stem from funds with vintage years 2000 and older, and as such are unlikely to call down any further capital.

Princess' undrawn allocation to the Partners Group Direct Investments 2012 program amounts to EUR 87.3 million, meaning that overall, unfunded commitments within port-folio now stands at EUR 212.5 million.

Possible secondary sale

Princess is currently evaluating the possibility of selling selected fund positions in the secon-dary market, the purpose of which is to acce-lerate the ongoing transition of the portfolio towards global direct investments. It is anti-cipated that EUR 130-180 million could po-tentially be raised from such a transaction. However, a sale will only proceed if Princess is able to conclude the secondary sale at a relatively narrow discount to NAV, at which stage a formal announcement will be made.

Outlook

The Investment Manager expects Princess to deliver positive NAV growth in 2012, with healthy operating results from underlying portfolio companies and successful realizati-ons positively impacting performance.

Distributions should continue to receive support from trade sales as cash-rich corpo-rates increasingly deploy capital as an alter-native to holding cash on their balance sheets. These distributions should help to enhance Princess' already strong liquidity position, while also facilitating new direct investments.

However, the macroeconomic issues of nega-tive fiscal balances and high sovereign debt levels remain largely unresolved, and should continue to provide a drag on economic growth over the remainder of the year. The-refore, while the Investment Manager will continue to screen several new direct invest-ments globally, a cautious approach to invest-ments will be maintained.

The Investment Manager will continue to fo-cus on the small-to-mid-cap end of the in-vestment spectrum where valuations are re-latively more attractive compared to larger transactions. It is also likely to maintain its emerging market bias for new private equity direct investments, as the region is expected to exhibit stronger macroeconomic growth fundamentals than more developed econo-mies in the years to come. 

Overall, the Investment Manager remains confident that the attractive dividend yield on offer and the ongoing transition of the portfolio towards direct investments will fur-ther enhance its value for shareholders, thereby supporting a narrowing of the NAV--to-share-price discount over time.

MARKET ENVIRONMENT

Expectations for the global economy weakened in the second quarter

The second quarter of 2012 saw the global economy enter more turbulent waters, as the Eurozone debt crisis continued its course. June was an eventful month, with Spain joi-ning the ranks of European bailout countries after requesting up to EUR 100 billion to shore up its banks.

Reflecting the concerns in the region, ratings agencies downgraded Spain and Greece fur-ther during the quarter. At the same time, in electoral developments, the socialist can-didate was voted to power in France, while Greece saw in a coalition of parties in favor of maintaining its International Monetary Fund (IMF) and European Commission (EC) bailout package, easing concerns that the country may exit the Eurozone. In terms of economic fundamentals, industrial production has weakened not only in peripheral coun-tries, but also at the Eurozone core, while unemployment remains at historic high levels at the Eurozone level and consumer senti-ment has clearly deteriorated.

On a more positive note, a number of affir-mative decisions were made at the latest European Union summit in late June, aimed at stemming the Eurozone debt crisis. These decisions include the establishment of Euro-zone-wide banking supervision, allowing the European rescue funds (EFSF, ESM) to poten-tially recapitalize banks directly, and an aut-horization for the rescue funds to conduct secondary bond market purchases. While positive, specific details were lacking and implementation will most likely be complica-ted.

The uncertain situation in Europe continues to be felt in other parts of the world, even in the higher-growth emerging market eco-nomies. For example, doubts have arisen over the strength of China's manufacturing sector, with mixed signals seen for the past several months among the official PMI mea-sure and similar private readings. Overall, China's second-quarter economic growth eased for the sixth straight quarter to +7.6% year-on-year, as the myriad concerns - both external and internal (for example property controls) - have impacted China's domestic demand, which compounds the weak export performance.

