Wrap Text
Consolidated unaudited financial results for the six-month period ended 30 September 2016
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 2016
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 2016.
Key financial data
* Net asset value at 30 September 2016: EUR 5 510 million, an increase of EUR 289 million from 31 March 2016
* Growth in net asset value reflects a compound return of 16 per cent per annum, in euro terms, since March 2009, including dividends paid
* Net asset value per share at 30 September 2016: EUR 28.12 (31 March 2016: EUR 26.65)
* Commitments totalling EUR 207 million in respect of new and existing investments were made during the period, including EUR 179 million (GBP 139 million) in respect of Pension Insurance Corporation Group Limited
* Dividends received from British American Tobacco during the period amounted to EUR 127 million
* Dividend of some EUR 32 million, or EUR 0.161 per share, paid during the period
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. The Company's ordinary shares are listed on the Luxembourg Stock Exchange, the primary listing, and the depository receipts issued by Reinet Securities SA in respect of the Company's ordinary shares are listed on the Johannesburg Stock Exchange, the secondary listing. The Company's ordinary 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 OVERVIEW
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 overview have however been presented in a more comprehensive format than required by IFRS in order to provide readers with detailed information relating to the underlying assets and liabilities.
Consolidated net asset value
The consolidated net asset value ('NAV') at 30 September 2016 comprised:
+---------------------------+-----------------------+-------------------+
| | 30 September 2016 | 31 March 2016 |
+---------------------------+-----------------+-----+-------------+-----+
| | EUR m| %| EUR m| %|
+---------------------------+-----------------+-----+-------------+-----+
|Listed investments | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|British American | 3 874| 70.3| 3 512| 67.3|
|Tobacco p.l.c. | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|SPDR Gold shares | 26| 0.5| 24| 0.5|
+---------------------------+-----------------+-----+-------------+-----+
|Selecta Biosciences, Inc. | 4| 0.1| -| -|
+---------------------------+-----------------+-----+-------------+-----+
|Unlisted investments | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Pension Insurance | 1 070| 19.4| 920| 17.6|
|Corporation Group Limited | | | | |
+---------------------------+-----------------+-----+-------------+-----+
| | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Private equity and | 711| 12.9| 671| 12.8|
|related partnerships | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Trilantic Capital Partners | 161| 2.9| 143| 2.7|
|Fund IV, Fund | | | | |
|V, TEP, related | | | | |
|general partners and | | | | |
|management companies | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Renshaw Bay and | 169| 3.0| 178| 3.4|
|related investments | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Renshaw Bay advisory and | 10| | 11| |
|investment management | | | | |
|company | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|JPS Credit | 86| | 84| |
|Opportunities Fund | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Renshaw Bay Real | 73| | 83| |
|Estate Finance Fund | | | | |
+---------------------------+-----------------+-----+-------------+-----+
| | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|36 South | 53| 1.0| 62| 1.2|
|macro/volatility funds | | | | |
+---------------------------+-----------------+-----+-------------+-----+
| | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Asian private equity | 175| 3.2| 155| 3.0|
|and portfolio funds | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Milestone China | 132| | 113| |
|Opportunities funds, | | | | |
|investment holdings and | | | | |
|management company | | | | |
|participation | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Prescient China | 43| | 42| |
|Balanced Fund | | | | |
|and investment | | | | |
|management company | | | | |
+---------------------------+-----------------+-----+-------------+-----+
| | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Specialised private | 153| 2.8| 133| 2.5|
|equity funds | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Vanterra Flex Investments | 28| | 30| |
+---------------------------+-----------------+-----+-------------+-----+
|Vanterra C Change TEM | 22| | 23| |
+---------------------------+-----------------+-----+-------------+-----+
|NanoDimension funds and | 41| | 48| |
|co-investment opportunities| | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Fountainhead Expert Fund | 20| | 19| |
+---------------------------+-----------------+-----+-------------+-----+
|Snow Phipps funds | 37| | 8| |
|and co-investment | | | | |
|opportunities | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Other fund investments | 5| | 5| |
+---------------------------+-----------------+-----+-------------+-----+
| | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|United States land | 149| 2.7| 164| 3.1|
|development and mortgages | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Diamond interests | 61| 1.1| 59| 1.1|
+---------------------------+-----------------+-----+-------------+-----+
|Other investments | 60| 1.1| 66| 1.3|
+---------------------------+-----------------+-----+-------------+-----+
|Total investments | 5 955|108.1| 5 416|103.7|
+---------------------------+-----------------+-----+-------------+-----+
|Cash and liquid funds | 194| 3.5| 380| 7.3|
+---------------------------+-----------------+-----+-------------+-----+
|Bank borrowings | | | | |
|and derivatives | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Borrowings | (381)|(6.9)| (417)|(8.0)|
+---------------------------+-----------------+-----+-------------+-----+
|Net derivative | (182)|(3.3)| (78)|(1.5)|
|assets/(liabilities) | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Other liabilities | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Minority interest, fees | (76)|(1.4)| (80)|(1.5)|
|payable and | | | | |
|other liabilities, net | | | | |
|of other assets | | | | |
+---------------------------+-----------------+-----+-------------+-----+
|Consolidated net | 5 510|100.0| 5 221|100.0|
|asset value | | | | |
+---------------------------+-----------------+-----+-------------+-----+
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'.
