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REINET INVESTMENTS S.C.A - Management statement for the first quarter ended 30 June 2014

Release Date: 23/07/2014 07:30
Code(s): REI     PDF:  
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Management statement for the first quarter ended 30 June 2014

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 


23 JULY 2014


MANAGEMENT STATEMENT FOR THE FIRST QUARTER ENDED 30 JUNE 2014


The Board of Reinet Investments Manager S.A. announces the results of Reinet Investments S.C.A. for the quarter ended 30 June 2014.

Key financial data

 - Net asset value at 30 June 2014: EUR 4 423 million, an increase of 7 per cent from 31 March 2014

 - Net asset value per ordinary share at 30 June 2014: EUR 22.57 (31 March 2014: EUR 21.00)

 - Additional investment of EUR 94 million in Pension Corporation Group Limited during the period

 - Dividends received from British American Tobacco (‘BAT’) during the period amounted to EUR 88 million


Reinet Investments S.C.A. (the 'Company') 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. ('Reinet Fund' or 'the Fund'), a specialised investment fund also incorporated in Luxembourg.  The Company’s shares are listed on the Luxembourg Stock Exchange, the primary listing, and its South African Depository Receipts are listed in Johannesburg, the secondary listing.  The Company’s shares are included in the 'LuxX' index of the principal shares traded on the Luxembourg exchange. The Company and the Fund together with the Fund’s subsidiaries are referred to as ‘Reinet’.

Cautionary statement regarding forward-looking statements
This document contains forward-looking statements as that term is defined in the United States Private Securities Litigation Reform Act of 1995. Words such as 'may', 'should', 'estimate', 'project', 'plan', 'believe', 'expect', 'anticipate', 'intend', 'potential', 'goal', 'strategy', 'target', 'will', 'seek' and similar expressions may identify forward-looking statements. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from the forward-looking statements as a result of a number of risks and uncertainties, many of which are outside Reinet’s control. Reinet does not undertake to update, nor does it have any obligation to provide updates or to revise, any forward-looking statements.

Reinet Investments S.C.A.
R.C.S. Luxembourg B 16.576
Registered office: 35, boulevard Prince Henri, L-1724 Luxembourg, Tel. (+352) 22 42 10, Fax (+352) 22 72 53
Email: info@reinet.com,  website: www.reinet.com