Meanwhile, the US economy continues to grow at a tepid pace. While the world's lar-gest economy remains one of the few rela-tively bright spots around the globe (advance estimates for second-quarter GDP growth show a quarter-on-quarter gain of +1.5% , on an annualized basis), the country is not isolated from developments in Europe and elsewhere. Furthermore, with the unemploy-ment rate proving sticky (8.2% in June 2012), bank and household deleveraging ongoing, and the prospect of fiscal tightening ahead, a meaningful acceleration of the US economic recovery is unlikely in the near-term. In response, the US Federal Reserve opted to extend Operation Twist, whereby it sells short-dated government bills and bonds to buy longer-dated government bonds, until the end of 2012, which is aimed at lowering long-term borrowing rates to stimulate con-sumption and investment. Nonetheless, the country's debt ceiling and impending fiscal cliff remain issues for the coming quarters.

Taken together, recent developments paint a sobering picture for the world economy in the second quarter of 2012. Reflecting this, the IMF has revised its global growth fore-casts to +3.5% for 2012 and +3.9% for 2013, down from its earlier estimates of +3.6% and +4.1% (made in April this year). 

Merger and acquisition activity saw green sprouts of recovery

A challenging macroeconomic backdrop not-withstanding, merger and acquisition (M&A) and private equity buyout activity saw growth in the second quarter. Global M&A activity bounced back after five consecutive quarters of decline. According to mergermar-ket, a business development tool that provi-des proprietary intelligence and analysis for the M&A sector, the global value of M&A transactions for the three months ended 30 June 2012 grew by 13.9% quarter-on-quar-ter to USD 494.9 billion. The increase in deal value was driven by volume growth in the mid-cap segment (USD 500 million to USD 2 billion), which accounted for approximately one-third of total transaction value, the hig-hest proportion recorded since 2001.

On a geographical basis, US deals fueled the rise in global M&A activity this quarter, up 27.9% from the prior period to USD 145.2 billion and driven partly by an uptick in acti-vity in the consumer sector. For example, the quarter saw Nestlé's USD 11.9 billion acquisition of the children's food and nutriti-on business of US-headquartered Pfizer. The transaction was done at a considerably high premium of nearly 20x 2012 earnings and is a prime example of cash-flushed corpora-tes looking to deploy accumulated cash reser-ves to growth-oriented acquisitions.

On the other hand, M&A activity in the Euro-zone region expanded by a slower 6.6% from the preceding period to USD 183.7 billion. While the prolonged debt crisis and various political uncertainties continue to impact M&A sentiment in this region, the second-quarter

M&A figures perhaps give testimony to the notion that Europe offers value to acquirers, or at least to those able to secure financing. Furthermore, the deal numbers during the period represented the highest quarterly total since the fourth quarter of 2009. Showing similarly weak growth was second-quarter deal flow in the Asia-Pacific region, which came in at USD 71.1 billion, up by just 3% from the first three months of the year, as activity in the region was affected by muted investor sentiment from the Eurozone debt crisis.

The largest M&A deal announced globally in the second quarter was the acquisition of the remaining 50% stake in Mexican brewer Grupo Modelo by the world's largest brewer Anheuser-Busch InBev for USD 17.8 billion. In the face of difficult macro conditions around the world, the relatively positive M&A numbers in the period were mirrored in the level of private equity buyout activity, as described below.

Healthy activity in the private equity buyout space

With access to large amounts of dry powder for making investments, private equity buy-out activity bounced back significantly from the prior quarter. Data compiled by merger-market shows an aggregate USD 61.2 billion of buyout transactions in the second quarter of 2012, an increase of 16.5% from the prior period. This increase snaps three consecutive quarters of decline, however, the absolute amount is still the second lowest since June 2010. The largest buyout transaction for the quarter was the USD 3.7 billion acquisition of German natural gas pipeline operator Open Grid Europe in May 2012. The asset was acquired from E.ON by a consortium led by Macquarie Group.

Based on mergermarket records for the first half of 2012, debt financing for buyout transactions was on the whole higher than that seen last year. In the first six months of 2012, buyout structures were funded on average with nearly 60% debt, the third-highest level since the highs of 2007. Offset-ting this is a reduction in the average EBITDA multiples to the second-lowest level in the past eight years, which points to a desire for sustainable financing structures and healthy cash-flow backing.

