Wrap Text
Management statement for the third quarter ended 31 December 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 THIRD QUARTER ENDED 31 DECEMBER 2015
The Board of Reinet Investments Manager S.A. announces the results of Reinet Investments S.C.A. for the quarter ended 31 December 2015.
Key financial data
* Net asset value at 31 December 2015: EUR 5 362 million, an increase of EUR 278 million from 30 September 2015, reflecting increases in assets values in the quarter
* Net asset value per ordinary share at 31 December 2015: EUR 27.36 (30 September 2015: EUR 25.95)
* Commitments to new investments of EUR 92 million were made during the quarter under review.
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
Consolidated Net Asset Value
The Consolidated Net Asset Value ('NAV') at 31 December 2015 comprised:
+----------------------+-------------------------+---------------------------+
| | 31 December 2015 | 30 September 2015 |
+----------------------+-------------------------+---------------------------+
| | EUR m| %| EUR m| %|
+----------------------+-----------+-------------+-------------+-------------+
|Listed investments | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|British American | 3 803| 70.9| 3 664| 72.1|
|Tobacco p.l.c. | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|SPDR Gold shares | 21| 0.4| 22| 0.4|
+----------------------+-----------+-------------+-------------+-------------+
|Unlisted investments | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Pension Corporation | 941| 17.6| 815| 16.0|
|Group Limited | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Private equity and | 705| 13.2| 713| 14.0|
|related partnerships | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Trilantic Capital | 158| 3.0| 174| 3.4|
|Partners | | | | |
|Fund IV, Fund V, TEP | | | | |
|and related | | | | |
|management companies | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Renshaw Bay and | 167| 3.1| 198| 3.9|
|related investments | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Renshaw Bay | 15| | 14| |
|advisory and | | | | |
|investment management | | | | |
|company | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|JPS Credit | 88| | 84| |
|Opportunities Fund | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Renshaw Bay Real | 64| | 54| |
|Estate Finance Fund | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Renshaw Bay Structured| -| | 46| |
|Finance Opportunity | | | | |
|L.P. | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|36 South | 65| 1.2| 74| 1.5|
|macro/volatility funds| | | | |
+----------------------+-----------+-------------+-------------+-------------+
| | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Asian private equity | 170| 3.2| 134| 2.6|
|and portfolio funds | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Milestone China | 118| | 89| |
|Opportunities funds, | | | | |
|investment holdings | | | | |
|and management company| | | | |
|participation | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|GEMS | 4| | 4| |
+----------------------+-----------+-------------+-------------+-------------+
|Prescient China | 48| | 41| |
|Balanced Fund | | | | |
|and investment | | | | |
|management company | | | | |
+----------------------+-----------+-------------+-------------+-------------+
| | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Specialised private | 145| 2.7| 133| 2.6|
|equity funds | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Vanterra Flex | 38| | 34| |
|Investments | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Vanterra C Change TEM | 25| | 21| |
+----------------------+-----------+-------------+-------------+-------------+
|NanoDimension funds | 48| | 47| |
|and co-investment | | | | |
|opportunities | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Fountainhead Expert | 25| | 23| |
|Fund | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Other fund investments| 9| | 8| |
+----------------------+-----------+-------------+-------------+-------------+
| | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|United States land | 200| 3.7| 189| 3.7|
|development and | | | | |
|mortgages | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Diamond interests | 58| 1.1| 65| 1.3|
+----------------------+-----------+-------------+-------------+-------------+
|Other investments | 66| 1.2| 58| 1.2|
+----------------------+-----------+-------------+-------------+-------------+
| | 5 794| 108.1| 5 526| 108.7|
+----------------------+-----------+-------------+-------------+-------------+
|Cash and liquid funds | 123| 2.3| 128| 2.5|
+----------------------+-----------+-------------+-------------+-------------+
|Bank borrowings and | | | | |
|collar financing | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Borrowings | (450)| (8.4)| (454)| (8.9)|
+----------------------+-----------+-------------+-------------+-------------+
|Derivative | (41)| (0.8)| (38)| (0.7)|
|assets/(liabilities) | | | | |
+----------------------+-----------+-------------+-------------+-------------+
| | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Other liabilities | | | | |
+----------------------+-----------+-------------+-------------+-------------+
|Fees payable and | (48)| (0.9)| (60)| (1.2)|
|other liabilities, net| | | | |
|of other assets | | | | |
+----------------------+-----------+-------------+-------------+-------------+
| | 5 378| 100.3| 5 102| 100.4|
+----------------------+-----------+-------------+-------------+-------------+
|Minority interests | (16)| (0.3)| (18)| (0.4)|
+----------------------+-----------+-------------+-------------+-------------+
|Consolidated net | 5 362| 100.0| 5 084| 100.0|
|asset value | | | | |
+----------------------+-----------+-------------+-------------+-------------+
All investments are held either directly or indirectly, by Reinet Fund S.C.A., F.I.S. ('Reinet Fund'). Reinet Investments S.C.A. (the 'Company') and Reinet Fund together with Reinet 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 NAV during the quarter under review are described below.