BUSINESS REVIEW

+---------------++-----+------------++------------------++
|Consolidated Net Asset Value ('NAV')                   ||
|The NAV of Reinet Investments S.C.A. at                || 
|30 June 2014 comprised:                                ||
+---------------++------------------++------------------++
|               ||30 June           ||31 March          ||
|               ||2014              ||2014              ||
+---------------++-----+-----+------++----+-- ---+------++
|               ||EUR m|     |     %||EUR m|     |     %||
+---------------++-----+-----+------++----+------+------++
|Listed         ||     |     |      ||     |     |      ||
|investments    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|British        ||3 229|     |  73.0||2 997|     |  72.8||
|American       ||     |     |      ||     |     |      ||
|Tobacco p.l.c. ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|               ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Unlisted       ||     |     |      ||     |     |      ||
|investments    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Pension        ||  655|     |  14.8||  548|     |  13.3||
|Corporation    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Private equity ||  687|     |  15.6||  655|     |  15.9||
|and related    ||     |     |      ||     |     |      ||
|partnerships   ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Trilantic      ||     |     |      ||     |     |      ||
|Capital        ||     |     |      ||     |     |      ||
|Partners       ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Fund IV, Fund V||  215|     |   4.9||  210|     |   5.1||
|and related    ||     |     |      ||     |     |      ||
|management     ||     |     |      ||     |     |      ||
|companies      ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Renshaw Bay and||  155|     |   3.5||  128|     |   3.1||
|related        ||     |     |      ||     |     |      ||
|investments    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Renshaw Bay    ||   27|     |      ||   26|     |      ||
|advisory and   ||     |     |      ||     |     |      ||
|investment     ||     |     |      ||     |     |      ||
|management     ||     |     |      ||     |     |      ||
|company        ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|JPS Credit     ||   65|     |      ||   63|     |      ||
|Opportunities  ||     |     |      ||     |     |      ||
|Fund           ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Renshaw Bay    ||   43|     |      ||   38|     |      ||
|Real Estate    ||     |     |      ||     |     |      ||
|Finance Fund   ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Renshaw Bay    ||   20|     |      ||    1|     |      ||
|Structured     ||     |     |      ||     |     |      ||
|Finance        ||     |     |      ||     |     |      ||
|Opportunity    ||     |     |      ||     |     |      ||
|Fund           ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|36 South macro ||   70|     |   1.6||   72|     |   1.8||
|/ volatility   ||     |     |      ||     |     |      ||
|funds          ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|               ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Asian private  ||  107|     |   2.4||  104|     |   2.5||
|equity and     ||     |     |      ||     |     |      ||
|portfolio funds||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Milestone China||   79|     |      ||   77|     |      ||
|Opportunities  ||     |     |      ||     |     |      ||
|funds,         ||     |     |      ||     |     |      ||
|investment     ||     |     |      ||     |     |      ||
|holdings       ||     |     |      ||     |     |      ||
|and related    ||     |     |      ||     |     |      ||
|opportunities  ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|GEMS           ||    8|     |      ||    8|     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Prescient China||   20|     |      ||   19|     |      ||
|Balanced Fund  ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Specialised    ||  140|     |   3.2||  141|     |   3.4||
|private equity ||     |     |      ||     |     |      ||
|funds          ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Vanterra Flex  ||   48|     |      ||   47|     |      ||
|Investments    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Vanterra C     ||   25|     |      ||   30|     |      ||
|Change TEM     ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|NanoDimension  ||   30|     |      ||   29|     |      ||
|Funds and      ||     |     |      ||     |     |      ||
|co-investment  ||     |     |      ||     |     |      ||
|opportunities  ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Fountainhead   ||   27|     |      ||   25|     |      ||
|Expert Fund    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Other fund     ||   10|     |      ||   10|     |      ||
|investments    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|               ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|US land        ||  149|     |   3.4||  134|     |   3.3||
|development and||     |     |      ||     |     |      ||
|mortgages      ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Jagersfontein  ||   82|     |   1.9||   76|     |   1.9||
|and other      ||     |     |      ||     |     |      ||
|diamond        ||     |     |      ||     |     |      ||
|exploration    ||     |     |      ||     |     |      ||
|interests      ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Other          ||   10|     |   0.2||   10|     |   0.2||
|investments    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|               ||4 812|     | 108.9||4 420|     | 107.4||
+---------------++-----+-----+------++-----+-----+------++
|Cash and       ||  149|     |   3.4||  223|     |   5.4||
|liquid funds   ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Bank borrowings||     |     |      ||     |     |      ||
|and collar     ||     |     |      ||     |     |      ||
|financing      ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Borrowings     ||(429)|     | (9.7)||(420)|     |(10.2)||
+---------------++-----+-----+------++-----+-----+------++
|Derivative     || (23)|     | (0.5)|| (13)|     | (0.3)||
|assets /       ||     |     |      ||     |     |      ||
|(liabilities)  ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Other          ||     |     |      ||     |     |      ||
|liabilities    ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Fees payable   || (49)|     | (1.3)|| (59)|     | (1.4)||
|and other      ||     |     |      ||     |     |      ||
|liabilities,   ||     |     |      ||     |     |      ||
|net of other   ||     |     |      ||     |     |      ||
|assets         ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Funding by     || (19)|     | (0.4)|| (19)|     | (0.5)||
|minority       ||     |     |      ||     |     |      ||
|partners       ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|               ||4 441|     | 100.4||4 132|     | 100.4||
+---------------++-----+-----+------++-----+-----+------++
|Minority       || (18)|     | (0.4)|| (17)|     | (0.4)||
|interests      ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++
|Consolidated   ||4 423|     | 100.0||4 115|     | 100.0||
|net asset      ||     |     |      ||     |     |      ||
|value          ||     |     |      ||     |     |      ||
+---------------++-----+-----+------++-----+-----+------++




All of the underlying assets are held by Reinet Fund S.C.A., F.I.S. ('Reinet Fund' or 'the Fund'). Reinet Investments S.C.A. and the Fund together with the Fund's subsidiaries are referred to as 'Reinet'.

