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Reinet Investments S.C.A. Depositary Receipts
issued by Reinet Securities SA
(Incorporated in Switzerland)
ISIN: CH0045793657
Depositary Receipt Code: REI
COMPANY ANNOUNCEMENT FOR IMMEDIATE RELEASE
MANAGEMENT STATEMENT FOR THE FIRST QUARTER ENDED 30 JUNE 2012
The Board of Reinet Investments Manager S.A. announces the results of Reinet Investments S.C.A. for the first quarter ended 30 June 2012.
Key financial data
* Net asset value at 30 June 2012: EUR 3 943 million, an increase of 8 per cent from 31 March 2012
* Net asset value per ordinary share at 30 June 2012: EUR 20.12 (31 March 2012: EUR 18.62)
* British American Tobacco p.l.c: fair value increased by EUR 199 million during the quarter
Consolidated Net Asset Value (NAV)
The NAV of Reinet Investments S.C.A. at 30 June 2012 comprised:
30 June 2012 31 March 2012
EUR m % EUR m %
Listed
investments
British 3 389 85.9 3 190 87.4
American
Tobacco
p.l.c.
Other 2 0.1 2 0.1
Cash and 338 8.6 368 10.1
liquid funds
Unlisted
investments
Trilantic 177 4.5 149 4.1
Capital
Partners (1)
US land 94 2.4 95 2.6
development
and
mortgages(1)
36 South 99 2.5 90 2.5
Jagersfontein 84 2.1 82 2.2
and other
diamond
interests
JPS Credit 58 1.5 54 1.5
Opportunities
Vanterra Flex 38 1.0 29 0.8
Investments
Vanterra C 33 0.8 24 0.6
Change TEM
Milestone 17 0.4 10 0.3
China
Opportunities
Renshaw Bay 6 0.2 3 0.1
Other 117 2.9 82 2.2
723 18.3 618 16.9
Bank
borrowings
and collar
financing
Borrowings (456) (11.6) (445) (12.2)
Derivative 23 0.6 30 0.8
asset
put and
call options
Other
liabilities
Fees payable (28) (0.7) (70) (1.9)
and other
liabilities,
net of
other assets
Funding by (35) (0.9) (32) (0.9)
minority
partners
3 956 100.3 3 661 100.3
Minority (13) (0.3) (12) (0.3)
interest
3 943 100.0 3 649 100.0
(1)This amount represents the 100 per cent investment, whereas the comments below use figures which represent Reinets 80 per cent investment.
All of the underlying assets are held by Reinet Fund S.C.A., F.I.S. ('Reinet Fund' or the Fund).
LISTED INVESTMENT IN BRITISH AMERICAN TOBACCO P.L.C. (BAT)
Reinet remains one of the largest shareholders in BAT, holding some 84 million shares representing 4.3 per cent of BATs capital. At 30 June 2012, the value of the investment in BAT in the balance sheet of Reinet was EUR 3 389 million, being 86 per cent of Reinets NAV. The BAT share price on the London Stock Exchange increased over the period under review from Pound 31.51 to Pound 32.42.
Reinet received a dividend from BAT during the period amounting to EUR 92 million (Pound 75 million), this being BATs final 2011 dividend.
CASH AND LIQUID FUNDS
Reinet holds cash on short-term deposit principally in European banks. Reinet also holds Pound 119 million (EUR 147 million) in a sterling liquidity fund and EUR 20 million in a euro denominated liquidity fund. Both funds hold highly rated short-term commercial paper and have short-term AAA credit ratings.
UNLISTED INVESTMENTS
Trilantic Capital Partners
Reinet has invested both in the Trilantic management companies and as a partner in the underlying funds. As at 30 June 2012, Reinet and its 20 per cent minority partners in Trilantic have invested the equivalent of EUR 132 million, net of capital repayments, in the initial Trilantic management company investment and the funds under Trilantic management. The investment in Trilantic is carried at the estimated fair value of EUR 177 million at 30 June 2012 (March 2012: EUR 149 million), based on recent valuations prepared by Trilantic. Of the EUR 177 million, some EUR 35 million is attributable to Reinets partners.
At 30 June 2012 Reinet had remaining commitments of EUR 46 million to invest in these funds, after taking into account the amounts payable by the minority partners.
In May 2012, Reinet approved a commitment of some EUR 79 million (US Dollars 100 million) to Trilantic in respect of the new Trilantic Capital Partners V (North America) L.P. Under the terms of the original strategic agreement, no management fee or carried interest will be payable to Trilantic in respect of the additional commitment.
United States land development and mortgages
Reinet has co-invested with partners to acquire interests in real estate development projects, usually properties where infrastructure services have been laid but where construction of properties has not yet commenced. It has also invested in mortgage debt on such developments and in specific properties. The investments are principally in Florida, Colorado and North and South Carolina.
At 30 June 2012, Reinet had invested a total of EUR 71 million in these projects. The investment is carried at the estimated fair value of EUR 94 million (March 2012: EUR 95 million) of which EUR 75 million is attributable to Reinet and EUR 19 million to its partners.