INFORMATION RELATING TO CURRENT KEY INVESTMENTS
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
| | |Committed |Remaining|Invested |Realised |Current |Total |
| | |amount (1)|committed|amount(2)|proceeds(2)|fair |realised |
| | |in |amount(1)|in |in |value(1) in|and |
| | |millions |in |millions |millions |millions |unrealised |
| | | |millions | | | |value(3) in|
| | | | | | | |millions |
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Listed investments | | | | | | | |
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|British American Tobacco |EUR| -| -| 1 739| 1 692| 3 874| 5 566|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|p.l.c. |GBP| -| -| 1 418| 1 383| 3 355| 4 738|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|SPDR Gold shares |EUR| 22| -| 22| -| 26| 26|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
| |USD| 25| -| 25| -| 29| 29|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Selecta Biosciences, Inc. |EUR| 4| -| 4| -| 4| 4|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
| |USD| 5| -| 5| -| 5| 5|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Unlisted investments | | | | | | | |
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Pension Insurance |EUR| 622| -| 656| -| 1 070| 1 070|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Corporation Group Limited |GBP| 539| -| 539| -| 927| 927|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Trilantic Capital Partners|EUR| 331| 108| 228| 261| 161| 422|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Euro investment |EUR| 86| 20| 66| 110| 69| 179|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|US dollar investment(4) |USD| 275| 99| 186| 190| 104| 294|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Renshaw Bay and | | | | | | | |
|related investments | | | | | | | |
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Renshaw Bay advisory and | | | | | | | |
|investment management |EUR| 29| 2| 29| -| 10| 10|
|company |---+----------+---------+---------+-----------+-----------+-----------+
| |GBP| 25| 1| 24| -| 9| 9|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|JPS Credit Opportunities | | | | | | | |
|Fund |EUR| 62| -| 54| -| 86| 86|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
| |USD| 70| -| 70| -| 97| 97|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Renshaw Bay Real Estate |EUR| 115| 34| 84| 15| 73| 88|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Finance Fund |GBP| 100| 30| 70| 12| 63| 75|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|36 South macro/volatility | | | | | | | |
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Funds |EUR| 88| -| 88| 6| 53| 59|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Asian private equity | | | | | | | |
|and portfolio funds | | | | | | | |
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Milestone China | | | | | | | |
|Opportunities funds, | | | | | | | |
|investment holdings and |EUR| 150| 8| 124| 16| 132| 148|
|management company |---+----------+---------+---------+-----------+-----------+-----------+
|participation |USD| 169| 9| 160| 20| 148| 168|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Prescient China Balanced |EUR| 29| -| 25| -| 43| 43|
|Fund and investment |---+----------+---------+---------+-----------+-----------+-----------+
|management company |USD| 32| -| 32| -| 48| 48|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Specialised private | | | | | | | |
|equity funds | | | | | | | |
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Vanterra Flex Investments |EUR| 93| 35| 49| 23| 28| 51|
| |---+----------+---------+---------+-----------+-----------+-----------+
| |USD| 104| 40| 64| 27| 31| 58|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Vanterra C Change TEM |EUR| 58| 5| 43| 1| 22| 23|
| |---+----------+---------+---------+-----------+-----------+-----------+
| |USD| 65| 6| 59| 1| 25| 26|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|NanoDimension funds and | | | | | | | |
|co-investment |---+----------+---------+---------+-----------+-----------+-----------+
|opportunities |EUR| 54| 9| 41| 1| 41| 42|
| |---+----------+---------+---------+-----------+-----------+-----------+
|Euro investment |EUR| 4| -| 4| 1| 5| 6|
| |---+----------+---------+---------+-----------+-----------+-----------+
