Transilvania Investments Alliance S A : Q1 2024 Financial Results (conference May 21, 2024 – call transcript)

Conference call, Q1 2024 Financial Results, 21.05.2024, 12:00 pm

Welcome to the Transilvania Investments conference for the presentation of the financial results recorded in the first quarter of 2024. Today's conference will be held by the members of the Executive Board, namely Răzvan Raţ, Executive Vice-Presidentand Stela Corpacian, Executive

Vice-President.

The material presented during the conference is also available on our website, under Investor relations/Presentations section, and will also be viewed during the presentation. After the presentation, we will have a Q&A session.

Please be informed that this conference will be recorded, with the audio recording to be posted on our company's website in the previously indicated section. Moreover, please note that the personal data you have provided upon registration to this conference will be processed pursuant to the company's policy regarding personal data processing. That being said, Răzvan, you have the floor.

Răzvan Raț: Good afternoon! First of all, I would like to thank you for attending this meeting. I'm going to let my colleague, Stela Corpacian, to present the chapter regarding the indicators. This presentation will have two chapters.

Stela Corpacian: Thank you, Răzvan! Good afternoon! I'm going to start with a presentation and overview of the main indicators recorded on 31 March 2024, and we are going to go into more depth during the presentation.

Thus, on 31 March 2024, Transilvania Investments recorded a net profit worth RON 16.69 million, 30% lower than the net profit achieved at the end of the first quarter of 2023, the latter being influenced by more favourable evolutions for some issuers from the Company's FVTPL portfolio in the first quarter of 2023. It should be noted that, at the same time, the profit before tax recorded at the end of the first quarter of 2024 is RON 16.52 million, namely 13.72% higher than the profit estimated in the revenue and expenses budget for the first quarter of 2024.

On 31 March 2024, the company's net operating income amounts to RON 24 million, down by 22% compared to the amount recorded on 31 March 2023 for the same reasons indicated before, namely the positive developments of some issuers, but higher by RON 1.89 million than the profit estimated in the revenue and expenses budget for the first quarter of 2024.

Operating expenses currently amount to RON 7.87 million, an increase by 4% than the ones recorded in the first quarter of 2023 and lower than the ones estimated in the revenue and expenses budget for the first quarter of 2024.

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Total assets on 31 March 2024, amount to RON 1,942 million, 34% higher than their value in the same period last year and 6.46% higher compared to 31 December 2023 due to the positive development of the capital market in Romania.

The financial instrument portfolio value as at 31 March 2024 is RON 1,901 million, 35% higher than the portfolio value as at 31 March 2023, namely a significant increase, and increasing by 9% than the value recorded on 31 December 2023.

Also, the net asset value increased significantly on 31 March 2024, amounting to RON 1,850 million or RON 0.8599/share, 34% higher than the net asset value at 31 March 2023 and 6.8% higher than the value reported for 31 December 2023.

The Transilvania Investments share closing price at BSE as at 29 March 2024 is RON 0.3280/share, higher by 12.71% compared to 31 March 2023 and higher by 0.61% than the closing price recorded at 31 December 2023.

The share trading discount is 62%, also higher by 3% compared to share trading discount as at 31 December 2023. This is mainly due to the net asset value per unit which recorded a higher increase than the trading price of Transilvania Investment shares.

As you can see in the next slide, during January - March 2024, the net asset value increased by over 6.8%, from RON 1.73 billion to RON 1.80 billion. Therefore, the Net Asset Value per Share reached at 31 March 2024 the record value of RON 0.8599, being the highest amount of the net asset value recorded by Transilvania Investments. As I previously indicated, these positive results were also driven by the capital market context in Romania. Therefore, the Romanian capital market continued to increase throughout the first quarter, the BET TOTAL RETURN index increasing by 12.3% as compared to the beginning of the year. The total trading amount on all types of financial instruments on the regulated market recorded an increase of 69% as compared to the same period of 2023.

In the next slide you can see the cash flow in the first quarter of 2024. Therefore, as you can notice, cash and cash equivalents decreased from RON 60 million to RON 16.8 million. This decrease is mainly due to the fact that the acquisitions of holdings have been significantly higher than the sales of holdings, acquisitions amounted to RON 65.5 million, while sales amounted to RON 36.5 million. A positive development on the cashflow comprises in dividend income, amounting to RON 11.9 million, and a negative development is the corporate tax payment amounting to RON 15.3 million and the payment of suppliers and employees, amounting to RON

5.3 million, as well as the dividend payment, amounting to RON 1 million, and the state tax payment RON 1.826 million, while the other items had insignificant developments.