Full information on Reinet's investments may be found in the Reinet 2014 annual report which is available at www.reinet.com

Major items impacting the consolidated net asset value during the quarter under review are described below.


LISTED INVESTMENT IN BRITISH AMERICAN TOBACCO P.L.C. ('BAT')

The investment in BAT remains Reinet's single largest investment position and is kept under constant review, considering the company's performance, the industry outlook, cash flows from dividends, stock market performance, volatility and liquidity.

Reinet holds 74.3 million shares in BAT, representing some 4.0 per cent of BAT's issued share capital. The value of the investment in BAT at 30 June 2014 was EUR 3 229 million (31 March 2014: EUR 2 997 million), being 73 per cent of Reinet's NAV. The BAT share price on the London Stock Exchange increased from GBP 33.35 at 31 March 2014 to GBP 34.78 at 30 June 2014.

Reinet received dividends from BAT during the quarter amounting to EUR 88 million (GBP 72 million), being BAT's final 2013 dividend.

Further information on BAT is available at www.bat.com.


UNLISTED INVESTMENTS
PENSION CORPORATION GROUP LIMITED

During the quarter under review, in accordance with its commitment, Reinet invested a further GBP 75 million (EUR 94 million) in Pension Corporation Group Limited to bring its equity holding to 43 per cent. The total capital invested to date is GBP 400 million, which constitutes 100 per cent of Reinet’s capital commitment to Pension Corporation Group Limited.

During the quarter, Pension Corporation Group Limited has concluded a pension insurance buy-in with the trustees of the Total UK Pension Plan covering GBP 1.6 billion of pensioner liabilities.

The investment is carried at an estimated fair value of EUR 655 million at 30 June 2014 (31 March 2014: EUR 548 million), taking into account the unaudited embedded value of Pension Corporation Group Limited at 31 March 2014, which increased during the quarter, and valuation multiples drawn from industry data. In addition, Reinet benefited from its additional investment in Pension Corporation Group Limited, which increased Reinet's interest in the company from 38 per cent at 31 March 2014 to 43 per cent at 30 June 2014.

Further information in respect of Pension Corporation is available at www.pensioncorporation.com.


PRIVATE EQUITY AND RELATED PARTNERSHIPS

RENSHAW BAY AND RELATED INVESTMENTS

Renshaw Bay Structured Finance Opportunity Fund 

Reinet has invested EUR 22 million to date in the Renshaw Bay Structured Finance Opportunity Fund (31 March 2014: EUR 3 million), of which EUR 19 million was invested in the current quarter. The investment is carried at the estimated fair value of EUR 20 million at 30 June 2014 (31 March 2014: EUR 1 million), based on unaudited valuation data provided by Renshaw Bay at 31 March 2014.

Reinet is committed to invest a further EUR 87 million in the fund.

The value of the investments in the Renshaw Bay advisory and management company, together with Renshaw Bay Real Estate Finance Fund and Renshaw Bay Structured Finance Opportunity Fund were broadly unchanged over the quarter.

Further information on Renshaw Bay may be found at www.renshawbay.com.

UNITED STATES LAND DEVELOPMENT AND MORTGAGES

The table above shows the value of the 100 per cent invested to date by Reinet and its partners in US land development and mortgages. Where Reinet co-invests with minority partners, amounts attributable to minority partners are shown in the table either as 'funding by minority partners' or 'minority interests'.

At 30 June 2014, Reinet had invested EUR 111 million in these projects (31 March 2014: EUR 99 million), of which EUR 12 million was invested in the current quarter. 

The investment is carried at the estimated fair value of EUR 149 million (31 March 2014: EUR 134 million) of which EUR 130 million is attributable to Reinet and EUR 19 million to its partners. 

The current valuation is based on independent valuations of underlying assets as at 31 December 2013 adjusted for cash receipts and payments in the period to 30 June 2014. The increase in the value for the current quarter reflects the strengthening of the US dollar against the euro, together with the capital invested referred to above and some minor revaluation adjustments.