Listed investments
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 the investment in BAT at 31 December 2015 was EUR 3 803 million (30 September 2015: EUR 3 664 million), being 71 per cent of Reinet's NAV. The BAT share price on the London Stock Exchange increased from GBP 36.43 at 30 September 2015 to GBP 37.71 at 31 December 2015.
Further information on BAT is available at www.bat.com/annualreport.
Unlisted investments
PENSION CORPORATION GROUP LIMITED
The total capital invested to date is EUR 543 million, which constitutes Reinet's full capital commitment to Pension Corporation Group Limited. Reinet's equity holding is 43 per cent.
The investment is carried at an estimated fair value of EUR 941 million at 31 December 2015 (30 September 2015: EUR 815 million), taking into account the unaudited embedded value of Pension Corporation Group Limited at 30 September 2015 and valuation multiples drawn from industry data; both of which increased during the quarter. The embedded value increase reflects new business written and the impact of changes in inflation and interest rates. The increase in market multiples reflects the uplift in the UK insurance market in the quarter.
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')
At 31 December 2015, Reinet and its partner have invested EUR 82 million (30 September 2015: EUR 83 million), net of capital repayments, in Trilantic general partnerships and management companies ('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 113 million at 31 December 2015 (30 September 2015: EUR 142 million). The investment in Fund IV is based on unaudited valuation data provided by Trilantic Management at 30 September 2015 adjusted for changes in the value of listed investments included in the portfolios. The decrease in the valuation is due mainly to distributions of EUR 12 million in the period under review together with net decreases in the value of the remaining investments. Of the EUR 113 million carrying value, some EUR 102 million is attributable to Reinet, with the balance being attributable to its minority partner.
At 31 December 2015, Reinet had remaining commitments of EUR 43 million to invest in Fund IV.
Trilantic Capital Partners V (North America) L.P. ('Fund V')
At 31 December 2015, Reinet had invested EUR 39 million in Fund V and Fund V's general partner ('Fund V GP') (30 September 2015: EUR 28 million). The investment is carried at the estimated fair value of EUR 40 million at 31 December 2015 (30 September 2015: EUR 27 million), based on unaudited valuation data provided by Trilantic Management as at 30 September 2015. The increase in fair value is due to capital invested in the quarter.
At 31 December 2015, Reinet had remaining commitments of EUR 56 million to invest in Fund V and Fund V GP.
Trilantic Energy Partners (North America) L.P. ('TEP')
At 31 December 2015, Reinet had invested EUR 6 million in TEP (30 September 2015: EUR 6 million). The investment is carried at the estimated fair value of EUR 5 million at 31 December 2015 (30 September 2015: EUR 5 million), based on unaudited valuation data as at 30 September 2015.
At 31 December 2015, Reinet had remaining commitments of EUR 30 million to invest in TEP.
Further information on Trilantic is available at www.trilanticpartners.com.
RENSHAW BAY AND RELATED INVESTMENTS
Renshaw Bay Real Estate Finance Fund
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.
During the quarter under review Reinet invested an additional EUR 8 million in the Renshaw Bay Real Estate Finance Fund.