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We will continue with the analysis on the statement of the financial position as at 31 March 2024. As previously indicated, in the first months of the financial year 2024, the value of total assets increased with 6.5%, from RON 1,824 million to RON 1,941 million. The most important development in terms of assets lies in the increase in financial assets measured at fair value through other comprehensive income, from RON 875 million to 1,028 million. As previously stated, this increase is due to the increase in the Romanian capital market which had positive influence in the Transilvania Investments portfolio.

The other elements of assets had the following developments: cash and cash equivalents decreased from RON 60 million to RON 16.8 million, as previously stated as a result of significant acquisitions of various holdings; the financial assets measured at fair value through profit or loss had an insignificant decrease from RON 811 to RON 803 million, and the other elements remained relatively constant to the values recorded at the end of the previous year.

With regards to liabilities, they also had a similar amount to the end of the previous year, namely RON 91 million. The most important category is deferred income tax liabilities, which correspond specifically to the value of financial assets at fair value through other comprehensive income, increasing from RON 57 million to RON 75 million. Current income tax liabilities had a significant decrease as a result of their payment in the first quarter, as previously stated, when I analyzed the cashflow. The total equity had a positive evolution, increasing from RON 1,732 million to RON 1,850 million. This increase is due both to the retained earnings, as well as to the revaluation reserves on financial assets at fair value through other comprehensive income.

Regarding the statement of profit or loss as at 31 March 2024, as we can note, Transilvania Investments recorded a net profit of RON 16.69 million as compared to RON 23.95 million in the previous year and this is due, as I previously stated, to the increases for certain holdings in the FVTPL portfolio, increases which were not recorded in the first quarter of 2024. At the same time, we should point out the positive evolution of the dividend income, namely RON 12 million, specifically due to the dividend income afferent to the stake held in BRD. The net gain on financial assets at fair value decreased from RON 29.79 million to RON 11.34 million. Overall, income decreased from RON 31 million to RON 24 million. The total expenses remained relatively steadily, with an insignificant increase, from RON 7.6 million to RON 7.9 million, mainly due to the personnel benefit expenses which increased due to the Stock Option Plan recorded in the first quarter of 2024, amounting to RON 1 million, compared to RON 300 thousand in the first quarter of 2023. The other elements of the expenses are relatively constant, as in the first quarter of 2023. As previously stated, the net profit is worth RON 17 million. Please note the gain from revaluation of financial assets measured at fair value through other comprehensive income, namely a significant amount of RON 103 million, as shown in the financial statement analysis, this having a positive result in the increase in the financial assets measured at fair value through other comprehensive income. Therefore, the total comprehensive income amounts to RON 119 million, recording a significant increase compared to the one achieved in the first quarter of 2023, amounting to RON 25 million.

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If we look at the evolution of the comprehensive income, compared to the amounts forecasted in the revenue and expenditure budget we see a positive evolution. Therefore, the profit before tax amounts to RON 16.5 million, as compared to RON 14.5 million, estimated in the revenue and expenditure budget. This positive evolution is mainly due to the dividend income, which is above the amount provided for in the budget, but mostly to the gain on financial assets measured at fair value through profit or loss, which shows a positive activity of the trading department. The total expenses are within the limits stated in the revenue and expenditure budget.

Moving on to the evolution of Transilvania Investments shares in the first quarter of 2024, we notice a constant evolution. Thus, the closing price in the last day of the quarter, amounting RON 0.3280/share, is approximately the same with the closing price at the end of 2023.

The trading discount increased to 62% from 55% at the end of March 2023, an increase due, as I previously stated, to the significant rise of the net asset value per share, which increased by 33%, from RON 0.6432 per share to RON 0.8599 per share. The trading price increased only by 12% compared to the increase of 33%. Here we see a high potential on increasing the price of TRANSI shares, so that they catch up the significant increase of the net assets per share.

In the next slide, by reference to the net asset value reported for 31 March 2024, the market price of TRANSI share recorded a significant discount of 62%, as previously indicated. The share price also recorded a significant discount by reference to Top 10 portfolio holdings (including cash and equivalents), namely 49%.

Regarding the top 10 holdings, the structure is relatively similar with the one recorded at the end of the previous year. The only change consists in the entry of the Nova Tourism Consortium S.A. in top 10 holdings, given that the stake held in the company H.R. Sud, which was previously ranked in top 10 holdings, was brought as contribution in kind to the increase in the share capital of Nova Tourism in the first quarter. The other holdings maintained a similar structure as previously, as well as their weight in total assets.