|US dollar investment |USD| 56| 10| 46| -| 41| 41|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Fountainhead Expert Fund |EUR| 36| 18| 15| -| 20| 20|
| |---+----------+---------+---------+-----------+-----------+-----------+
| |USD| 40| 20| 20| -| 23| 23|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Snow Phipps funds and |EUR| 116| 78| 37| 4| 37| 41|
|co-investment |---+----------+---------+---------+-----------+-----------+-----------+
|opportunities |USD| 130| 88| 42| 5| 42| 47|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|United States land |EUR| 184| 4| 155| -| 149| 149|
|development and |---+----------+---------+---------+-----------+-----------+-----------+
|mortgages |USD| 207| 4| 203| -| 168| 168|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
|Diamond interests(5) |EUR| 80| 2| 116| 62| 61| 123|
| |---+----------+---------+---------+-----------+-----------+-----------+
| |ZAR| 1 230| 40| 1 190| 868| 940| 1 808|
+--------------------------+---+----------+---------+---------+-----------+-----------+-----------+
(1) Calculated using period end foreign exchange rates.
(2) Calculated using actual foreign exchange rates at transaction date.
(3) Total of realised proceeds and current fair value.
(4) The invested amount for Trilantic Capital Partners includes an initial payment of USD 10 million.
(5) The exposure to the South African rand has been partially hedged by a forward exchange contract and borrowings in this currency.
PERFORMANCE
NET ASSET VALUE
The increase in the NAV of EUR 289 million during the period is influenced by the receipt of dividends from British American Tobacco p.l.c. ('BAT'), movements in the estimated fair value of certain investments, including BAT, and decreases in the estimated fair value of loans payable. Offsetting these increases in NAV is the decrease in the estimated fair value of the investments in United States land development and mortgages, an increase in the value of derivative liabilities associated with the collar financing and the effect of the weakening of sterling against the euro in the period.
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 and liabilities in euro terms. Applying current period exchange rates to the March 2016 assets and liabilities would have resulted in a decrease in value of some EUR 365 million.
Major items impacting the NAV, significant changes in carrying value and new investments during the period under review are described below.
LISTED INVESTMENTS
BRITISH AMERICAN
TOBACCO P.L.C.
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 received dividends from BAT during the period under review amounting to EUR 127 million (GBP 103 million), being BAT's final 2015 dividend and interim 2016 dividend.
Reinet holds 68.1 million shares in BAT, representing some 3.7 per cent of BAT's issued share capital. The value of Reinet's investment in BAT amounted to EUR 3 874 million at 30 September 2016, being 70 per cent of Reinet's NAV (31 March 2016: EUR 3 512 million). The BAT share price on the London Stock Exchange increased from GBP 40.90 at 31 March 2016 to GBP 49.30 at 30 September 2016, with a marked increase following the UK's referendum in June 2016. This increase in value is offset to some extent by the weakening of sterling against the euro during the period.
Further information on BAT is available at www.bat.com/annualreport.
SELECTA
BIOSCIENCES, INC.
In June 2016, Reinet invested EUR 4 million in Selecta Biosciences, Inc. ('Selecta') acquiring 350 000 shares in its initial public offering on the NASDAQ.
Selecta is a clinical-stage biopharmaceutical company using proprietary synthetic vaccine particle technology to discover and develop targeted therapies that are designed to modulate the immune system to effectively and safely treat rare and serious diseases.
Selecta is also a portfolio company of NanoDimension, pre and post the initial public offering.
Further information on Selecta is available at www.selectabio.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 2 billion and at 30 September 2016 committed to provide further funding of EUR 302 million to its current investments. Details of the funding commitments outstanding are given in the table below. The increase in commitments during the period under review amounted to EUR 207 million, and a total of EUR 251 million was funded during the period.
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.
