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Management statement for the first quarter ended 30 June 2015
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 2015
The Board of Reinet Investments Manager S.A. announces the results of Reinet Investments S.C.A. for the quarter ended 30 June 2015.
Key financial data
* Net asset value at 30 June 2015: EUR 5 155 million, an increase of EUR 78 million or 1.5 per cent from 31 March 2015
* Net asset value per ordinary share at 30 June 2015: EUR 26.31 (31 March 2015: EUR 25.91)
* Dividends received from British American Tobacco during the period amounted to EUR 100 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. Certain information included in the Management Report is text attributed to the management of investee entities. While no facts have come to our attention that lead us to conclude that any such information is inaccurate, we have not independently verified such information and do not assume any responsibility for the accuracy or completeness of such information.
BUSINESS REVIEW
+----------------------------------------------------------------------+
|Consolidated Net Asset Value |
+----------------------------------------------------------------------+
|The Consolidated Net Asset Value ('NAV') of Reinet Investments S.C.A. |
|at 30 June 2015 comprised: |
+----------------------------------------------------------------------+
| ||30 June 2015| |31 March 2015|
+----------------------------------------++-----++-----+-+-----++-----++
| ||EUR m|| %| |EUR m|| %||
+----------------------------------------++-----++-----+-+-----++-----++
|Listed investments || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|British American Tobacco p.l.c. ||3 577|| 69.4| |3 579|| 70.5||
+----------------------------------------++-----++-----+-+-----++-----++
|Unlisted investments || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|Pension Corporation Group Limited || 902|| 17.5| | 907|| 17.9||
+----------------------------------------++-----++-----+-+-----++-----++
|Private equity and related partnerships || 853|| 16.5| | 878|| 17.3||
+----------------------------------------++-----++-----+-+-----++-----++
|Trilantic Capital Partners || 232|| 4.5| | 231|| 4.6||
+----------------------------------------++-----++-----+-+-----++-----++
|Fund IV, Fund V, TEP and related || || | | || ||
|management companies || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|Renshaw Bay and related investments || 203|| 3.9| | 223|| 4.4||
+----------------------------------------++-----++-----+-+-----++-----++
|Renshaw Bay advisory and investment || || | | || ||
|management company || 15|| | | 33|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|JPS Credit Opportunities Fund || 82|| | | 85|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|Renshaw Bay Real Estate Finance Fund || 55|| | | 55|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|Renshaw Bay Structured Finance || || | | || ||
|Opportunity L.P. || 51|| | | 50|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|36 South macro / volatility funds || 72|| 1.4| | 77|| 1.5||
+----------------------------------------++-----++-----+-+-----++-----++
| || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|Asian private equity and portfolio funds|| 160|| 3.1| | 167|| 3.3||
+----------------------------------------++-----++-----+-+-----++-----++
|Milestone China Opportunities funds, || || | | || ||
|investment holdings and management || || | | || ||
|company participation || 105|| | | 116|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|GEMS || 4|| | | 3|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|Prescient China Balanced Fund || 51|| | | 48|| ||
|and investment management company || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
| || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|Specialised private equity funds || 186|| 3.6| | 180|| 3.5||
+----------------------------------------++-----++-----+-+-----++-----++
|Vanterra Flex Investments || 55|| | | 53|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|Vanterra C Change TEM || 37|| | | 30|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|NanoDimension funds and || || | | || ||
|co-investment opportunities || 56|| | | 56|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|Fountainhead Expert Fund || 28|| | | 30|| ||
+----------------------------------------++-----++-----+-+-----++-----++
|Other fund investments || 10|| | | 11|| ||