Reinet is committed to invest a further EUR 7 million to acquire further mortgage debt, to fund development projects and acquire additional land and properties.
36 South global macro/volatility funds
Reinet has co-invested with the 36 South management team in the 36 South fund management and distribution companies. It is also an investor in the funds under management. These funds are established through an Irish-registered investment fund 36 South Funds PLC.
36 South is an absolute return fund manager which specialises in managing global macro/volatility funds. The fund management philosophy is to invest when market estimates of volatility are mis-priced. The volatility may apply to a wide range of underlying asset classes ranging from currencies and interest rates to equities.
Reinet has invested its full commitment of EUR 88 million in 36 South. Of this, EUR 15 million represented the initial investment in and loans to the jointly-held fund management activities; the balance of EUR 73 million being Reinets investment in the funds under management. During the year ended 31 March 2012, EUR 3 million of the loan was repaid. The investment in 36 South Funds PLC is carried at its fair value of EUR 87 million at 30 June 2012 (March 2012: EUR 78 million), together with the fair value of the loan of EUR 12 million, for a total of EUR 99 million.
Jagersfontein and other diamond interests
Reinet is an investor in an entity which extracts diamonds from the waste tailings from mining operations which began over a century ago. The tailings are located at Jagersfontein in South Africa. Developments in terms of gemstone extraction technology since the mines were first excavated mean that there is now the potential to recover stones which were previously treated as waste. In addition, Reinet has invested in a separate company which owns assets pertaining to mining rights and related activities to source diamonds on another property in South Africa.
As anticipated at the time of making the investment, Reinet has entered into agreements to sell a substantial part of its holdings in these projects to third parties, including local Black Economic Empowerment organisations. The sale of 42 per cent of the holdings in Jagersfontein was completed in the quarter under review, however other contracts are still subject to certain regulatory approvals being obtained and conditions precedent being met. Upon completion of the transactions, Reinet will have an equity interest of between 45 to 49 per cent in each of the ventures.
Sales proceeds amounting to EUR 1 million were received and a receivable amount of EUR 8 million is included in the carrying value below.
As at 30 June 2012, Reinet had provided loans of EUR 49 million and held equity interests of EUR 17 million in the above operations.
The investments in the underlying entities along with proceeds receivable are carried at their estimated aggregate fair value of EUR 84 million at 30 June 2012 (March 2012: EUR 82 million). Reinet is committed to invest a further EUR 29 million in these projects. The exposure to the South African rand has been substantially hedged by borrowings in that currency.
JPS Credit Opportunities Fund (Cayman) Ltd. (JPS Credit Fund)
The investment in JPS Credit Fund, which was the first transaction introduced to Reinet by Renshaw Bay, focuses on liquid opportunities in the credit markets.
JPS Credit Funds investment objective is to achieve attractive risk-adjusted returns through both capital appreciation and current income by taking positions in publicly traded and privately held securities, derivatives and other instruments (including bonds, credit default swaps and index options), primarily in credit and credit-related markets.
Reinet has invested its full commitment of EUR 52 million in JPS Credit Fund. This investment is carried at the estimated fair value of EUR 58 million at 30 June 2012 (March 2012: EUR 54 million).
Vanterra Flex Investments L.P. (Vanterra)
Reinet is an investor in Vanterra and in its general partner.
Vanterra was established in March 2010 to invest in listed and unlisted funds and to make direct investments in the United States and emerging markets. Vanterra has invested alongside Reinet in Trilantic and in the United States land development and mortgages. It is also an investor in Vanterra C Change Transformative Energy & Materials I, L.P. Vanterra seeks to construct a globally diversified private equity portfolio providing investors with long-term capital appreciation.
As at 30 June 2012, EUR 37 million of committed funds plus an additional EUR 3 million in respect of expenses had been invested in the fund. This investment is carried at the estimated fair value of EUR 38 million at 30 June 2012 (March 2012: EUR 29 million).
Reinet is committed to invest a further EUR 42 million in Vanterra.
Vanterra C Change Transformative Energy & Materials I, L.P. (TEM)
Reinet is an investor in TEM and in its general partner.
TEM was established in July 2010 to invest in companies and projects providing products or services that supply cleaner energy; create a more cost effective building environment through the use of energy efficient technologies; and develop renewable resources as a substitute for fossil and other traditional fuels.
As at 30 June 2012, capital contributions of EUR 35 million had been made to the fund. This investment is carried at the estimated fair value of EUR 33 million at 30 June 2012 (March 2012: EUR 24 million).
Reinet is committed to invest a further EUR 17 million in TEM.
Milestone China Opportunities Fund III L.P. (Milestone III)
Reinet is an investor in Milestone III and in its general partner.
In June 2011, Reinet entered into an agreement to invest in Milestone III, its general partner and to co-invest in certain of Milestone IIIs investments. Milestone III is a fund which will invest in high-growth companies with unique products and market positioning seeking expansion or acquisition capital in China.
As at 30 June 2012, capital contributions of EUR 10 million had been made to the fund and EUR 7 million was invested in the general partner. This investment is carried at the aggregate estimated fair value of EUR 17 million at 30 June 2012 (March 2012: EUR 10 million).