PENSION INSURANCE
CORPORATION
GROUP LIMITED
Pension Insurance 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 provides tailored pension insurance buyouts and buy-ins to the trustees and sponsors of UK defined benefit pension funds. Pension Insurance Corporation brings safety and security to scheme members' benefits through innovative, bespoke insurance solutions, which include deferred premiums and the use of company assets as part payment.
In June 2016, Pension Corporation raised GBP 250 million in additional capital; of this amount Reinet subscribed for an amount of EUR 179 million (GBP 139 million).
In the first six months of the 2016 calendar year, Pension Insurance Corporation wrote new pension insurance business with premiums of GBP 918 million compared to GBP 702 million in the same period last year. New business prospects remain within expectations for the rest of the year. The result of the UK's referendum in June 2016 has resulted in sharp falls in interest rates and increased currency and equity market volatility. Pension Insurance Corporation has been operating under the Solvency II framework of governance since 1 January 2016 and has effectively dealt with the volatility caused by the UK's referendum. Of interest, as part of Pension Insurance Corporation's investment programme an investment of GBP 100 million was made in debt secured on the Thames Tideway Tunnel; this investment has a maturity profile of almost 50 years.
Reinet's investment in Pension Corporation is carried at an estimated fair value of EUR 1 070 million at 30 September 2016 (31 March 2016: EUR 920 million), this value takes into account Pension Corporation's estimated embedded value at 30 June 2016 of GBP 2.5 billion (31 December 2015: GBP 1.9 billion) and valuation multiples drawn from industry data.
The change in estimated fair value is due to the increase in Pension Corporation's estimated embedded value which reflects new business written by Pension Insurance Corporation and the effect of changing economic variables, together with the capital increase in the half year ended 30 June 2016; offset by decreases in comparable valuation multiples being applied by the market in valuing listed companies in the UK insurance sector. These comparable market multiples are 6 per cent lower than those applied at 31 March 2016, reflecting the market movements relative to embedded value of the sector during the period which includes the effect of the market movement following the UK's referendum in June 2016. The estimated fair value is further reduced by the weakening of sterling against the euro in the period.
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. Trilantic primarily targets investments in the consumer, energy, industrials, technology, media and telecommunications, healthcare, financial and business services sectors, and currently manages six private equity funds with aggregate capital commitments of USD 7.6 billion.
Reinet and its minority partners invest in the Trilantic general partnerships and management companies (together 'Trilantic Management') and four of the six current funds under Trilantic's management.
Trilantic Capital Partners IV L.P. and Trilantic Capital Partners IV (Europe) L.P. are in the process of realising value from underlying investments. In the period under review, capital contributions of EUR 2 million were made and combined distributions of some EUR 8 million were received of which EUR 4 million (30 September 2015: EUR 2 million) was in respect of carried interest.
Trilantic Capital Partners V (North America) L.P., Trilantic Energy Partners (North America) L.P., and their respective general partners continue to build their portfolios with Reinet making capital contributions of some EUR 17 million in the period under review. Underlying investments are still considered to be at an early stage, however increases in value are being reported.
Reinet's and its minority partners' investment in Trilantic Management and the above funds is carried at the estimated fair value of EUR 161 million at 30 September 2016 (31 March 2016: EUR 143 million) of which EUR 9 million (31 March 2016: EUR 10 million) is attributable to minority partners. The estimated fair value is based on unaudited valuation data provided by Trilantic Management at 30 June 2016 adjusted for changes in the value of listed investments included in the portfolios. The increase in the estimated fair value is due to capital contributions of EUR 19 million together with increases in the estimated fair value of underlying investments, offset by distributions received.
Further information on Trilantic is available at www.trilantic.com.
RENSHAW BAY AND RELATED INVESTMENTS
Renshaw Bay Real
Estate Finance Fund
The Renshaw Bay Real Estate Finance Fund ('REFF') was created to take advantage of opportunities resulting from a funding gap between the expected demand for commercial real estate finance and its availability from banks, other traditional lenders and equity investors. Its real estate strategy focuses on the origination of commercial real estate loans primarily in Western Europe, and with a focus on the UK. The result of the UK's referendum in June 2016 initially impacted UK property prices, however over the past few months it appears that transaction activity is back to pre-referendum levels and the weakness of sterling has resulted in an increase in demand for commercial office space with rental income remaining stable. Management of REFF have completed a stress analysis of the fund and concluded that due to the benefits from its loan, property type and geographic diversity, they remain comfortable with the positioning of the portfolio.