+----------------------------------------++-----++-----+-+-----++-----++
| || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|United States land || 196|| 3.8| | 207|| 4.1||
|development and mortgages || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|Diamond interests || 86|| 1.7| | 92|| 1.8||
+----------------------------------------++-----++-----+-+-----++-----++
|Other investments || 36|| 0.7| | 11|| 0.2||
+----------------------------------------++-----++-----+-+-----++-----++
| ||5 650||109.6| |5 674||111.8||
+----------------------------------------++-----++-----+-+-----++-----++
|Cash and liquid funds || 82|| 1.6| | 76|| 1.5||
+----------------------------------------++-----++-----+-+-----++-----++
|Bank borrowings and collar financing || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|Borrowings ||(478)||(9.3)| |(474)||(9.4)||
+----------------------------------------++-----++-----+-+-----++-----++
|Derivative assets/(liabilities) || (24)||(0.4)| | (32)||(0.6)||
+----------------------------------------++-----++-----+-+-----++-----++
| || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|Other liabilities || || | | || ||
+----------------------------------------++-----++-----+-+-----++-----++
|Fees payable and other liabilities, || || | | || ||
|net of other assets || (46)||(0.9)| |(139)||(2.7)||
+----------------------------------------++-----++-----+-+-----++-----++
|Funding by minority partners || (3)||(0.1)| | (5)||(0.1)||
+----------------------------------------++-----++-----+-+-----++-----++
| ||5 181||100.5| |5 100||100.5||
+----------------------------------------++-----++-----+-+-----++-----++
|Minority interests || (26)||(0.5)| | (23)||(0.5)||
+----------------------------------------++-----++-----+-+-----++-----++
|Consolidated net asset value ||5 155||100.0| |5 077||100.0||
+----------------------------------------++-----++-----+-+-----++-----++
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 2015 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 3.9 per cent of BAT's issued share capital. The value of Reinet's investment in BAT at 30 June 2015 was EUR 3 577 million (31 March 2015: EUR 3 579 million), being 69 per cent of Reinet's NAV. The decrease in value of EUR 2 million results from a decrease in the BAT share price from GBP 34.885 at 31 March 2015 to GBP 34.145 at 30 June 2015 offset by the strengthening of sterling against the euro in the period.
Reinet received dividends from BAT during the quarter amounting to EUR 100 million (GBP 74 million), being BAT's final 2014 dividend.
Further information on BAT is available at www.bat.com/annualreport.
UNLISTED INVESTMENTS
PENSION CORPORATION GROUP LIMITED ('PENSION CORPORATION')
The total invested to date is GBP 400 million (EUR 564 million at current exchange rates), which constitutes 100 per cent of Reinet's capital commitment to Pension Corporation.
The investment is carried at an estimated fair value of EUR 902 million at 30 June 2015 (31 March 2015: EUR 907 million), this value takes into account Pension Corporation's unaudited embedded value at 31 March 2015 and valuation multiples drawn from industry data.
The decrease in value of Reinet's holding reflects decreases in comparable multiples being applied by the market in valuing listed companies in the UK insurance sector, in part offset by the increase in Pension Corporation's embedded value during the period and the strengthening of sterling against the euro.
Further information in respect of Pension Corporation is available at www.pensioncorporation.com.
PRIVATE EQUITY AND RELATED PARTNERSHIPS
TRILANTIC CAPITAL PARTNERS
Trilantic Capital Partners IV L.P. and Trilantic Capital Partners IV (Europe) L.P. ('Fund IV')
As at 30 June 2015, Reinet and its partner have invested the equivalent of EUR 99 million (31 March 2015: EUR 112 million), net of capital repayments, in Fund IV and its related management company. Capital repayments were received during the quarter under review, as Fund IV continues the process of realising investments.
In 2011, Fund IV invested in Implus Corporation ('Implus') a manufacturer of outdoor and fitness accessories. In April 2015 Fund IV sold its investment in Implus; which resulted in Reinet and its partner receiving capital repayments of EUR 12 million. Net carried interest earned amounted to EUR 1 million together with realised gains of EUR 9 million, before tax. Of these amounts, in aggregate, EUR 9 million was attributable to Reinet and EUR 1 million to the minority partner.