Reinet has invested EUR 61 million to date (30 September 2015: EUR 52 million). The fair value at 31 December 2015 is EUR 64 million (30 September 2015: EUR 54 million) based on audited valuation data provided by Renshaw Bay at 30 September 2015 adjusted for amounts invested in the quarter.
Reinet is committed to invest a further EUR 75 million in the fund.
Renshaw Bay Structured Finance Opportunity L.P.
During the quarter under review, the Renshaw Bay Structured Finance Opportunity L.P. was dissolved with all cash and remaining assets returned to its limited partners.
Reinet had invested a total of EUR 55 million in the fund; in connection with the dissolution it received cash distributions amounting to EUR 38 million and a distribution of assets with an estimated fair value of EUR 7 million. At 30 September 2015, the fair value of the investment was EUR 46 million.
The assets received are included in 'Other investments'.
36 SOUTH MACRO/VOLATILITY FUNDS
Reinet has invested its full commitment of EUR 88 million in the 36 South fund management and distribution companies together with the 36 South funds.
The investment in the funds is carried at its estimated fair value of EUR 57 million, based on unaudited capital statements received from the fund manager as at 31 December 2015 (30 September 2015: EUR 66 million); and the fair value of the short-term loan and investment in the fund management companies amounted to EUR 8 million (30 September 2015: EUR 8 million). The investments in total have a fair value of EUR 65 million (30 September 2015: EUR 74 million). The change in valuation reflects the movement in the value of the underlying funds during the quarter.
Further information on 36 South may be found at www.36south.com.
ASIAN PRIVATE EQUITY AND PORTFOLIO FUNDS
Milestone China Opportunities funds, investment holdings and management company participation
Milestone China Opportunities Fund III L.P. ('Milestone III')
At 31 December 2015, capital contributions of EUR 76 million, net of capital repayments, had been made to Milestone III (30 September 2015: EUR 74 million). This investment is carried at the estimated fair value of EUR 63 million at 31 December 2015 (30 September 2015: EUR 50 million). The valuation is based on unaudited valuation data provided by the fund manager at 30 September 2015, adjusted for changes in the value of listed investments in the underlying portfolio. The increase in fair value over the period under review is mainly the result of increases in value of underlying listed investments and the strengthening of the US dollar against the euro.
At 31 December 2015, Reinet had remaining commitments to Milestone III of EUR 11 million.
Investment holdings
At 31 December 2015, capital contributions of EUR 39 million had been made in respect of this investment (30 September 2015: EUR 32 million).
The investment is carried at the estimated fair value of EUR 51 million at 31 December 2015, based on unaudited valuation data at 30 September 2015, adjusted for changes in the value of listed investments in the underlying portfolio (30 September 2015: EUR 34 million). The increase in fair value is the result of capital contributions made in the quarter along with increases in the value of underlying listed investments and the strengthening of the US dollar against the euro.
At 31 December 2015, Reinet had no remaining commitment in respect of this investment.
Further information on Milestone Capital and Milestone funds may be found at www.mcmchina.com.
Prescient China Balanced Fund ('Prescient China') and investment management company
The investment in Prescient China and its investment management company is carried at the estimated fair value of EUR 48 million at 31 December 2015 (30 September 2015: EUR 41 million), based on unaudited valuation data provided by the fund manager at 31 December 2015. The increase in value during the quarter is due to increased values of the fund's underlying listed investments.
Further information on Prescient China may be found at www.prescient.co.za.
In respect of both the Milestone entities and Prescient China, listed securities are valued using the listed price as at 31 December 2015. Whilst the Chinese equity market showed a large increase in value in the quarter ended 31 December 2015, significant volatility remains and decreases in value have been noted in 2016 to date.
UNITED STATES LAND DEVELOPMENT AND MORTGAGES
At 31 December 2015, Reinet had invested EUR 178 million in this investment (30 September 2015: EUR 166 million), of which EUR 8 million was invested in the current quarter. The further increase in amounts invested includes some EUR 4 million in respect of foreign exchange gains due to the strengthening of the US dollar against the euro during the quarter.
The investment is carried at the estimated fair value of EUR 200 million (30 September 2015: EUR 189 million) of which EUR 197 million is attributable to Reinet and EUR 3 million to its partners.
