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Consolidated unaudited financial results for the six-month period ended 30 September 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
CONSOLIDATED UNAUDITED FINANCIAL RESULTS FOR THE SIX-MONTH PERIOD ENDED 30 SEPTEMBER 2015
The Board of Reinet Investments Manager S.A. announces the results of Reinet Investments S.C.A. for the six-month period ended 30 September 2015.
Key financial data
* Net asset value at 30 September 2015: EUR 5 084 million, an increase of EUR 7 million from 31 March 2015, reflecting increases in asset values offset by adverse foreign exchange rate movements
* Net asset value per ordinary share at 30 September 2015: EUR 25.95 (31 March 2015: EUR 25.91)
* Commitments totalling EUR 89 million in respect of new and existing investments were made during the period
* Dividends received from British American Tobacco during the period amounted to EUR 149 million
* Cash dividend of EUR 31 million, or EUR 0.157 per share paid during the period, an increase of 2.6 per cent over prior year
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'), a specialised investment fund also incorporated in Luxembourg. Reinet Investments shares are listed on the Luxembourg Stock Exchange, the primary listing, and Reinet Investments South African Depository Receipts are listed on the Johannesburg Stock Exchange, the secondary listing. The Company's shares are included in the 'LuxX' index of the principal shares traded on the Luxembourg Stock Exchange. The Company and Reinet Fund together with Reinet 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.
BUSINESS REVIEW
Reinet Investments S.C.A. (the 'Company') has determined that it meets the definition of an investment entity in terms of the amended International Financial Reporting Standards ('IFRS') 10. The consolidated net asset value and consolidated income statement included in this business review have however been presented in a more comprehensive format than required by IFRS in order to provide readers with more detailed information relating to the underlying assets and liabilities.
Consolidated Net Asset Value
The Consolidated Net Asset Value ('NAV') at 30 September 2015 comprised:
+----------------------------------------++-------------------++---------------++
|| 30 September 2015 || 31 March 2015 ||
+----------------------------------------++-------------------++---------------++
|| EUR m|| %|| EUR m|| %||
+----------------------------------------++---------++--------++-------++------++
|Listed investments || || || || ||
+----------------------------------------++---------++--------++-------++------++
|British American Tobacco p.l.c. || 3 664|| 72.1|| 3 579|| 70.5||
+----------------------------------------++---------++--------++-------++------++
|SPDR Gold shares || 22|| 0.4|| -|| -||
+----------------------------------------++---------++--------++-------++------++
|Unlisted investments || || || || ||
+----------------------------------------++---------++--------++-------++------++
|Pension Corporation Group Limited || 815|| 16.0|| 907|| 17.9||
+----------------------------------------++---------++--------++-------++------++
|Private equity and related partnerships || 713|| 14.0|| 878|| 17.3||
+----------------------------------------++---------++--------++-------++------++
|Trilantic Capital Partners || 174|| 3.4|| 231|| 4.6||
+----------------------------------------++---------++--------++-------++------++
|Fund IV, Fund V, TEP || || || || ||
|and related management companies || || || || ||
+----------------------------------------++---------++--------++-------++------++
|Renshaw Bay and related investments || 198|| 3.9|| 223|| 4.4||
+----------------------------------------++---------++--------++-------++------++
|Renshaw Bay advisory and investment || || || || ||
|management company || 14|| || 33|| ||
+----------------------------------------++---------++--------++-------++------++
|JPS Credit Opportunities Fund || 84|| || 85|| ||
+----------------------------------------++---------++--------++-------++------++
|Renshaw Bay Real Estate Finance Fund || 54|| || 55|| ||
+----------------------------------------++---------++--------++-------++------++
|Renshaw Bay Structured Finance || || || || ||
|Opportunity L.P. || 46|| || 50|| ||
+----------------------------------------++---------++--------++-------++------++
|36 South macro/volatility funds || 74|| 1.5|| 77|| 1.5||
+----------------------------------------++---------++--------++-------++------++
| || || || || ||
+----------------------------------------++---------++--------++-------++------++
|Asian private equity and portfolio funds|| 134|| 2.6|| 167|| 3.3||
+----------------------------------------++---------++--------++-------++------++
|Milestone China Opportunities || || || || ||
|funds, investment holdings and || || || || ||
|management company participation || 89|| || 116|| ||
+----------------------------------------++---------++--------++-------++------++
|GEMS || 4|| || 3|| ||
+----------------------------------------++---------++--------++-------++------++
|Prescient China Balanced Fund || 41|| || 48|| ||
|and investment management company || || || || ||
+----------------------------------------++---------++--------++-------++------++
| || || || || ||
+----------------------------------------++---------++--------++-------++------++
|Specialised private equity funds || 133|| 2.6|| 180|| 3.5||
+----------------------------------------++---------++--------++-------++------++
|Vanterra Flex Investments || 34|| || 53|| ||
+----------------------------------------++---------++--------++-------++------++
|Vanterra C Change TEM || 21|| || 30|| ||
+----------------------------------------++---------++--------++-------++------++
|NanoDimension funds and || || || || ||
|co-investment opportunities || 47|| || 56|| ||
+----------------------------------------++---------++--------++-------++------++
|Fountainhead Expert Fund || 23|| || 30|| ||
+----------------------------------------++---------++--------++-------++------++
|Other fund investments || 8|| || 11|| ||
+----------------------------------------++---------++--------++-------++------++
| || || || || ||
+----------------------------------------++---------++--------++-------++------++
|United States land || || || || ||
|development and mortgages || 189|| 3.7|| 207|| 4.1||
+----------------------------------------++---------++--------++-------++------++
|Diamond interests || 65|| 1.3|| 92|| 1.8||
+----------------------------------------++---------++--------++-------++------++
|Other investments || 58|| 1.2|| 11|| 0.2||
+----------------------------------------++---------++--------++-------++------++
| || 5 526|| 108.7|| 5 674|| 111.8||
+----------------------------------------++---------++--------++-------++------++
|Cash and liquid funds || 128|| 2.5|| 76|| 1.5||
+----------------------------------------++---------++--------++-------++------++
|Bank borrowings and collar financing || || || || ||
+----------------------------------------++---------++--------++-------++------++
|Borrowings || (454)|| (8.9)|| (474)|| (9.4)||
+----------------------------------------++---------++--------++-------++------++
|Derivative assets/(liabilities) || (38)|| (0.7)|| (32)|| (0.6)||
+----------------------------------------++---------++--------++-------++------++
| || || || || ||
+----------------------------------------++---------++--------++-------++------++
|Other liabilities || || || || ||
+----------------------------------------++---------++--------++-------++------++
|Fees payable and other liabilities, || (60)|| (1.2)|| (139)|| (2.7)||
|net of other assets || || || || ||
+----------------------------------------++---------++--------++-------++------++
|Funding by minority partners || -|| -|| (5)|| (0.1)||
+----------------------------------------++---------++--------++-------++------++
| || 5 102|| 100.4|| 5 100|| 100.5||
+----------------------------------------++---------++--------++-------++------++
|Minority interests || (18)|| (0.4)|| (23)|| (0.5)||
+----------------------------------------++---------++--------++-------++------++
|Consolidated net asset value || 5 084|| 100.0|| 5 077|| 100.0||
+----------------------------------------++---------++--------++-------++------++
All investments are held, either directly or indirectly, by Reinet Fund S.C.A., F.I.S. ('Reinet Fund'). The Company and Reinet Fund together with Reinet Fund's subsidiaries are referred to as 'Reinet'.