Reinet is committed to invest a further EUR 6 million in these investments as at 30 June 2014.

OTHER INVESTMENTS

There were no significant changes in value during the quarter in respect of other investments either as a result of movements in the valuation of underlying investments, further amounts invested or returns of capital. 


CASH AND LIQUID FUNDS

Cash and liquid funds at 30 June 2014 amounted to EUR 149 million (31 March 2014: EUR 223 million).

During the quarter under review Reinet invested some EUR 136 million in underlying investments, including EUR 94 million in Pension Corporation, EUR 12 million in US land development and mortgages and EUR 19 million in the Renshaw Bay Structured Finance Opportunity Fund. A dividend of GBP 72 million (EUR 88 million) was received from BAT and performance and management fees of EUR 27 million accrued at 31 March 2014 were paid to the Investment Advisor.

Reinet has in place borrowing facilities which will permit it to drawdown the equivalent of up to GBP 300 million in a combination of currencies to fund further investment commitment. The borrowing facilities comprise a facility with Bank of America for GBP 150 million and a facility with Morgan Stanley of GBP 150 million. As at 30 June 2014, these facilities had not been drawn upon.


BANK BORROWINGS AND RELATED DERIVATIVE CONTRACTS

Borrowings

Reinet has borrowed GBP 300 million under a medium-term financing facility. At 30 June 2014, the fair value of the borrowing was EUR 369 million (31 March 2014: EUR 358 million). The transaction incorporates the purchase by Reinet of put options and the sale by Reinet of call options over 13.7 million BAT shares. The unpaid net option premium is payable over the period to 2017 and is carried as a liability at its fair value of EUR 30 million as at 30 June 2014 (31 March 2014: EUR 32 million).

Reinet has also borrowed ZAR 443 million to fund its investments in South African projects. At 30 June 2014, the fair value of the borrowing was EUR 30 million (31 March 2014: EUR 30 million).

Derivative assets / (liabilities) – put and call options and forward exchange contracts

The put options and the call options linked to the GBP 300 million medium-term facility referred to above, are carried at their respective fair values at the balance sheet date. At 30 June 2014, the net derivative liability is carried at its fair value of EUR 25 million (31 March 2014: EUR 16 million).

Reinet has entered into forward exchange contracts to sell ZAR 740 million. The net derivative asset in respect of the forward exchange contracts is carried at its fair value of EUR 2 million at 30 June 2014 (31 March 2014: EUR 3 million).


OTHER LIABILITIES

Fees payable and other liabilities, net of other assets

Fees payable and other liabilities comprise principally EUR 5 million accrued in respect of the performance fee payable as at 30 June 2014, together with the management fee accrual of EUR 6 million. In addition, a provision for deferred taxes of EUR 3 million relating to unrealised gains arising from the investments in Trilantic Capital Partners has been made. Withholding taxes of EUR 8 million relating to the investment in US land development and mortgages have also been provided for, together with other operating expenses currently payable.

The management fee for the quarter under review amounted to EUR 6 million (31 March 2014: EUR 35 million).

Funding by minority partners

Reinet invests in certain investments, principally Trilantic Capital Partners and US land development and mortgages, 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 of EUR 19 million, are shown as 'Funding by minority partners' in the table above.


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 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.
General Partner
For and on behalf of Reinet Investments S.C.A.

23 July 2014

Website: 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. Reinet Investments shares are listed on the Luxembourg Stock Exchange, its primary listing, and Reinet Investments South African Depository Receipts are listed in Johannesburg, its secondary listing.



Notes for South African editors

Acknowledging the interest in Reinet's 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 2014 of 14.5597, and a rate of 14.5024 as at 31 March 2014.

                                        30 June 2014       31 March 2014

Net asset value                         ZAR 64 398 m       ZAR 59 677 m

Net asset value per ordinary share      ZAR 328.61         ZAR 304.55



Reinet Investments S.C.A.
Registered office: 35, Boulevard Prince Henri, L-1724 Luxembourg
Telephone: +352 22 42 10, Telefax: +352 22 7253
Email: info@reinet.com, website: www.reinet.com

Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)


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