The investment is carried at the estimated fair value of EUR 73 million at 30 September 2016 (31 March 2016: EUR 83 million) based on unaudited valuation data provided by the fund manager at 30 June 2016. The decrease in estimated fair value is due to capital repayments received from early repaid loans together with the weakening of sterling against the euro in the period.
ASIAN PRIVATE EQUITY AND PORTFOLIO FUNDS
Milestone China
Opportunities funds,
investment holdings
and management
company participation
Reinet has invested along with Milestone Capital in a management company based in Shanghai, and has also invested in certain funds and investment companies managed by Milestone Capital (together 'Milestone').
During the period under review Milestone benefitted from the increase in value of several of its underlying listed investments, in particular Li Ning Company Limited.
The investment in Milestone is held at the estimated fair value of EUR 132 million (31 March 2016: EUR 113 million) based on audited financial information provided by Milestone Capital at 30 June 2016 adjusted for movements in listed investments and cash movements up to 30 September 2016. The change in estimated fair value reflects capital contributed in the period together with increases in the value of underlying listed and unlisted investments.
Further information on Milestone Capital and Milestone funds may be found at www.mcmchina.com.
SPECIALISED PRIVATE EQUITY FUNDS
Snow Phipps funds
and co-investment
opportunities
Snow Phipps is a private equity firm which targets investments in market-leading companies in the industrials, services and consumer sectors primarily headquartered in North America.
In 2011, Reinet committed to invest up to USD 10 million (EUR 9 million) in Snow Phipps II, L.P. In the year ended 31 March 2016, Reinet made a commitment of USD 100 million (EUR 89 million) to Snow Phipps III, L.P. the successor fund to Snow Phipps II, L.P. In addition, in the current period Reinet committed USD 20 million (EUR 18 million) to two co-investment opportunities.
Reinet's investment in the two funds and associated co-investments is carried at an estimated fair value of EUR 37 million at 30 September 2016 (31 March 2016: EUR 8 million), the increase in value being mainly due to additional capital invested in the period.
Further information on Snow Phipps is available at www.snowphipps.com.
UNITED STATES
LAND DEVELOPMENT
AND MORTGAGES
Reinet has 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. Reinet has also purchased mortgage debt linked to such developments from financial institutions, usually at significant discounts to face value.
In addition, Reinet has invested in residential golf communities, owning the land for sale to future homeowners together with infrastructure assets.
The investment is carried at the estimated fair value of EUR 149 million (31 March 2016: EUR 164 million), of which EUR 2 million is attributable to minority partners (31 March 2016: EUR 2 million).
The current valuation is based on unaudited financial statements as at 30 June 2016 adjusted for cash movements up to 30 September 2016. The decrease in the valuation reflects more conservative estimates of land values and rates of lot sales, together with increases in running costs of the golf club communities.
Further information on Arendale, which holds the residential golf community assets, may be found at www.arendale.com.
Further information on Reinet's investments may be found in the Reinet 2016 annual report which is available at www.reinet.com.
COMMITTED FUNDS
Funding commitments are entered into in various currencies including sterling, US dollar and South African rand and are converted into euro using 30 September 2016 exchange rates.
The table below summarises Reinet's outstanding investment commitments at 30 September 2016.