Continued liquidity via trade sales and secondary buyouts

Private equity trade sales and secondary buyouts continued their upward trend, with secondary buyouts in particular rising stron-gly by 85.2% quarter-on-quarter in terms of deal value to USD 20 billion for the second quarter of 2012. The increase in exits via trade sales and secondary buyouts were characterized by a string of large-cap tran-sactions (greater than USD 1 billion), which showed a significant increase from the pre-vious quarter. The consumer segment conti-nued to see acquisitive interest, which ulti-mately led to higher deal flow and accounted for two of the top five private equity-backed exits in the first six months of 2012.

Moreover, cash-rich corporate balance sheets have continued to drive not only M&A activity in general but also trade sales by private equity firms. Corporations with an abundance of cash are often more willing to pay a pre-mium for acquisitions so as to gain market access and internationalization, while on the other end justifying premiums by a potenti-ally greater scope for extracting synergies. This was aptly demonstrated in the US mar-ket, with exit premiums in the region avera-ging 63.7%, according to mergermarket, the second-highest level since 2004. Exit premi-ums in Europe were significantly lower, ave-raging 13.1%, while globally, the average stood at 24.8%.

Overall, the highest-value private equity exit for the second quarter was Kohlberg Kravis Roberts' USD 6.7 billion sale of European chemist chain Alliance Boots to US pharmacy operator Walgreen, providing the US-based company access to the European retail pharmacy market.

Global IPO activity bounced back, but not so for private equity-backed listings

While trade sales and secondary buyouts remain fluid, private equity exit markets re-main bifurcated as public listings of portfolio companies were adversely impacted by pu-blic market volatility during the second quarter, despite broadly higher IPO volumes in general. According to Ernst & Young data, global IPO capital raising in the second quarter of 2012 saw a significant increase of 141% quarter-on-quarter to USD 41.8 billion. This was inflated by the USD 16.0 billion lis-ting of Facebook on the NASDAQ exchange, which was the largest IPO for the quarter and constituted nearly 40% of the total capi-tal raised via IPO markets for the period. Excluding the Facebook listing, global IPO activity in the second quarter still increased by nearly 50% sequentially.

The Americas region drove IPO activity du-ring the quarter, accounting for approxima-tely 60% of capital raised. The US markets remain an attractive IPO location, with nine out of the top 20 global IPOs completed on US stock exchanges. Similarly, Asian markets accounted for 35% of global funds raised, with 104 transactions raising USD 14.5 billi-on, an increase of 87% from the prior quar-ter. However, European markets saw a 68% decline from the first quarter, with less than EUR 1 billion raised through 46 listings, re-presenting just 2% of global capital raised and amply reflecting the uncertain events in the Eurozone.

While global IPO activity rebounded on a sequential basis, private equity-backed IPO activity did not follow suit, as financial sponsors stood on the sidelines, seeking windows of lower volatility and possibly bet-ter valuations. Private equity-backed compa-nies raised USD 3.4 billion across 22 listings during the quarter, representing a decrease of 43.7% from the prior period in terms of funds raised. Of the private equity-backed listings that did make it to market in the se-cond quarter, US stock exchanges claimed the lion's share of proceeds, with USD 3.1 billion of capital raised across twelve portfolio company listings. The largest private equity-backed IPO (and ninth-largest overall) for the quarter was the USD 595 million NYSE listing of PetroLogistics, the world's largest propane dehydrogenation operator.

Looking at market volatility, the CBOE Vola-tility S&P 500 Index, or VIX, had an up-and-down quarter. The index rose sharply in May 2012, reflecting weakened investor confi-dence over global growth scenarios, before settling down and ending June more or less where it started the quarter. If nothing else, this illustrates the volatility evident in the public markets.