The Company records its assets and liabilities in euro; the depreciation of other currencies against the euro has resulted in a decrease in the value of certain assets in euro terms. Applying current period exchange rates to the March 2015 NAV would result in a decrease in value of some EUR 120 million. Despite the decrease from adverse foreign exchange effects, the NAV increased by EUR 7 million; the additional increase in value being due to net increases in the value of underlying investments, decreases in the value of borrowings and decreases in other liabilities, all excluding the effects of changes in foreign exchange rates.
Further 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 NAV during the period under review are described below.
Listed Investments
BRITISH AMERICAN TOBACCO P.L.C.
The investment in British American Tobacco p.l.c. ('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 increased by EUR 85 million in the period to EUR 3 664 million at 30 September 2015, being 72 per cent of Reinet's NAV. The BAT share price on the London Stock Exchange increased over the period from GBP 34.885 to GBP 36.430. This increase in value is offset to some extent by the weakening of sterling against the euro during the period.
Reinet received dividends from BAT during the period amounting to EUR 149 million (GBP 110 million), being BAT's final 2014 dividend and interim 2015 dividend.
Further information on BAT is available at www.bat.com/annualreport.
SPDR GOLD SHARES ('GLD')
During the period under review, Reinet invested EUR 22 million in GLD, the largest physically backed gold exchange traded fund in the world.
Reinet holds 230 000 shares with a market value of EUR 22 million as at 30 September 2015.
Further information on GLD can be found at www.spdrgoldshares.com.
Unlisted Investments
Reinet seeks, through a range of investment structures, to build partnerships with other investors, specialised fund managers and entrepreneurs to find and develop opportunities for long-term value creation for its shareholders.
Since its formation in 2008, Reinet has invested over EUR 1 664 million and is committed to provide further funding of EUR 411 million to its current investments. Details of the funding commitments outstanding at 30 September 2015 are given in the table below. The increase in commitments during the period under review amounted to EUR 89 million.
Unlisted investments are carried at their estimated fair value. In determining fair value, Reinet Fund Manager S.A. (the 'Fund Manager') relies on audited and unaudited financial statements of investee companies, management reporting and valuations provided by third-party experts. Valuations are based on the net asset value of investment funds as well as discounted cash flow models and comparable valuation multiples for other entities, as appropriate.
The table above shows the value of the 100 per cent investment in Trilantic Capital Partners and the United States land development and mortgages. In each case, Reinet co-invests with minority investors. Amounts attributable to these minority investors are shown in the table either as 'funding by minority partners' or 'minority interests'.
Funding commitments are entered into in various currencies including sterling, US dollar and South African rand and are converted into euro using 30 September 2015 exchange rates.
PENSION CORPORATION GROUP LIMITED
Committed amount: EUR 541 million (EUR equivalent of GBP commitment)
Invested amount: EUR 541 million (EUR equivalent of GBP investment)
Remaining commitment: EUR nil
Distributed amount: EUR nil
Fair value: EUR 815 million
Pension Corporation Group Limited's ('Pension Corporation') wholly-owned subsidiary, Pension Insurance Corporation plc ('Pension Insurance Corporation') is one of the UK's leading providers of risk management solutions to defined benefit pension funds. Pension Insurance Corporation is authorised and regulated as an insurance company by the Prudential Regulation Authority in the United Kingdom. At 30 September 2015 it had GBP 14 billion in assets and insured more than 100 000 pension fund members. In November 2015, Pension Insurance Corporation announced a GBP 2.4 billion pension insurance buyout with the trustees of the Philips UK pension fund. The transaction covers the pension benefits of around 26 000 UK pension scheme members.
Reinet's equity holding in Pension Corporation equals 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.
Reinet's interest in Pension Corporation is carried at an estimated fair value of EUR 815 million at 30 September 2015 (31 March 2015: EUR 907 million), this value takes into account Pension Corporation's unaudited embedded value at 30 June 2015 and valuation multiples drawn from industry data.
The decrease in value reflects the decrease in comparable multiples being applied by the market in valuing listed companies in the UK insurance sector. The multiple applied in the valuation is therefore lower than that applied at 31 March 2015, reflecting the market movements of the sector during the period. The decrease in value also reflects the weakening of sterling against the euro in the period. These decreases are offset in part by the increase in the unaudited embedded value of Pension Corporation over the six-month period to 30 June 2015.
Further information on Pension Corporation is available at www.pensioncorporation.com.
PRIVATE EQUITY AND RELATED PARTNERSHIPS
TRILANTIC CAPITAL PARTNERS
Trilantic Capital Partners ('Trilantic') is a global private equity firm focused on making controlling and significant minority interest investments in companies in North America and Western Europe. Trilantic employs flexible transaction structures and has a strong heritage of partnering with family-owned businesses and providing growth capital to management teams.