Reinet is committed to invest a further EUR 102 million in Milestone III and co-investment opportunities that it may present.
Renshaw Bay
In February 2011, Reinet announced plans for a co-investment with Mr William T. Winters and RIT Capital Partners to establish an investment advisory and management business to be known as Renshaw Bay. This business is managed by Mr Winters, a former Co-Chief Executive Officer of JP Morgan Investment Bank.
Reinet owns 25.01 per cent of the business alongside Mr Winters, who holds 50 per cent, and RIT Capital Partners, which holds 24.99 per cent. Reinet has invested EUR 6 million to date in Renshaw Bay and has committed to invest an additional EUR 6 million. In addition to its involvement in the advisory and management company itself, Reinet will also co-invest in future opportunities to be determined by the partners. During the year under review, Reinet invested in the JPS Credit Opportunities Fund, an opportunity identified by Renshaw Bay.
Other unlisted investments
This portfolio includes small businesses with growth potential as well as investments in specialised investment funds focused on developing markets and niche sectors. The portfolio is valued at its fair value of EUR 117 million in the balance sheet at 30 June 2012 (March 2012: EUR 82 million), based on a detailed evaluation of each of the investments.
BANK BORROWINGS AND COLLAR FINANCING
Borrowings
Reinet has borrowed ZAR 443 million to fund its investments in South African projects. At 30 June 2012, the fair value of the borrowing was EUR 43 million (March 2012: EUR 43 million).
In February 2012, Reinet entered into a Pound 300 million medium-term financing facility. At 30 June 2012, the fair value of the borrowing was EUR 362 million (March 2012: EUR 350 million). The transaction incorporates the purchase by Reinet of put options and the sale by Reinet of call options over approximately 13.7 million BAT shares. The net premium cost in respect of the options is payable to the counterparty over the life of the transactions, which run to 2017. The unpaid premium is carried as a liability at its fair value of EUR 51 million as at 30 June 2012 (March 2012: EUR 52 million).
Derivative asset put and call options
As part of the Pound 300 million financing facility, Reinet purchased put options which provide protection should the value of the BAT shares used to secure the borrowings fall below a certain amount. Proceeds received as a result of the put option being exercised would be used to repay the amounts borrowed. Reinet has also sold call options over an equal number of BAT shares. Both the put options and the call options are carried at their respective fair values at the balance sheet date. The net derivative asset is carried at its fair value of EUR 23 million at 30 June 2012 (March 2012: EUR 30 million).
OTHER LIABILITIES
Fees payable and other liabilities, net of other assets
Fees payable and other liabilities comprise principally a provision of EUR 4 million in respect of the proportionate accrual of the performance fee payable and an accrual of EUR 6 million in respect of the management fee together with deferred taxation liabilities of EUR 15 million and other operating expenses payable. The performance fee and management fee are payable to Reinet Investment Advisors Limited.
Funding by minority partners
Reinet invests in certain investments, principally Trilantic Capital Partners and US land and developments, along with minority partners. As capital calls are received, minority partners fund their share by advancing funds to Reinet; as distributions are received from investees, Reinet refunds their pro-rata share to the minority partners. The net amounts received are shown as funding by minority partners.
SHARES IN ISSUE
The number of shares in issue remained unchanged during the period at 195 942 286. This figure includes 1 000 management shares held by the General Partner.
STATUTORY INFORMATION
Primary listing
Reinet Investments S.C.A. shares are listed on the Luxembourg Stock Exchange with the ISIN number LU0383812293. Thomson Reuters code REIT.LU and Bloomberg code REIN.LX. Reinet Investments shares are included in the 'LuxX' index of the principal shares traded on the Luxembourg exchange.
Secondary listing
Reinet Investments S.C.A. South African Depository Receipts are traded on the stock exchange in Johannesburg under the ISIN number CH 0045793657. Thomson Reuters code REIJ.J and Bloomberg code REI.SJ.
Reinet Investments Manager S.A.
For and on behalf of Reinet Investments S.C.A.
Website: www.reinet.com (http://www.reinet.com/)
Reinet Investments S.C.A. is a partnership limited by shares incorporated in the Grand Duchy of Luxembourg and having its registered office at 35, boulevard Prince Henri, L 1724 Luxembourg. It is governed by the Luxembourg law on securitisation and in this capacity allows its shareholders to participate indirectly in the portfolio of assets held by its wholly-owned subsidiary Reinet Fund S.C.A., F.I.S., a specialised investment fund also incorporated in Luxembourg
Notes for South African editors
Acknowledging the interest in Reinets results on the part of South African investors, set out below are key figures from the results expressed in rand.
Using the closing euro/rand exchange rate prevailing as at 30 June 2012 of 10.3397, and a rate of 10.2282 as at 31 March 2012.
30 June 2012 31 March 2012
Net asset value ZAR 40 769 m ZAR 37 323 m
Net asset value per ordinary share ZAR 208.03 ZAR 190.45
18 JULY 2012
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 18/07/2012 07:30:00 Supplied by www.sharenet.co.za
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