A shift in the competitive fundraising landscape

Based on data from Preqin, 126 funds reached a final close in the second quarter, having raised an aggregate sum of USD 61.4 billion. While both the number of funds that held a final close and the amount of funds raised are down slightly from the first quarter, there was a significant increase in interim closes during the quarter (USD 48.5 billion across 145 funds), which bodes well and makes the picture more complete. Furthermore, funds are closing at a faster pace, with an average time taken of 16.7 months for funds that have closed year-to-date, as compared with an average of 18.5 months for 2011. Nonetheless, the fundraising environment remains highly competitive, with more than 1'800 private equity funds currently on the road seeking to raise a total of over USD 800 billion in capital.

According to a survey by Preqin, some 90% of investors plan to increase or at least maintain their allocations to private equity over the next twelve months. While quality funds are still attracting capital from institutional investors, it is imperative that fund managers continue to successfully differentiate themselves from the record number of funds seeking to raise capital in the marketplace.

Also contributing and shaping the competitive landscape are a number of regulatory changes expected to take place in developed markets. The Volcker Rule (part of the Dodd-Frank Act), Basel III and Solvency II are likely to restrict banks' and insurance companies' private markets investment activity. Nevertheless, 75% of banks and 88% of insurance companies have indicated that they expect to either increase or maintain their current level of exposure to private equity over the long-term, implying that despite the regulatory restrictions, private equity as an asset class remains highly important to institutional investors.

Outlook

While the success of various economic mea-sures and policy decisions made during the quarter remains to be seen, the impact on the global economy is likely to be significant. Going forward, a reduction in the uncertainty surrounding the global economy is necessary before further growth will be witnessed.

A number of pre-requisite conditions for strong private equity deal making are in place, for instance low interest rates and strong acquisition firepower. However, these have been in place for some time. Without further stability as to macroeconomics and earnings outlooks, buyout activity is likely to remain relatively subdued (at least when contrasted with the much higher volumes seen in the mid-2000's), with the probable exception of relative value-driven strategies. On the other hand, private equity exit activi-ty should remain relatively healthy, suppor-ted by secondary buyouts and trade sales. IPO activity will, as ever, be strongly related to market conditions. 

On the fundraising side, private equity firms will experience a highly competitive landsca-pe in the near-term, though well-established firms with a good track record will be able to stand out from the crowd.

Sources: International Monetary Fund; mergermarket; Thomson Reuters; Preqin, PwC; Ernst & Young; Partners Group research

PORTFOLIO TRANSACTIONS

In the first six months of 2012, Princess re-ceived proceeds from exited investments of EUR 83.8 million, compared to new invest-ments of EUR 39.4 million from a combinati-on of both direct transactions and capital calls from third party fund investments.

Selected investments

§ Trimco

At the end of April, the Company closed the small-cap direct investment into Trimco In-ternational Holdings Limited (Trimco), the Asia-based global provider of apparel labeling solutions. Founded in 1979, and headquarte-red in Hong Kong, the management has successfully enlarged Trimco's operational footprint over the last few years with the establishment of subsidiaries in China, India, Thailand and Singapore. To further interna-tionalize the company's footprint, an add-on acquisition in a UK-headquartered internatio-nal label solution provider with a presence in the UK, Turkey, Romania and other import-ant garment manufacturing hubs was com-pleted shortly after the transaction closed.

§ Global Blue

In May, Princess, through its recent allocati-on to the Partners Group Direct Investments 2012 program, agreed to acquire a stake in Global Blue, a provider of travel-related finan-cial services headquartered in Switzerland.

Global Blue's tax-free shopping business of-fers refund services through a partnership network of more than 270'000 retail mer-chants worldwide and refund counters at major airports. The transaction closed at the end of July 2012.

Selected exits

§ General Nutrition Centers

In the first quarter of 2012, Princess fully realized its direct investment in GNC Hol-dings Inc. (GNC), the specialty retailer of health products, and prior to said exit, Prin-cess' largest portfolio company holding. The sale of GNC represented a return of more than 4x the cost of Princess' original direct investment and an IRR above 35%. The realization of the direct investment generated overall proceeds of EUR 18.2 million in Fe-bruary and March 2012. In addition, Princess received a EUR 1.7 million distribution from its additional indirect holdings in GNC.