Reinet and its minority partner invest in the Trilantic general partnerships and management companies ('Trilantic Management'). The terms of the investment in Trilantic Management provide that Reinet and its partner will not pay any management fees or carried interest cost on substantially all of the investments in funds under Trilantic Management. In addition, the agreement provides for Reinet and its partner to receive a share of the carried interest payable to Trilantic Management on the realisation of investments held in the funds, once a hurdle rate has been achieved. This applies to Trilantic Capital Partners IV L.P. ('Fund IV Global') and Trilantic Capital Partners IV (Europe) L.P. ('Fund IV Europe') (together 'Fund IV'), Trilantic Capital Partners V (North America) L.P. ('Fund V'), Trilantic Energy Partners (North America) L.P. ('TEP') and to any future funds launched by Trilantic where Reinet makes a commitment. Reinet's share of any carried interest earned by Trilantic Management is 11.25 per cent in respect of Fund IV and 15 per cent in respect of Fund V and TEP.
Further information on Trilantic is available at www.trilanticpartners.com.
Trilantic Capital Partners IV L.P. and Trilantic Capital Partners IV (Europe) L.P.
Committed amount: EUR 184 million (including an increase of EUR 3 million during the period) (EUR commitment and EUR equivalent of USD commitment)
Invested amount: EUR 142 million (EUR investment and EUR equivalent of USD investment)
Remaining commitment: EUR 42 million
Total invested including initial investment in management companies: EUR 152 million
Distributed amount: EUR 233 million
Fair value: EUR 128 million
Reinet has a 90 per cent interest in an entity which invests in two funds, Fund IV Global, which invests primarily in North America, and Fund IV Europe, which invests in Western Europe. Current investments held in the Fund IV Global portfolio in North America in which Reinet has interests include natural gas and oil exploration and production; sports and casual accessories; soft goods and electronics; and electricity transmission component manufacture and supply. In Western Europe, Fund IV Europe has interests in gaming machines and video-lotteries; education publishing; commodities broking; affordable luxury clothing; and high-speed rail equipment manufacturing.
During the period under review, Fund IV successfully disposed of several key assets. Following these disposals, Reinet received total proceeds of some EUR 97 million, of which EUR 87 million was attributable to Reinet and EUR 10 million to its minority partner. More information on the specific investments disposed of is detailed below.
In 2011, Fund IV Global invested in Implus Corporation ('Implus') a manufacturer of footwear, outdoor and fitness accessories. In the six months to 30 September 2015, Fund IV Global sold its investment in Implus to a third party.
In 2012, Fund IV Europe invested in Talgo, S.A. ('Talgo') a manufacturer of high-speed rail equipment in Spain and Euskaltel S.A. ('Euskaltel') a leading cable operator and market leader in the fixed line, broadband and Pay TV markets in Spain. In the period under review, Fund IV Europe sold a portion of its investment in Talgo following an initial public offering ('IPO') in May 2015 and sold all of its investment in Euskaltel following its IPO in July 2015.
At 30 September 2015, Reinet and its partner have invested the equivalent of EUR 83 million (31 March 2015: EUR 112 million), net of capital repayments, in Trilantic Management and Fund IV. Capital repayments will continue to be received in future, as Fund IV continues the process of realising investments.
The investment is carried at the estimated fair value of EUR 142 million at 30 September 2015 (31 March 2015: EUR 198 million). The investment in Fund IV is based on unaudited valuation data provided by Trilantic Management at 30 June 2015 adjusted for changes in the value of listed investments included in the portfolios. The decrease in the valuation is due mainly to the distributions of EUR 97 million described above offset by increases in the value of certain assets prior to distributions and unrealised gains on the remaining investments. Of the EUR 142 million carrying value, some EUR 128 million is attributable to Reinet, with the balance being attributable to its minority partner.
At 30 September 2015, Reinet had remaining commitments of EUR 42 million to invest in Fund IV, this amount includes an amount of EUR 3 million relating to a restatement of the original un-invested limited partner commitments taken over from Lehman Brothers.
Trilantic Capital Partners V (North America) L.P.
Committed amount: EUR 93 million (EUR equivalent of USD commitment)
Invested amount: EUR 28 million (EUR equivalent of USD investment)
Remaining commitment: EUR 65 million
Distributed amount: EUR nil
Fair value: EUR 27 million
Independent of the investment in Fund IV, Reinet has also committed to invest EUR 90 million in Fund V, together with a commitment of some EUR 3 million to Fund V's general partner ('Fund V GP').
Current investments held in the Fund V portfolio in North America include interests in hotel management services; natural gas and oil exploration and production, as well as fresh water transportation and storage services to industry participants; professional staffing and direct hire services; and outdoor equipment.
At 30 September 2015, Reinet had invested EUR 28 million in Fund V and Fund V GP (31 March 2015: EUR 27 million). The investment is carried at the estimated fair value of EUR 27 million at 30 September 2015 (31 March 2015: EUR 29 million), based on unaudited valuation data provided by Trilantic Management as at 30 June 2015.
At 30 September 2015, Reinet had remaining commitments of EUR 65 million to invest in Fund V and Fund V GP.
Trilantic Energy Partners (North America) L.P.
Committed amount: EUR 35 million (including an increase of EUR 12 million during the period) (EUR equivalent of USD commitment)
Invested amount: EUR 6 million (EUR equivalent of USD investment)
Remaining commitment: EUR 29 million
Distributed amount: EUR nil
Fair value: EUR 5 million
At 30 September 2015, Reinet's commitment to TEP amounted to EUR 35 million including an increase of EUR 12 million (USD 14 million) during the period.
Current investments held in the TEP portfolio in North America focus on interests in natural gas and oil exploration and production, as well as fresh water transportation and storage services to industry participants.
During the period under review, Reinet invested EUR 1 million in TEP. At 30 September 2015, Reinet had invested EUR 6 million in TEP. The investment is carried at the estimated fair value of EUR 5 million at 30 September 2015 (31 March 2015: EUR 4 million), based on unaudited valuation data as at 30 June 2015.
At 30 September 2015, Reinet had remaining commitments of EUR 29 million to invest in TEP.
RENSHAW BAY AND RELATED INVESTMENTS
Renshaw Bay advisory and investment management company
Committed amount: EUR 34 million (EUR equivalent of GBP commitment)
Invested amount: EUR 32 million (EUR equivalent of GBP investment)
Distributed amount: EUR nil
Fair value: EUR 14 million
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 leave Renshaw Bay and on 2 October 2015, Renshaw Bay completed the transfer of its Real Estate Finance business to entities in the group headed by GAM Holdings AG. As a result of these developments, Reinet re-evaluated the expected cash flows from the business and accordingly adjusted the value of its investment in Renshaw Bay.