As previously stated, the total asset value increased by 6% in the first quarter of 2024. It also resulted in a positive increase in the net asset value and the number of companies in the portfolio has a continuous decrease, as I indicated within the previous presentations, according to our portfolio restructuring strategy, as well as the exit strategy. The financial instruments portfolio also had a significant increase, from RON 1,799 million to RON 1,918 million. Cash and cash equivalents decreased as a result of significant holding acquisitions in the first quarter of 2024.

The portfolio structure by sectors also remained relatively constant with the end of the previous year, so that the banks supersector accounts for 36%, while the travel and leisure supersector accounts for 21%. All the other sectors have similar levels to the previous year.

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In terms of the financial instrument portfolio variation, we notice that the most significant increase comes from the share portfolio, and this is mainly due to the increase in holdings in the banking sector, which brought a positive adjustment amounting to RON 111 million, as well as the energy sector holdings, amounting to RON 28 million, while the other sectors have insignificant increases or reductions.

I'm going to ask my colleague, Răzvan Raţ to present the strategic goals and the business lines that we are going to focus upon in the next 4 years.

Răzvan Raț: Thank you! In the first stage, we are going to overview the investments, namely the financial investments made in the first quarter of 2024. The total investments amount to RON

65.95 million, divided into acquisitions on the BSE regulated market, worth RON 46.5 million, acquisition of own shares, amounting to RON 2.8 million, government securities, RON 16.62 million and equity holdings within the private equity fund CEECAT FUNDS, amounting to EUR 0.16 million.

In the first quarter, our share acquisitions focused on sectors already represented in the company's portfolio. We mostly looked at the financial sector, with BRD, Banca Transilvania and I'm also going to include here Fondul Proprietatea, at energy and utilities, with OMV, Hidroelectrica, Transgaz and Electrica, and on other sectors, where we made investments in DIGI and One United Properties. Own-sharesbought-back amounted to RON 2.83 million. Based on the resolution of the Extraordinary General Meeting, the buy-back program was completed for the shares which will be cancelled, and we currently run a buy-back program for the shares which will be assigned to employees, based on the Stock Option Plan program which was approved by the General Meeting of Shareholders.

In terms of disinvestments, in the first quarter of 2024, the total sales amounted to RON 35 million. The sales on the BSE regulated market amounted to RON 34.36 million and the sale of fund units amounted to RON 0.64 million.

Also, regarding the sales, we carried out transactions with a view of partially marking profit in the sectors represented in the portfolio, i.e. financial - BRD, Banca Transilvania, Fondul Proprietatea and Evergent Investments, energy and utilities - OMV Petrom, Hidroelectrica, Romgaz, Electrica and Nuclearelectrica, and other sectors - DIGI.

The General Meeting of Shareholders of 22 April 2024 approved the new strategy for the period 2024-2028. The strategy approved by the General Meeting included a slight change from the previous strategy, namely 4 strategic lines for business development were approved. In the past we had 5 development lines. We now only have travel, real estate, active trading and private equity.

In the area of travel, we aim at transforming/consolidating the management models for the portfolio of companies operating in the travel sector. By way of example, acquiring specialized operating services and/or operation under international brands can also be considered.

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The active trading area includes the strategy afferent to issuers actively traded on financial markets, particularly our market, BVB, with high liquidity, with a view of maintaining an adequate liquidity level profile of the managed portfolio and will target both short- and long-term investment horizons.

In the area of private equity, we aim at developing and effectively capitalizing on the potential offered by the niche of such investments, both in new sectors and by a private equity approach for the assets in our portfolio. We consider this area because we, as a fund, we can make such investments, and our investors could benefit from our investments made in this field.

According to the strategy from an investment policy perspective, we pursue medium and long- term investments because these allow the Company to capitalize on investment opportunities characterized by a low liquidity level, such as private equity. We aim at reaching a balanced strategy and by combining the growth component, focused on long-term growth, with yield, focused on constant revenues. We consider varied and attractive opportunities for purposes of maximising return and we also try to minimize the risk as much as possible.

Restructuring the historical portfolio of holdings that have exhausted their growth potential or have low growth potential. We believe that restructuring the historical portfolio is essential to maintain the return and affordability of the portfolio on a long-term, aiming to capitalize on the portfolio and to reallocate resources on investments which can provide higher growth potential.