§ Farley's & Sathers Candy

US-based confectionary Farley's & Sathers Candy, a portfolio company of Catterton Partners, completed its merger with Ferrara Pan Candy Company in June. Catterton Partners will remain a major investor in the combined company, and plans to leverage its collective expertise and broad supply chain to create a leading candy manufactur-er. Catterton created the company in 2002 through the combination of assets from Far-ley's Foods and Sathers Candy Company, and has since grown it both organically and through add-on acquisitions of famous con-fectionary brands.

§ Ameos

In April 2012, Quadriga Capital Private Equity Fund II L.P. (Quadriga II) distributed EUR 5.1 million to Princess from the sale of Ameos, a company which manages a portfo-lio of hospitals and nursing homes in Germany and Switzerland, to a consortium of inves-tors led by Carlyle Group. Under Quadriga II's ownership, the company maintained a strong financial track record, growing its re-venue base significantly to over EUR 300 million and its total assets to more than EUR 400 million.

§ Lifeways Community Care

In June, UK healthcare operator Lifeways Community Care (Lifeways) was sold to OMERS Private Equity in a secondary mana-gement buyout worth approximately GBP 210 million. With approximately 6'300 trai-ned staff, the company currently supports and cares for more than 3'400 people. Since the investment in 2007, Lifeways has grown significantly both organically and via eleven add-on acquisitions. Prior to this exit, Life-ways was Princess' third largest portfolio company holding.

LARGEST PORTFOLIO HOLDINGS

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. Please note that contributions may exceed total commitments due to foreign currency movements. The overview shows the 20 largest direct investments and the 50 largest partnerships based on NAV.

STRUCTURAL OVERVIEW

Princess Private Equity Holding Limited is a Guernsey-registered 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 convertible bond and invested the capital by way of commitments to private equity partnerships. The convertible bond was converted into shares in December 2006. Concurrently, the investment guideli-nes were amended and the reporting curren-cy 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 aims to provide shareholders with long-term capital growth and an attractive dividend yield. Princess' investments are managed on a discretionary basis by Princess Management Limited, a wholly-owned subsidiary of Partners Group Holding, registered in Guernsey. The Investment Manager is responsible for, inter alia, selecting, acquiring and disposing of investments and carrying out financing and cash management services.

The Investment Manager is permitted to de-legate some or all of its obligations and has entered into an advisory agreement with Partners Group AG. Partners Group is a glo-bal private markets investment management firm with EUR 25 billion in investment pro-grams under management in private equity, private debt, private real estate and private infrastructure. Through the advisory agree-ment, Princess benefits from the global pre-sence, the size and experience of the invest-ment team and relationships with many of the world's leading private equity firms.

FACTS AND FIGURES

Company Princess Private Equity Holding Limited

Currency denomination Euro

Designated sponsors Frankfurt Stock Exchange: Conrad Hinrich Donner Bank AG London Stock Exchange: JPMorgan Cazenove

Dividends Princess intends to pay a dividend of 5-8% p.a. on NAV

Incentive fee 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)

Incorporation 1999

Listing Frankfurt Stock Exchange

London Stock Exchange

Management fee 0.375% per quarter of the higher of (i) NAV or (ii) value of Princess' assets less any temporary investments plus unfunded commitments, plus 0.0625% per quarter in respect of secondary investments and 0.125% per quarter in respect of direct investments

Securities Fully paid-up ordinary registered shares

Structure Guernsey Company, Authorized closed-ended fund in Guernsey

Trading information

(Frankfurt Stock Exchange)

WKN: A0LBRM

ISIN: DE000A0LBRM2

Trading symbol: PEY1

Bloomberg: PEY1 GY

Reuters: PEYGz.DE / PEYGz.F

Trading information

(London Stock Exchange)

WKN: A0LBRL

ISIN: GG00B28C2R28

Trading symbol: PEY

Bloomberg: PEY LN

Reuters: PEY.L

Voting rights Each ordinary registered share represents one voting right

STATEMENT UNDER DISCLOSURE AND TRANSPARENCY RULES

Condensed set of financial statements

The condensed set of financial statements is set out in the section "financial state-ments".