At 30 September 2015, Reinet had invested EUR 32 million in Renshaw Bay (31 March 2015: EUR 33 million). The investment is carried at the estimated fair value of EUR 14 million at 30 September 2015 (31 March 2015: EUR 33 million).
Further information on Renshaw Bay may be found at www.renshawbay.com.
ASIAN PRIVATE EQUITY AND PORTFOLIO FUNDS
Milestone China Opportunities funds ('Milestone'), investment holdings and management company participation
Reinet has invested with Milestone Capital in a management company based in Shanghai. Reinet has also invested in certain funds and investment companies managed by Milestone Capital.
Milestone Capital has a strong track record in helping portfolio companies scale their operations and be listed on either domestic or foreign stock exchanges. Funds under management invest primarily in domestic Chinese high-growth companies seeking expansion or acquisition capital. Milestone funds seek to maximise medium- to long-term capital appreciation by making direct investments to acquire minority or majority equity stakes in those companies identified by Milestone's investment team. Current areas of investment include: restaurants; B2C online travel services; bio-pharmaceutical manufacturers; medical device manufacturers; food and beverage distribution; brands covering sportswear and apparel; big data services; e-commerce; power generation equipment; retail pharmacies and online education.
Further information on Milestone Capital and Milestone funds may be found at www.mcmchina.com.
Milestone China Opportunities Fund III L.P. ('Milestone III')
Committed amount: EUR 89 million (EUR equivalent of USD commitment)
Invested amount: EUR 78 million (EUR equivalent of USD investment)
Remaining commitment: EUR 11 million
Distributed amount: EUR 8 million
Fair value: EUR 50 million
During the period under review, Reinet invested an additional EUR 2 million in Milestone III and received distributions amounting to EUR 8 million in respect of Milestone III's disposal of its investment in Cabbeen Fashion Limited ('Cabbeen').
In 2013, Milestone III invested in Cabbeen, a leading China-based fashion menswear company. In the six months to 30 September 2015, Milestone III sold all of its investment in Cabbeen following its IPO on the Hong Kong Stock Exchange.
At 30 September 2015, capital contributions of EUR 74 million, net of capital repayments, had been made to Milestone III (31 March 2015: EUR 80 million). This investment is carried at the estimated fair value of EUR 50 million at 30 September 2015, based on unaudited valuation data provided by the fund manager at 30 June 2015 (31 March 2015: EUR 66 million). The decrease in fair value over the period under review is mainly the result of the distribution of EUR 8 million received together with decreases in value of underlying listed investments and the weakening of the US dollar against the euro.
At 30 September 2015, Reinet had remaining commitments to Milestone III of EUR 11 million.
Investment holdings
Committed amount: EUR 38 million (EUR equivalent of USD commitment)
Invested amount: EUR 32 million (EUR equivalent of USD investment)
Remaining commitment: EUR 6 million
Distributed amount: EUR nil
Fair value: EUR 34 million
Reinet has also invested in a long-term investment vehicle in partnership with certain of the Milestone general partner principals and other partners. The investment vehicle seeks to leverage the investment expertise of the Milestone principals.
At 30 September 2015, capital contributions of EUR 32 million had been made in respect of this investment (31 March 2015: EUR 33 million). This decrease is 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 34 million at 30 September 2015, based on a recent independent valuation with listed investments marked to market values at the period end (31 March 2015: EUR 46 million). The decrease in fair value over the period under review is the result of decreases in the value of underlying listed investments and the weakening of the US dollar against the euro.
At 30 September 2015, Reinet had remaining commitments of EUR 6 million, which were invested after the period end.
Prescient China Balanced Fund ('Prescient China') and investment management company
Committed amount: EUR 29 million (EUR equivalent of USD commitment)
Invested amount: EUR 29 million (EUR equivalent of USD investment)
Remaining commitment: EUR nil
Distributed amount: EUR nil
Fair value: EUR 41 million
Prescient China is a fund managed by a subsidiary of Prescient Holdings Limited, a South African-listed fund manager. The fund invests in equities, bonds, cash and derivatives with the objective of generating inflation-beating returns at acceptable risk levels. It invests principally in equities and other instruments listed on the Shanghai and Shenzhen Stock Exchanges.
Reinet invested its full capital commitment to the fund in March 2013 and in the management company in March 2015.
These investments are carried at the estimated fair value of EUR 41 million based on unaudited valuation statements provided by the fund manager at 30 September 2015 (31 March 2015: EUR 48 million). The decrease in fair value over the period under review is the result of decreases in the value of underlying listed investments and the weakening of the US dollar against the euro.
Further information on Prescient China may be found at www.prescient.co.za.
SPECIALISED PRIVATE EQUITY FUNDS
Vanterra Flex Investments L.P. ('Vanterra')
Committed amount: EUR 89 million (EUR equivalent of USD commitment)
Invested amount: EUR 54 million (EUR equivalent of USD investment)
Remaining commitment: EUR 35 million
Total invested including expenses: EUR 58 million
Distributed amount: EUR 24 million
Fair value: EUR 34 million
Vanterra was established in 2010 to invest in privately issued securities and to make direct investments in the United States and emerging markets. Vanterra seeks to construct a globally diversified private equity portfolio providing investors with long-term capital appreciation. Vanterra has co-invested alongside Reinet in Trilantic Fund IV, the United States land development and mortgages, Vanterra C Change Transformative Energy & Materials I, L.P. and Vanterra C Change Transformative Energy & Materials AIV-A, L.P. Vanterra also has investments in established platforms in United States healthcare, small business credit, distressed general partner secondaries and Brazil.
Reinet is an investor in both Vanterra and in its general partner.
During the period under review, Vanterra distributed EUR 14 million following a distribution from its investment in Cressey & Company Fund IV, L.P. and the partial sale of its holding in Talgo. Further details in respect of Talgo can be found above.
At 30 September 2015, Reinet had invested the equivalent of EUR 34 million including EUR 4 million of expenses and net of capital repayments (31 March 2015: EUR 50 million) in Vanterra. This investment is carried at the estimated fair value of EUR 34 million at 30 September 2015, based on unaudited financial information as at 30 June 2015, adjusted for cash movements and changes in prices of listed investments (31 March 2015: EUR 53 million). The decrease in the fair value is due mainly to the distribution of EUR 14 million described above, decreases in value of listed investments and the weakening of the US dollar against the euro.