In terms of the return profile, the Company seeks to constantly improving the return profile of the managed portfolio using the entire range of instruments permitted. Here I would consider investments in shares. These provide capital growth opportunities, while government bonds provide stable revenues and also a certain level of protection against the market volatility. At the same time, we want to improve the return including by increasing the weight of dividends generated by the sub-portfolio of subsidiaries.

We focus on a balanced shareholder remuneration policy, which aims both at direct remuneration, through dividend gain, and at indirect remuneration, meaning capital gain from the reduction of the trading discount. Dividends provide a constant cashflow to shareholders, ensuring a specific level of stability and predictability of the investment return. In addition to dividends, we also aim at increasing the value of the capital invested by shareholders, by reducing the trading discount of shares compared to the net asset value.

If we look at item 7 of the strategy - NAVPS increase and discount reduction- it is directly related to this item (shareholder remuneration). For the next period we aim at increasing NAV per share by at least 6%, yearly, except for this year, when the increase shall be calculated on a pro-rata basis, from 30 April, when the strategy entered into force, until the end of the year. Also, we aim at reducing the discount by 7%, yearly.

In this area, by transparency and efficient communication with the shareholders, we believe we can reduce uncertainty and increase the level of trust in the real value of assets managed by us.

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At the same time, including the remuneration policy, which was approved by the General Meeting of Shareholders, is directly related, in terms of performance, to fulfilling the criteria for increasing the net asset value and reducing the discount. Considering its share, 90% of the share allocation weight for the management is directly related to fulfilling these two criteria of the strategy.

Moving on to the Investment Policy Statement, we have a long-term investment horizon. Indeed, the Company pursues a constant and stable growth of its portfolio through investments made on solid grounds, which generally require a longer period to reach maturity. Although I would say that the main focus is on a medium- and long-term, we still remain open to short-term opportunities which can bring added benefits.

The financial markets are dynamic and sometimes provide short-term opportunities which can bring additional benefits. At the same time, we aim at identifying these opportunities, without comprising our long-term goals we have set. Short-term investments may provide faster liquidity and allow a faster access to capital, when needed. We can also capitalize on the market variations or certain short-term events that may contribute, in their turn, to the general performance of the return.

An asset allocation policy, the principle of investment diversification. Long-term diversification is mainly helpful in reducing the market volatility and we can also consider the area of maximising returns.

An active investment risk management. The company implements measures to monitor investment risks, as well as to respond quickly to any unforeseen situations. An efficient risk management contributes to improving the portfolio performance, by reducing potential losses to a minimum and also maximizing profit opportunities. We aim at protecting the investor's capital through a thorough risk management, at the same time providing the stability and profitability of the portfolio.

Corporate governance. Applying a Corporate Governance Code ensures transparency of operations and builds investor's trust in the company. By applying the provisions of the Corporate Governance Code of BSE we undertake to observe the highest level of standards in terms of transparency, responsibility and ethics. There is particular emphasis on the observance of the shareholders' right to information, making sure they are always up to date and involved in important decisions made by the company, therefore building their trust.

Information about the company. Transilvania Investments Alliance is an Alternative Investment Fund Manager (A.I.F.M.) and a Retail Investor Alternative Investment Fund, of closed-end type, diversified, set up as an investment company, self-managed, authorized by the F.S.A.

The Company manages an investment portfolio which has a main exposure on the Romanian capital market, mainly on listed shares of companies from banks, travel and leisure, real-estate

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and energy sectors. The Company also invests in units issued by undertakings for collective investment in transferable securities, in securities and alternative investment funds.

It is managed in a two-tier management system by an Executive Board which carries out its activity under the control of the Supervisory Board.

The shares issued by the Company are traded on the Bucharest Stock Exchange, with the TRANSI symbol, on the main segment, Premium category and they are included in BET-FI,BET-XT, BET- XT-TR and BET-BK indices.

Regarding shareholding, 50.79% of shares are held by resident individuals, 0.61% by non-resident individuals, 47.83% resident legal entities and the remaining 0.77% by non-resident legal entities.

Once again, thank you for your presence. In the Q&A session, if you have any questions, we are more than happy to provide answers.

OK. Given that there seem to be no questions, I would like to thank you one more time for being here. We are going to meet again in the meeting for the financial statements for the second quarter, but should any questions arise from the shareholders, you can also send them via e-mail and we will answer them during the next conference or we can post the answers on the company website, to make the answers available for all shareholders. Thank you, once again!

Good-bye!

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