The investment is carried at the estimated fair value of EUR 199 million at 30 June 2015 (31 March 2015: EUR 198 million). The fair value is based on unaudited valuation data as at 31 March 2015, adjusted for cash movements in the quarter. Of the EUR 199 million carrying value, some EUR 179 million is attributable to Reinet, with the balance being attributable to its minority partner. The increase in value is due to unrealised gains on underlying investments, offset by distributions of capital and gains in the period. Fund IV holds an investment in Talgo, S.A. ('Talgo') a manufacturer of high-speed rail equipment; the value of this investment increased following its initial public offering in May 2015.
At 30 June 2015, Reinet had remaining commitments of EUR 34 million to invest in Fund IV.
Vanterra Flex Investments and Vanterra C Change TEM also hold investments in Talgo; the increase in value of the investment in Talgo is reflected in these valuations.
Trilantic Capital Partners V (North America) L.P. ('Fund V')
As at 30 June 2015, Reinet had invested EUR 27 million in Fund V and its general partner (31 March 2015: EUR 27 million). The investment is carried at the estimated fair value of EUR 28 million at 30 June 2015 (31 March 2015: EUR 29 million), based on unaudited valuation data as at 31 March 2015.
At 30 June 2015, Reinet had remaining commitments of EUR 66 million to invest in Fund V.
Trilantic Energy Partners (North America) L.P. ('TEP')
As at 30 June 2015, Reinet's commitment to TEP amounted to EUR 30 million including an increase of EUR 7 million (USD 8 million) made during the quarter. In July 2015 Reinet increased its commitment by a further EUR 5 million (USD 5 million) following the final closing of TEP.
As at 30 June 2015, Reinet had invested EUR 5 million in TEP. The investment is carried at the estimated fair value of EUR 5 million at 30 June 2015 (31 March 2015: EUR 4 million), based on unaudited valuation data as at 31 March 2015.
At 30 June 2015, Reinet had remaining commitments of EUR 25 million to invest in TEP.
Further information on Trilantic is available at www.trilantic.com.
RENSHAW BAY AND RELATED INVESTMENTS
Renshaw Bay Advisory and Investment Management Entity
Reinet has co-invested with Mr William T. Winters, RIT Capital Partners plc and Renshaw Bay's management team in an investment advisory and management business, known as Renshaw Bay.
In February 2015, Mr Winters announced his intention to step down from the CEO role; as a result Reinet re-evaluated the expected cash flows from the business and accordingly adjusted the value of its investment in Renshaw Bay.
Reinet has invested EUR 34 million to date in Renshaw Bay (31 March 2015: EUR 33 million). The investment is carried at the estimated fair value of EUR 15 million at 30 June 2015 (31 March 2015: EUR 33 million).
At 30 June 2015, Reinet had remaining commitments of EUR 2 million to invest in Renshaw Bay.
Further information on Renshaw Bay may be found at www.renshawbay.com.
UNITED STATES LAND DEVELOPMENT AND MORTGAGES
During the quarter under review, Reinet committed a further EUR 5 million of which EUR 1 million was funded.
At 30 June 2015, Reinet had invested EUR 156 million in this investment (31 March 2015: EUR 161 million). The decrease in amounts invested includes some EUR 6 million in respect of foreign exchange losses due to the weakening of the US dollar against the euro during the period.
The investment is carried at the estimated fair value of EUR 196 million (31 March 2015: EUR 207 million), of which EUR 189 million is attributable to Reinet (31 March 2015: EUR 199 million) and EUR 7 million to its partners (31 March 2015: EUR 8 million).
The current valuation is based on independent valuations of underlying assets as at 31 December 2014 adjusted for cash movements in the period to 30 June 2015. Of the decrease in valuation some EUR 8 million reflects the weakening of the US dollar against the euro during the quarter.
Reinet had remaining commitments of EUR 4 million as at 30 June 2015.
OTHER INVESTMENTS
The increase in other investments relates to a new investment in a venture in the digital music industry.
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 2015 amounted to EUR 82 million (31 March 2015: EUR 76 million).
During the quarter under review Reinet received dividends from BAT amounting to EUR 100 million and invested some EUR 41 million in underlying investments. Performance and management fees of EUR 96 million accrued at 31 March 2015 were paid to Reinet Investment Advisors Limited (the 'Investment Advisor') and distributions from investments amounted to EUR 43 million.