At 30 September 2015, Reinet had remaining commitments of EUR 35 million to invest in Vanterra.
Further information on Vanterra may be found at www.vanterra.com.
Vanterra C Change Transformative Energy & Materials I, L.P. ('Vanterra C Change TEM')
Committed amount: EUR 59 million (EUR equivalent of USD commitment)
Invested amount: EUR 53 million (EUR equivalent of USD investment)
Remaining commitment: EUR 6 million
Distributed amount: EUR 1 million
Fair value: EUR 21 million
Vanterra C Change 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.
Reinet is an investor in Vanterra C Change TEM and in its general partner.
In the period under review, Reinet received a distribution of EUR 6 million from Vanterra C Change TEM and its general partner, following the partial sale of its holding in Talgo. Of this distribution EUR 5 million was a recallable return of capital and EUR 1 million represents capital returned. Further details in respect of Talgo can be found above.
At 30 September 2015, Reinet had invested the equivalent of EUR 52 million net of capital repayments (31 March 2015: EUR 60 million) in Vanterra C Change TEM and its general partner, the investment is carried at the estimated fair value of EUR 21 million at 30 September 2015, based on unaudited financial information as at 30 June 2015, adjusted for cash movements and changes in prices of listed investments (31 March 2015: EUR 30 million). The decrease in the fair value is due mainly to the distribution of EUR 6 million described above, decreases in value of listed investments and the weakening of the US dollar against the euro.
At 30 September 2015, Reinet had remaining commitments of EUR 6 million to invest in Vanterra C Change TEM and its general partner.
Further information on Vanterra C Change TEM may be found at www.temcapital.com.
NanoDimension funds and co-investment opportunities
Committed amount: EUR 54 million (EUR commitment and EUR equivalent of USD commitment)
Invested amount: EUR 39 million (EUR investment and EUR equivalent of USD investment)
Remaining commitment: EUR 15 million
Distributed amount: EUR nil
Fair value: EUR 47 million
NanoDimension Management Limited has established two funds in which Reinet is an investor. The focus of each fund is to invest in and support the growth and commercialisation of nanotechnology, the manipulation of matter at an atomic and molecular level. Areas of investment by the funds include: pharmaceuticals and drug delivery structures; optical and electronic switches; and thin film photo-chromatic coatings.
At 30 September 2015, capital contributions of EUR 39 million had been made to the funds and co-investment (31 March 2015: EUR 40 million). The fair value of Reinet's investment in the two funds and the co-investment amounted to EUR 47 million (31 March 2015: EUR 56 million). The estimate of fair value is based on unaudited valuation data received from the fund manager as at 30 June 2015 together with an independent valuation of the co-investment. The decrease in value reflects decreases in the value of underlying investments and the weakening of the US dollar against the euro in the period.
At 30 September 2015, Reinet had remaining commitments to the funds amounting to EUR 15 million.
Further information on NanoDimension may be found at www.nanodimension.com.
Fountainhead Expert Fund ('Fountainhead')
Committed amount: EUR 36 million (EUR equivalent of USD commitment)
Invested amount: EUR 18 million (EUR equivalent of USD investment)
Remaining commitment: EUR 18 million
Distributed amount: EUR nil
Fair value: EUR 23 million
Fountainhead is a fund investing in a concentrated manner in global equities offering superior potential for capital appreciation and value realisation by benchmarking themselves to global inflation and striving for absolute real returns through time.
Reinet has invested EUR 18 million to date in Fountainhead.
At 30 September 2015, the fair value of the investment was EUR 23 million based on the unaudited valuation at that date provided by the fund manager (31 March 2015: EUR 30 million). The decrease in fair value over the period under review is the result of decreases in the value of underlying listed investments and the weakening of the US dollar against the euro.
At 30 September 2015, Reinet had remaining commitments to Fountainhead of EUR 18 million, subject to Fountainhead's fulfilment of certain conditions.
Further information on Fountainhead may be found at www.fountainheadpartners.co.za.
UNITED STATES LAND DEVELOPMENT AND MORTGAGES
Committed amount: EUR 169 million (including an increase of EUR 13 million during the period) (EUR equivalent of USD commitment)
Invested amount: EUR 166 million (EUR equivalent of USD investment)
Remaining commitment: EUR 3 million
Distributed amount: EUR nil
Fair value: EUR 186 million
Reinet has co-invested both directly and with partners to acquire interests in real estate development projects. The investments are located in Florida, Georgia, Colorado, North and South Carolina and Nevada. These include properties where infrastructure services have been laid but where the construction of properties has not yet commenced. In addition, Reinet has invested in residential golf communities, owning the land for sale to future homeowners together with infrastructure assets. Reinet has also purchased mortgage debt linked to such developments from financial institutions, usually at significant discounts to face value.
During the period under review, Reinet purchased certain minority interests and repaid funding provided by a minority partner for the total amount of EUR 9 million. These transactions increased the aggregate fair value of the investment in United States land development and mortgages by some EUR 5 million and reduced the liability to minority partners and value attributable to minority interests by some EUR 4 million.
At 30 September 2015, Reinet had invested EUR 166 million in these projects (31 March 2015: EUR 161 million). The investment is carried at the estimated fair value of EUR 189 million (31 March 2015: EUR 207 million), of which EUR 186 million is attributable to Reinet (31 March 2015: EUR 199 million) and EUR 3 million to its partners (31 March 2015: EUR 8 million).
The current valuation is based on independent valuations of underlying assets as at 30 June 2015. The decrease in the valuation reflects a decrease in value of certain assets due to reduced cash-flow projections and the weakening of the US dollar against the euro during the period.
At 30 September 2015, Reinet had remaining commitments of EUR 3 million, as part of a short-term financing facility granted during the period.
DIAMOND INTERESTS
Reinet has invested in two projects in South Africa.
In total these projects are carried at their estimated fair value of EUR 65 million at 30 September 2015 (31 March 2015: EUR 92 million).
The exposure to the South African rand has been hedged through borrowings and forward exchange contracts.
Jagersfontein
Project cost: EUR 55 million (EUR equivalent of ZAR cost)
Invested amount: EUR 53 million (EUR equivalent of ZAR investment)
Remaining commitment: EUR 2 million
Distributed amount: EUR 35 million
Fair value: EUR 38 million
Reinet is an investor in an entity which extracts diamonds from the waste tailings of 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.