The current valuation is based on independent valuations of underlying assets as at 30 June 2015 adjusted for cash receipts and payments in the period to 31 December 2015. The increase in the value for the current quarter reflects additional investments made and the strengthening of the US dollar against the euro during the quarter.
DIAMOND INTERESTS
Reinet has invested in two projects in South Africa.
In total these projects are carried at their estimated fair value of EUR 58 million at 31 December 2015 (30 September 2015: EUR 65 million). The current valuation is based on discounted cash flow analyses prepared by local management. The decrease in carrying value reflects loan repayments received in the quarter and the weakening of the South African rand against the euro.
At 31 December 2015, Reinet had remaining commitments of EUR 3 million to invest in these projects.
The exposure to the South African rand has been hedged through borrowings and forward exchange contracts.
OTHER INVESTMENTS
The increase in other investments relates mainly to the transfer of assets from the Renshaw Bay Structured Finance Opportunity L.P. following its dissolution in December 2015. The value of the assets received was EUR 7 million.
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.
CASH AND LIQUID FUNDS
Cash and liquid funds at 31 December 2015 amounted to EUR 123 million (30 September 2015: EUR 128 million).
During the quarter under review Reinet invested some EUR 39 million in underlying investments, including EUR 12 million in the Trilantic investments, EUR 8 million in the Renshaw Bay entities, EUR 7 million in Milestone and EUR 8 million in United States land development and mortgages. Distributions from investments amounted to EUR 51 million, including EUR 38 million from the Renshaw Bay Structured Finance Opportunity L.P. and EUR 12 million from the Trilantic funds. Management fees of EUR 21 million accrued at 30 September 2015 were paid to Reinet Investment Advisor Limited (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 31 December 2015, these facilities had not been drawn upon.
BANK BORROWINGS AND DERIVATIVE CONTRACTS
Borrowings
In February 2012, Reinet entered into a GBP 300 million medium-term collar financing arrangement. At 31 December 2015, the fair value of the borrowing was EUR 408 million (30 September 2015: EUR 407 million). The increase in fair value reflects the strengthening of sterling against the euro during the quarter. 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 15 million as at 31 December 2015 (30 September 2015: EUR 18 million).
Reinet has also borrowed ZAR 443 million to fund its investments in South African projects. At 31 December 2015, the fair value of the borrowing was EUR 26 million (30 September 2015: EUR 29 million). The decrease in fair value reflects the weakening of the South African rand against the euro.
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 facility 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 43 million at 31 December 2015 (30 September 2015: EUR 38 million).
Reinet has entered into forward exchange contracts to sell ZAR 550 million (30 September 2015: ZAR 650 million). The net derivative asset in respect of the forward exchange contracts is carried at its fair value of EUR 2 million at 31 December 2015 (30 September 2015: liability of EUR 1 million).
OTHER LIABILITIES
Fees payable and other liabilities, net of other assets
Fees payable and other liabilities comprise principally an accrual of EUR 11 million in respect of the management fee up to 31 December 2015 (30 September 2015: EUR 21 million) and a provision for deferred taxes of EUR 31 million (30 September 2015: 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 31 December 2015 (30 September 2015: EUR nil) as the conditions required to pay a fee had not been met at that date.
The performance fee and management fee are payable to the Investment Advisor.
COMMITMENTS MADE
In 2011, Reinet committed to invest up to USD 10 million in Snow Phipps II, L.P. a US fund investing in the US middle-market private equity space. In the current quarter, Reinet made a commitment of USD 100 million (EUR 92 million) to Snow Phipps III, L.P. the successor fund to Snow Phipps II, L.P.
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.
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 depositary receipt issued by Reinet Securities SA represents one-tenth of one ordinary share in Reinet Investments S.C.A.
Reinet Investments Manager S.A.
General Partner
For and on behalf of Reinet Investments S.C.A.
Website: www.reinet.com
26 January 2016
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, its 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 31 December 2015 of 16.8045 and a rate of 15.485 as at 30 September 2015.
31 December 2015 30 September 2015
Net asset value ZAR 90 106 m ZAR 78 726 m
Net asset value per ordinary share ZAR 459.77 ZAR 401.84
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
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 26/01/2016 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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