Interim management report

The important events that have occurred during the period and the key factors influ-encing the financial statements are all set out in the Investment Manager's report.

In addition, Princess held its Annual General Meeting on 16 May 2012. All resolutions put to shareholders at its Annual General Meeting were duly passed on a show of hands. Items duly passed by shareholders were to: adopt the financial reports for the year ended 31 December 2011; re-appoint Pricewaterhou-seCoopers CI LLP as the Company's auditors for the year ending 31 December 2012; re-elect directors; authorize the Directors to allot shares in the capital of the Company, subject to certain conditions; disapply pre-emption rights in relation to the allotment of securities, subject to certain conditions; and authorize the Company to conduct mar-ket purchases of its ordinary shares.

§ Principal risks and uncertainties

The current focus of the Company is to invest in private equity and private debt direct investments. In addition, the current portfolio also includes private equity funds, which themselves invest in unquoted companies. The investment manager believes that for the remaining six months of the financial year Princess' principal risk relates to the performance of its existing private equity portfolio, the further development of the global economy and of credit markets that may impact the private equity investment and exit environment in the short term. The principal risks and uncertainties have been adequately considered by the Board, inter alia, in the quarterly Board Meetings and a further explanation of the risks and how they are managed is contained in note 17 to the accounts in the Princess annual report 2011, which can be found on the Princess website.

Responsibility statement of the Directors in respect of the half-yearly financial report

We confirm that to the best of our knowledge:

§ the condensed set of financial statements has been prepared in accordance with IAS 34:

§ the interim management report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure and Trans¬parency Rules, being related party transacti¬ons that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that pe¬riod; and any changes in the related party transactions described in the last annual re¬port that could do so.

Signed on behalf of the Board of Directors on 14 August 2012

Brian Human

Chairman

Richard Battey

Chairman of the Audit Committee

UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited consolidated statement of comprehensive income for the period from 01 January 2012 to 30 June 2012

The Euro earnings per share is calculated by dividing the surplus / (loss) for the financial period by the weighted average number of shares outstanding.

Unaudited consolidated statement of financial position As at 30 June 2012

Unaudited consolidated statement of changes in equity for the period from 01 January 2012 to 30 June 2012

Unaudited consolidated cash flow statement

for the period from 01 January 2012 to 30 June 2012

Notes to the unaudited consolidated financial statements for the period from 01 January 2012 to 30 June 2012

1 Organization and business activity

Princess Private Equity Holding Limited (the "Company") is an investment holding company established on 12 May 1999. The Company's registered office is Tudor House, St. Peter Port, Guernsey, GY1 1BT. The Company is a Guernsey limited liability company that invests in a broadly diversified portfolio of private market investments through its wholly-owned subsidiary, Princess Private Equity Subholding Limited (the "Subsidiary"). The Subsidiary together with the Company form a group (the "Group").

Since 13 December 2006 the shares of the Company have been listed on the Prime Standard of the Frankfurt StockExchange. As of 1 November 2007 the shares have also been listed on the main market of the London Stock Exchange.

2 Basis of preparation

The condensed interim consolidated financial information has been prepared in accordance with IAS 34 - Interim Financial Reporting. The condensed interim consolidated financial information does not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the Group's annual consolidated financial statements for the period ended 31 December 2011, which have been prepared in accordance with International Financial Reporting Standards.

The accounting policies adopted are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the period ended 31 December 2011, except for the adoption of the following amendments mandatory for annual periods beginning on or after 1 January 2012.