Reinet's effective interest in the Jagersfontein project is 48 per cent. Other shareholders include a Black Economic Empowerment ('BEE') organisation, a local community trust and the parties responsible for the day-to-day operations.
Of the proceeds of diamond sales during the period, EUR 3 million (ZAR 44 million) was used to repay loans and interest due to Reinet with the balance retained to fund on-going operations.
At 30 September 2015, Reinet held equity interests of EUR 9 million (31 March 2015: EUR 18 million) in the above investment and had outstanding loans of EUR 20 million (31 March 2015: EUR 22 million). In addition, EUR 6 million (31 March 2015: EUR 8 million) is receivable from third parties in respect of sales of part of the equity investments and Reinet has accrued income of EUR 3 million (31 March 2015: EUR 5 million) in respect of the funding that it has provided in connection with the project to date.
The investment is carried at its estimated fair value of EUR 38 million at 30 September 2015 (31 March 2015: EUR 53 million). The current valuation is based on discounted cash flow analyses prepared by local management. The decrease in carrying value reflects loan repayments, decreases in underlying cash flow forecasts due to an anticipated decline in diamond prices, lower diamond yields and the weakening of the South African rand against the euro in the period.
At 30 September 2015, Reinet had remaining commitments of EUR 2 million to invest in this project.
Rooipoort
Project cost: EUR 25 million (EUR equivalent of ZAR cost)
Invested amount: EUR 24 million (EUR equivalent of ZAR cost)
Remaining commitment: EUR 1 million
Distributed amount: EUR 7 million
Fair value: EUR 27 million
Reinet has a 49 per cent interest in a separate project, which has acquired rights to source diamonds on a previously unexploited site at Rooipoort near Kimberley in South Africa. Other shareholders include a BEE organisation and the parties responsible for the day-to-day operations.
Of the proceeds of diamond sales during the period, EUR 4 million (ZAR 70 million) was used to repay loans and interest due to Reinet with the balance retained to fund on-going operations.
At 30 September 2015, Reinet held equity interests of EUR 9 million (31 March 2015: EUR 11 million) in the above investment and had outstanding loans of EUR 12 million (31 March 2015: EUR 20 million). In addition, EUR 3 million (31 March 2015: EUR 4 million) is receivable from third parties in respect of sales of part of the equity investments and Reinet has accrued income of EUR 3 million (31 March 2015: EUR 4 million) in respect of the funding that it has provided in connection with the project to date.
The investment is carried at its estimated fair value of EUR 27 million at 30 September 2015 (31 March 2015: EUR 39 million). The current valuation is based on discounted cash flow analyses prepared by local management. The decrease in carrying value reflects loan repayments, decreases in underlying cash flow forecasts due to an anticipated decline in diamond prices, lower diamond yields and the weakening of the South African rand against the euro in the period.
At 30 September 2015, Reinet had remaining commitments of EUR 1 million to invest in this project.
OTHER INVESTMENTS
The increase in other investments relates to two new investments in the period, the first is a venture in the digital music industry and the second, a 3D manufacturing initiative.
There were no significant changes in value during the period in respect of other investments either as a result of movements in the valuation of underlying investments, further amounts invested or returns of capital.
Committed Funds
The table below summarises Reinet's outstanding investment commitments at 30 September 2015.
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
| | 31 March| Exchange| Committed| Funded|30 September|30 September|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
| | 2015(1)| rate effects(2)|during the|during the| 2015(3)| 2015|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
| | | |period (3)|period (3)| | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
| | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
| | EUR m| EUR m| EUR m| EUR m| EUR m| %|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
| | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Pension Corporation | -| -| -| -| -| -|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
| | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Private equity and related partnerships | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Trilantic Capital Partners | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Fund IV, Fund V, TEP and related | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|management companies(4) (5) | 123| (5)| 15| 3| 136| 33.1|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Renshaw Bay and related | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|investments | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Renshaw Bay advisory and | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|investment management company | 2| -| -| -| 2| 0.5|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|JPS Credit Opportunities Fund | -| -| -| -| -| -|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Renshaw Bay Real Estate Finance Fund (5)| 83| (2)| -| 2| 83| 20.2|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Renshaw Bay Structured | | | | | | |
|Finance Opportunity L.P. | 84| (3)| -| -| 81| 19.7|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|36 South macro/volatility funds | -| -| -| -| -| -|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Asian private equity and | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|portfolio funds | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Milestone China Opportunities | | | | | | |
|funds, investment holdings and | | | | | | |
|management company participation | 22| (2)| -| (2)| 18| 4.4|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|GEMS | -| -| -| -| -| -|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Prescient China Balanced Fund | -| -| -| -| -| -|
|and investment management company | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Specialised private equity funds | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Vanterra Flex Investments | 42| (2)| -| (5)| 35| 8.5|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Vanterra C Change TEM (5) | 1| -| -| 5| 6| 1.5|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|NanoDimension funds and | | | | | | |
|co investment opportunities | 16| -| -| (1)| 15| 3.6|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Fountainhead Expert Fund | 19| (1)| -| -| 18| 4.4|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Other fund investments | 3| -| -| -| 3| 0.7|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|United States land | -| -| 13| (10)| 3| 0.7|
|development and mortgages(4) | | | | | | |
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Diamond interests | 3| -| -| -| 3| 0.7|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
|Other investments | 7| -| 61| (60)| 8| 2.0|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
| | 405| (15)| 89| (68)| 411| 100.0|
+----------------------------------------+---------+----------------+----------+----------+------------+------------+
(1) Commitments calculated using 31 March 2015 exchange rates.
(2) Reflects exchange rate movements between 31 March 2015 and 30 September 2015.
(3) Amounts calculated using 30 September 2015 exchange rates.
(4) Commitments noted represent only Reinet's share of the investments at 30 September 2015, additional commitments payable by minority partners amount to EUR 5 million in respect of Trilantic and EUR nil in respect of United States land development and mortgages.
(5) Certain repayments of capital increased the outstanding commitment.
CASH AND LIQUID FUNDS
Reinet holds cash on deposit principally in European banks.