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 commitments. 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 2015, these facilities had not been drawn upon.
BANK BORROWINGS AND RELATED DERIVATIVE CONTRACTS
Borrowings
In February 2012, in order to meet its ongoing commitments, Reinet entered into a GBP 300 million medium-term collar financing arrangement. At 30 June 2015, the fair value of the borrowing was EUR 423 million (31 March 2015: EUR 415 million). The increase in fair value reflects the strengthening of sterling against the euro during the period, offset by higher market interest rates. The collar financing arrangement involves the purchase by Reinet of put options and the sale by Reinet of call options over 13.7 million BAT shares. The remaining unpaid net option premium is payable over the period to 2017 and is carried as a liability at its fair value of EUR 22 million as at 30 June 2015 (31 March 2015: EUR 25 million). 1.4 million BAT shares have also been pledged to guarantee the balance of the net option premium and a portion of the interest payments.
Reinet has also borrowed ZAR 443 million to fund its investments in South African projects. At 30 June 2015, the fair value of the borrowing was EUR 33 million (31 March 2015: EUR 34 million). The decrease in fair value reflects the weakening of the South African rand during the period.
Derivative assets / (liabilities) – put and call options and forward exchange contracts
Put and call options in respect of the GBP 300 million medium-term collar financing arrangement noted above are carried at their respective fair values at the balance sheet date. The net derivative liability is carried at its fair value of EUR 19 million at 30 June 2015 (31 March 2015: EUR 26 million).
Reinet has entered into forward exchange contracts to sell ZAR 715 million (31 March 2015: ZAR 715 million). The net derivative liability in respect of the forward exchange contracts is carried at its fair value of EUR 5 million at 30 June 2015 (31 March 2015: EUR 6 million).
OTHER LIABILITIES
Fees payable and other liabilities, net of other assets
Fees payable and other liabilities comprise principally EUR 10 million (31 March 2015: EUR 17 million) in respect of the management fee payable, a net provision for deferred taxes of EUR 32 million (31 March 2015: EUR 38 million) relating to gains arising from the investments in Trilantic Capital Partners, withholding taxes relating to the investment in US land and mortgages and other provisions, together with other operating expenses currently payable of EUR 4 million (31 March 2015: EUR 5 million).
A performance fee of EUR 79 million was paid during the period in respect of the year ended 31 March 2015. No performance fee was recorded for the period under review due to a fall in the market price of Reinet shares between March 2015 and 30 June 2015. The reference market price per share used at 31 March 2015 was EUR 19.6718, only if the price per share rises above this level will a performance fee become payable.
The performance fee and management fee are payable to Reinet Investment Advisors Limited.
Funding by minority partners
Reinet invests in certain investments, principally the Trilantic funds and United States 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.
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. Reinet shares are included in the 'LuxX' index of the principal shares traded on the Luxembourg Stock Exchange.
Secondary Listing
Reinet Investments S.C.A. South African Depository Receipts are traded on the Johannesburg stock exchange under the ISIN number CH 0045793657. Thomson Reuters code REIJ.J. One depository receipt issued by Reinet Securities SA represents one tenth of one ordinary share in Reinet Investments S.C.A.
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Reinet Investments Manager S.A.
General Partner
For and on behalf of Reinet Investments S.C.A.
23 July 2015
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.
Reinet Investments S.C.A.
R.C.S. Luxembourg B 16.576
Registered office: 35, Boulevard Prince Henri, L-1724 Luxembourg, Telephone: (+352) 22 4210 Telefax: (+352) 22 7253
Email: info@reinet.com, website: www.reinet.com
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 2015 of 13.5526, and a rate of 13.0229 as at 31 March 2015.
30 June 2015 31 March 2015
Net asset value ZAR 69 864 m ZAR 66 117 m
Net asset value per ordinary share ZAR 356.55 ZAR 337.42
Date: 23/07/2015 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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