IFRS 1 (effective 1 July 2011) - First-time adoption of International Financial Reporting Standards

IFRS 7 (effective 1 July 2011) - Financial instruments: disclosures - risk exposure from transferred financial assets

IAS 12 (effective 1 January 2012) - Deferred tax

The Board of Directors has assessed the impact of these amendments and concluded that these standards and new interpretations will not affect the Group's results of operations or financial position.

The following standards, interpretations and amendments to published standards that are mandatory for future accounting periods, but where early adoption is permitted now have not been duly adopted.

IFRS 7 (effective 1 January 2013) - Financial instruments: disclosures - Offsetting of financial assets and liabilities IFRS 9 (effective 1 January 2015) - Financial instruments

IFRS 10 (effective 1 January 2013) - Consolidated financial statements

IFRS 11 (effective 1 January 2013) - Joint arrangements

IFRS 12 (effective 1 January 2013) - Disclosure of interests in other entities

IFRS 13 (effective 1 January 2013) - Fair value measurement

IAS 1 (effective 1 July 2012) - Presentation of items of other comprehensive income IAS 19 (effective 1 January 2013) - Employee benefits

IAS 27 (effective 1 January 2013) - Separate financial statements

IAS 28 (effective 1 January 2013) - Investments in associates and joint ventures IAS 32 (effective 1 January 2014) - Financial instruments: Presentation

The Board of Directors is in the process of assessing the impact of these amendments and believes that these new accounting standards and interpretations will not significantly affect the Group's results of operations or financial position but will require additional disclosures with respect to the valuation and treatment of financial assets.

3 Shareholders above 3% of Ordinary shares issued

CVP/CAP Coop Personalversicherung holds 3'551'206 shares which is 5.11% of all ordinary shares issued. Deutsche Asset Management Investmentgesellschaft mbH holds 6'095'900 shares which is 8.77% of all ordinary shares issued. Vega Invest Fund plc holds 4'785'000 shares which is 6.89% of all ordinary shares issued. Societe Generale Option Europe holds 3'724'557 shares which is 5.36% of all ordinary shares issued. Witan Investment Trust plc holds

2'210'000 shares which is 3.18% of all ordinary shares issued. Abrams Capital LLC, holds 2'341'439 shares which is 3.37% of all ordinary shares issued. Red Rocks Capital LLC holds 2'111'650 shares which is 3.04% of all ordinary shares issued.

4 Segment calculation

On 27 July 2011, the Company entered into a 3-year multi-currency revolving credit facility with Lloyds TSB Bank plc for EUR 80m.

In relation to the interest charged, on drawn amounts, this is calculated at a margin of 3.25% per annum above the applicable LIBOR rate or, in relation to any loan in EUR, EURIBOR. In addition there is a commitment fee of 1.05% per annum calculated on the daily undrawn amounts plus a once off arrangement fee of EUR 800'000 and a monitoring fee in the amount of EUR 25'000 per annum.

In the event that the facility will be provided by more than one lender then there will be an agency fee of EUR 40'000 per annum.

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 350m, a cash reserve of at least EUR 3m and a total asset ratio (total debt plus current liabilities as a percentage of restricted net asset value) not greater than 25%.

Previously, on 25 September 2009, the Company entered into a 3-year credit facility, with a large international bank and other lenders. The credit facility was structured as a combination of committed senior term and revolving facilities and a subordinated term facility.

The Company repaid and terminated its junior facility of EUR 32.5m on 18 August 2011 and terminated the senior facility with effect from the same date.

The credit facility formed part of a EUR 170m syndicated term loan and revolving facilities (the "Syndicated Facilities") available to the Company, Pearl Holding Limited and Partners Group Global Opportunities Limited (each a "Borrower") that could be allocated among the Borrowers as per individual demand and as determined by Partners Group AG (the "Allocation Agent"), subject to certain minimum and maximum limits.

The Syndicated Facilities were comprised of senior and junior facilities of EUR 85m each. The junior term facilities were provided by Green Stone IC Limited and Partners Group Finance CHF IC Limited, each a Guernsey limited liability company, which since 21 December 2009 had split the subordinated term facility in the proportion of EUR 15.67/EUR 69.33m respectively.