Reinet's liquidity is measured by its ability to meet potential cash requirements, including unfunded commitments on investments and the repayment of borrowings, and can be summarised as follows:
Cash at bank EUR 128 m
Undrawn borrowing facilities EUR 406 m
Cash required for unfunded commitments (refer to table above) (EUR 411 m)
Cash required to meet ZAR borrowing obligations (refer to note below) (EUR 29 m)
Existing bank borrowings of EUR 425 million under the collar financing arrangements noted below will be settled either by the delivery of BAT shares pursuant to the put and call options in place, by the proceeds of the sale of BAT shares or may be rolled over or replaced by other borrowings.
Reinet may sell further BAT shares or use such shares to secure additional financing facilities from time to time.
The undrawn borrowing facilities comprise a facility with Bank of America Merrill Lynch of GBP 150 million and a facility with Morgan Stanley Bank N.A. of GBP 150 million, in total GBP 300 million (EUR 406 million). At 30 September 2015, these facilities had not been drawn upon.
BANK BORROWINGS AND RELATED DERIVATIVE CONTRACTS
Borrowings
In February 2012, in order to meet its on-going commitments, Reinet entered into a GBP 300 million, medium-term collar financing arrangement. At 30 September 2015, the fair value of the borrowing was EUR 407 million (31 March 2015: EUR 415 million). The decrease in fair value reflects the weakening of sterling against the euro, offset by a slight decrease in interest rates during the period. 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 18 million as at 30 September 2015 (31 March 2015: EUR 25 million). 1.0 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 September 2015, the fair value of the borrowing was EUR 29 million (31 March 2015: EUR 34 million).
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 38 million at 30 September 2015 (31 March 2015: EUR 26 million).
Reinet has entered into a forward exchange contract to sell ZAR 650 million (31 March 2015: ZAR 715 million). The derivative liability in respect of the forward exchange contract is carried at its fair value of EUR 1 million at 30 September 2015 (31 March 2015: EUR 6 million).
Refer to page 60 of the Reinet 2015 annual report for a description of Reinet's policy on foreign exchange exposure.
OTHER LIABILITIES
Fees payable and other liabilities, net of other assets
Fees payable and other liabilities comprise principally an accrual of EUR 21 million in respect of the management fee payable at 30 September 2015 (31 March 2015: EUR 18 million) and a provision for deferred taxes of EUR 34 million relating to gains arising from the investments in Trilantic Capital Partners and withholding taxes relating to the investment in United States land development and mortgages.
No provision has been made in respect of a performance fee as at 30 September 2015 (31 March 2015: EUR 78 million) as the conditions required to pay a fee had not been met at that date.
The performance fee and management fee are payable to Reinet Investment Advisors Limited.
The management fee expense for the period under review amounted to EUR 23 million (30 September 2014: EUR 18 million).
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. During the period under review, Reinet Fund purchased a part of the minority interests in United States land development and mortgages. These transactions reduced the amounts due to minorities.
MINORITY INTERESTS
Minority partners share in the gains and losses arising in the investments in which they have interests. To the extent that gains are not distributed to minority partners, their share of the uplift in valuation is accounted for as a liability.
SUMMARISED CONSOLIDATED INCOME STATEMENT
+----------------------+--------------------------------------------------+
| | Six-month period ended |
+----------------------+--------------------------------------------------+
| | 30 September 2015| 30 September 2014|
+----------------------+-------------------+-----+-------------------+----+
| | EURm| EURm| EURm|EURm|
| | | | | |
+----------------------+-------------------+-----+-------------------+----+
|Income | | | | |
+----------------------+-------------------+-----+-------------------+----+
|BAT dividends | 149| | 133| |
+----------------------+-------------------+-----+-------------------+----+
|Interest and other | 15| | 9| |
|investment income | | | | |
+----------------------+-------------------+-----+-------------------+----+
|Realised gains | 73| | 10| |
|on investments | | | | |
+----------------------+-------------------+-----+-------------------+----+
|Realised gains on | 1| | -| |
|foreign exchange | | | | |
|contracts | | | | |
+----------------------+-------------------+-----+-------------------+----+
|Carried interest | | | | |
|earned on | | | | |
|investments | 2| 240| 3| 155|
+----------------------+-------------------+-----+-------------------+----+
| | | | | |
+----------------------+-------------------+-----+-------------------+----+
|Expenses | | | | |
+----------------------+-------------------+-----+-------------------+----+
|Management fee | (23)| | (18)| |
+----------------------+-------------------+-----+-------------------+----+
|Performance fee | -| | (12)| |
+----------------------+-------------------+-----+-------------------+----+
|Operating expenses, | | | | |
|foreign exchange and | | | | |
|transaction-related | | | | |
|costs | (3)| | (4)| |
+----------------------+-------------------+-----+-------------------+----+
|Interest expense | (6)| | (6)| |
+----------------------+-------------------+-----+-------------------+----+
|Tax income/(expense) | 2| (30)| (7)|(47)|
+----------------------+-------------------+-----+-------------------+----+
|Realised investment | | | | |
|income, net | | | | |
|of expenses | | 210| | 108|
+----------------------+-------------------+-----+-------------------+----+
|Fair value | | | | |
|adjustments | | | | |
+----------------------+-------------------+-----+-------------------+----+
|BAT – unrealised | | | | |
|gain on shares | | | | |
|held | 85| | 324| |
+----------------------+-------------------+-----+-------------------+----+
|Other investments | (260)| | 57| |
+----------------------+-------------------+-----+-------------------+----+
|Derivative instruments| (6)| | (10)| |
+----------------------+-------------------+-----+-------------------+----+
|Borrowings | 15|(166)| (25)| 346|
+----------------------+-------------------+-----+-------------------+----+
| | | | | |
+----------------------+-------------------+-----+-------------------+----+
|Effect of | | | | |
|exchange rate | | | | |
|changes on | | | | |
|cash balances | | (2)| | 9|
+----------------------+-------------------+-----+-------------------+----+
|Net profit | | 42| | 463|
+----------------------+-------------------+-----+-------------------+----+
|Minority interest | | (4)| | (6)|
+----------------------+-------------------+-----+-------------------+----+
|Profit attributable | | | | |
|to the | | | | |
|shareholders of | | | | |
|the Company | | 38| | 457|
+----------------------+-------------------+-----+-------------------+----+
INCOME
Dividends received from BAT increased from EUR 133 million (GBP 107 million) during the period to September 2014 to EUR 149 million (GBP 110 million) during the period under review. The increase is due to the increase of GBP 0.05 in the dividend per BAT share and a strengthening in the sterling/euro exchange rate at the time of the dividend payments. The dividends received from BAT during the period represent the final 2014 dividend, paid in May 2015 as well as the interim 2015 dividend paid in September 2015.