Green Stone IC Limited is majority owned by partners and employees of Partners Group Holding AG while Partners Group Finance CHF IC Limited is a wholly owned subsidiary of Partners Group Holding AG.

The senior term facilities were provided by Partners Group Finance CHF IC Limited, the large international bank and effective from 17 February 2010, an additional Swiss based bank with whom Partners Group Finance CHF IC Limited transferred part of its commitment.

In relation to the senior revolving facility, interest on drawn amounts was calculated at a rate of 5% per annum (calculated as a margin of 2.75% on drawn amounts plus a facility fee of 2.25% on the applicable senior facility

amount) above the applicable EURIBOR rate. In addition there was a facility fee of 2.25% per annum on the remaining undrawn applicable senior facility amount.

The margin on drawn amounts under the junior facility was 8.75% per annum above EURIBOR. No facility fee was due under the junior facility.

In the period ended 31 December 2010, the Company paid a participation fee of 2% of their commitment to Partners Group Finance CHF IC Limited of EUR 244'706 and EUR 152'941 to the Swiss based bank in connection with the Company's need to utilize the senior facility. In addition an annual agency fee of EUR 20'000 was paid to the senior facility agent.

No such fees have been paid during the period ended 31 December 2011.

The Company had to maintain a minimum adjusted net asset value and a minimum cash balance, which in the case of the Company is EUR 350m and EUR 3m respectively. In addition the Company had to have a net asset cover (total indebtedness to adjusted net asset value) of less than 25%.

The facilities, in relation to the Company, were secured, inter alia, by way of a pledge over the shares in Princess Private Equity Subholding Limited and a pledge over the bank accounts and the inter-company loans within the Group.

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 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 Group's shares during 2012 and 2011.

The net asset per share is calculated by dividing the net assets in the consolidated statement of financial position by the number of actual shares outstanding at the end of the reporting period.

11 Dividends

The Board of Directors of Princess Private Equity Holding Limited declared a dividend of EUR 0.24 paid on 22 June 2012 on each Ordinary Share. The dividend paid on 22 June 2012 amounted to EUR 16.7 million (2011; EUR 31.4 million).

Registered Office

Princess Private Equity Holding Limited Tudor House

Le Bordage

St. Peter Port

Guernsey, GY1 1BT

Channel Islands

Phone +44 1481 711 690

Facsimile +44 1481 730 947

Registered number: 35241

Investment manager

Princess Management Limited

Guernsey, Channel Islands

Investor relations

Jan-Frederik Modell

Phone: +44 (0)20 7575 2753

E-mail: jan-frederik.modell@partnersgroup.com

Administrator

Partners Group (Guernsey) Limited Guernsey, Channel Islands

Auditors

PricewaterhouseCoopers CI LLP Royal Bank Place

1 Glategny Esplanade

St Peter Port

Guernsey, GY1 4ND

Channel Islands

Trading Information

A copy of this announcement will be available upon the Company's website (www.princess-privateequity.net).

This document does not constitute an offer to sell or a solicitation of an offer to buy or subscribe for any securities and neither is it intended to be an investment advertisement or sales instrument of Princess Private Equity Holding Limited. The distribution of this document may be restricted by law in certain jurisdictions. Persons into whose possession this document comes must inform themselves about, and observe any such restrictions on the distribution of this document. In particular, this document and the information contained therein is not for distribution or publication, neither directly nor indirectly, in or into the United States of America, Canada, Australia or Japan.

This document may have been prepared using financial information contained in the books and records of the product described herein as of the reporting date. This information is believed to be accurate but has not been audited by any third party. This document may describe past performance, which may not be indicative of future results. No liability is accepted for any actions taken on the basis of the information provided in this document. Neither the contents of Princess' website nor the contents of any website accessible from hyperlinks on Princess' website (or any other website) is incorporated into, or forms part of, this announcement.