Interest income is earned on bank deposits and loans made to underlying investments.
Total realised gains on investments of EUR 73 million include EUR 68 million in respect of investments realised by the Trilantic funds. Reinet's share of the Trilantic gains amounts to EUR 61 million with a further EUR 7 million being attributable to the minority partner.
Carried interest of EUR 2 million was attributable to Reinet in respect of investments realised by the Trilantic funds.
EXPENSES
A performance fee may be payable for the year ended 31 March 2016. The performance fee is calculated as 10 per cent of the Cumulative Total Shareholder Return as defined in the Company's Prospectus, published on 10 October 2008, including dividends paid, over the period since completion of the rights issue in December 2008 up to 31 March 2016, less the sum of all performance fees paid in respect of previous periods. The provision for the performance fee accrued in respect of the six-month period ended 30 September 2015 amounts to EUR nil (30 September 2014: EUR 12 million).
The management fee for the period ended 30 September 2015 amounts to EUR 23 million (30 September 2014: EUR 18 million). Operating expenses of EUR 3 million include EUR 1 million in respect of charges from Reinet Investments Manager S.A. (the 'General Partner') and other expenses, including legal and other fees, which amounted to EUR 2 million.
Interest expense relates to sterling and South African rand denominated borrowings.
The net tax income of EUR 2 million includes corporate and withholding taxes payable in respect of gains realised on Trilantic investments, offset by a reduction in the deferred tax provision related to unrealised gains, expected distributions and accrued interest in respect of the Trilantic funds and other United States investments.
FAIR VALUE ADJUSTMENTS
The investment in 74.3 million BAT shares increased in value by EUR 85 million during the period under review. Of this, EUR 159 million was attributable to the increase in value of the underlying BAT shares in sterling terms offset by EUR 74 million due to the weakening of sterling against the euro during the period under review.
The unrealised fair value adjustment of EUR 260 million in respect of other investments includes a decrease in the fair value of the investment in Pension Corporation of EUR 92 million, a decrease in the unrealised gain in respect of the Trilantic funds of EUR 31 million, decreases in the value of the investments in United States land development and mortgages of EUR 32 million, decreases in the value of the investments in Diamond interests of EUR 21 million together with decreases of EUR 85 million in respect of certain other investments. The above amounts include the negative effect of changes in foreign exchange rates due to the depreciation of other currencies against the euro in the period under review.
The fair value of the collar financing derivative liability increased by EUR 12 million during the period, reflecting the increase in the price of the BAT shares underlying the put and call options. The fair value of the forward exchange contracts increased by EUR 5 million; the contracts were settled on 30 September 2015 realising a gain of EUR 1 million.
Borrowings are carried at fair value reflecting the discounted cash flow value of future principal and interest payments taking into account prevailing interest rates. An unrealised gain of EUR 5 million arose in respect of the South African rand borrowing due to the weakening of the South African rand during the period. An unrealised gain of EUR 10 million arose in respect of the sterling borrowing. Of this, a gain of EUR 9 million is due to the weakening of the sterling/euro exchange rate during the period.
MINORITY INTEREST
The minority interest expense arises in respect of the minority partners' shares in the earnings of the Reinet entities which hold the Trilantic and United States land development and mortgages interests, respectively.
PROFIT FOR THE PERIOD
Net realised income for the period amounted to EUR 210 million (30 September 2014: EUR 108 million). Net profit attributable to shareholders, taking into account unrealised fair value adjustments, was EUR 38 million (30 September 2014: EUR 457 million).
DIVIDEND
A cash dividend of EUR 0.157 per share totalling EUR 31 million was paid in September 2015, following approval at the Annual General Meeting on 25 August 2015. No interim dividend is proposed in respect of the six months ended 30 September 2015.
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.
FINANCIAL STATEMENTS
The unaudited interim consolidated financial statements at 30 September 2015, on which this announcement is based, were approved by the Board of the General Partner on 10 November 2015. The printed Reinet Interim Report will be available upon request from early December 2015.
SHARE INFORMATION
Primary listing
Reinet Investments S.C.A. shares are listed on the Luxembourg Stock Exchange with the ISIN number LU0383812293 (symbol 'ReinetInvest'). 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 CH0045793657 (symbol 'REI'). 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)
12 November 2015
Reinet Investments Manager S.A.
General Partner
For and on behalf of Reinet Investments S.C.A.
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. ('Reinet Fund'), a specialised investment fund also incorporated in Luxembourg. Reinet Investments shares are listed on the Luxembourg Stock Exchange, the primary listing, and Reinet Investments South African Depository Receipts are listed on the Johannesburg Stock Exchange, the secondary listing.
Notes for South African editors
One Depository Receipt represents one-tenth of one ordinary share in Reinet.
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 September 2015 of 15.485 and a rate of 13.0229 as at 31 March 2015.
30 September 2015 31 March 2015
Net asset value ZAR 78 726 m ZAR 66 117 m
Net asset value per ordinary share ZAR 401.84 ZAR 337.42
Using the average euro/rand exchange rate for the six-month period ended 30 September 2015 of 13.9292 and an average rate of 14.3590 for the six-month period ended 30 September 2014.
30 September 2015 30 September 2014
Profit for the period ZAR 529 m ZAR 6 562 m
Headline earnings per share
To comply with the South African practice of providing Headline earnings per share data the relevant data is as follows:
30 September 2015 30 September 2014
Unadjusted earnings per share EUR 0.19 EUR 2.33
Headline earnings per share * EUR 0.19 EUR 2.33
Unadjusted earnings per share ZAR 2.65 ZAR 33.46
Headline earnings per share * ZAR 2.65 ZAR 33.46
* There are no dilutive instruments
Dividends paid
September 2015 September 2014
Gross dividend per DR EUR 0.0157 EUR 0.0153
Gross dividend per DR ZAR 0.2292969 ZAR 0.2126899
Euro/rand exchange rate 14.6049 13.9013
Date: 12/11/2015 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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