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
| | | Exchange| Committed| Funded| 30| 30|
| | 31 March| rate| during the| during the| September| September|
| |2016(1) EUR| effects(2) EUR| period(3) EUR| period(3) EUR| 2016(3) EUR| 2016|
| | m| m| m| m| m| %|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Selecta Biosciences, Inc. | -| -| 4| (4)| -| -|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Pension Insurance Corporation | -| -| 179| (179)| -| -|
|Group Limited(4) | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Private equity and related partnerships | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Trilantic Capital Partners | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Fund IV, Fund V, TEP, related | 120| 2| -| (19)| 103| 34.1|
|general partners and | | | | | | |
|management companies(5) | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Renshaw Bay and related investments | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Renshaw Bay advisory and | 2| -| -| -| 2| 0.7|
|investment management company | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|JPS Credit Opportunities Fund | -| -| -| -| -| -|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Renshaw Bay Real Estate Finance Fund | 45| (4)| -| (7)| 34| 11.3|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|36 South macro/volatility funds | -| -| -| -| -| -|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Asian private equity and portfolio funds| | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Milestone China Opportunities | 10| -| -| (2)| 8| 2.6|
|funds, investment holdings and | | | | | | |
|management company participation | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Prescient China Balanced Fund | -| -| -| -| -| -|
|and investment management company | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Specialised private equity funds | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Vanterra Flex Investments | 35| -| -| -| 35| 11.6|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Vanterra C Change TEM | 5| -| -| -| 5| 1.7|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|NanoDimension funds and | 12| -| -| (3)| 9| 3.0|
|co-investment opportunities | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Fountainhead Expert Fund | 18| -| -| -| 18| 5.9|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Snow Phipps funds | 89| -| 18| (29)| 78| 25.8|
|and co-investment opportunities | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Other fund investments | 1| -| -| -| 1| 0.3|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|United States land | 5| -| 4| (5)| 4| 1.3|
|development and mortgages(5) | | | | | | |
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Diamond interests | 2| -| -| -| 2| 0.7|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
|Other investments | 4| -| 2| (3)| 3| 1.0|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
| | 348| (2)| 207| (251)| 302| 100.0|
+----------------------------------------+-----------+---------------+--------------+--------------+-------------+----------+
(1) Commitments calculated using 31 March 2016 exchange rates.
(2) Reflects exchange rate movements between 31 March 2016 and 30 September 2016.
(3) Amounts calculated using 30 September 2016 exchange rates, except for Pension Insurance Corporation Group Limited.
(4) The amount paid to Pension Insurance Corporation Group in the period amounts to EUR 179 million using the actual exchange rate at the date of payment.
(5) Commitments noted represent only Reinet's share of the investments at 30 September 2016, 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.
CASH AND LIQUID FUNDS
Reinet holds cash on deposit principally in European-based 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 194 m
Cash required for unfunded commitments (refer to table above) (EUR 302 m)
Cash required to meet ZAR borrowing obligations (refer to note below) (EUR 29 m)
Existing bank borrowings of EUR 352 million under the medium-term 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 existing liquid funds or 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 previously undrawn borrowing facilities comprised 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 346 million). These facilities expired at 30 September 2016. Reinet is in the process of renewing or replacing these with alternative arrangements.
BANK BORROWINGS AND DERIVATIVES
Borrowings
In February 2012, in order to meet its ongoing commitments, Reinet entered into a GBP 300 million, medium-term collar financing arrangement. At 30 September 2016, the estimated fair value of the borrowing was EUR 347 million (31 March 2016: EUR 380 million). The decrease in estimated fair value reflects the weakening of sterling against the euro, offset by a 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 estimated fair value of EUR 5 million as at 30 September 2016 (31 March 2016: EUR 11 million). Some 1 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 2016, the estimated fair value of the borrowing was EUR 29 million (31 March 2016: EUR 26 million), the increase reflects the strengthening of the South African rand against the euro in the period.
Derivative assets/(liabilities) – put and call options and forward exchange contracts
Put and call options in respect of the GBP 300 million medium-term collar financing arrangement noted above are carried at their respective fair values at the balance sheet date. The net derivative liability is carried at its estimated fair value of EUR 183 million at 30 September 2016 (31 March 2016: EUR 80 million). The increase in the value of the liability is due to the increase in the BAT share price of over GBP 9 per share in the period. These options expire or alternatively will be settled before 31 March 2017.
Reinet has entered into a forward exchange contract to sell ZAR 480 million (31 March 2016: ZAR 550 million). Outstanding contracts amounting in total to ZAR 550 million were settled on 30 September 2016 realising a loss of EUR 4 million. New forward exchange contracts to sell ZAR 480 million in one year's time were entered into the same date. The derivative asset in respect of the forward exchange contract is carried at its estimated fair value of EUR 1 million at 30 September 2016 (31 March 2016: EUR 2 million).
OTHER LIABILITIES
Minority interest, fees payable and other liabilities, net of other assets
The minority interest liability amounts to EUR 15 million (31 March 2016: EUR 15 million) and is in respect of minority partners' share in the gains and losses not yet distributed to them arising from the estimated fair value movement of investments in which they have interests.
Fees payable and other liabilities comprise principally an accrual of EUR 21 million in respect of the management fee payable at 30 September 2016 (31 March 2016: EUR 22 million) a provision for deferred taxes of EUR 11 million (31 March 2016: EUR 10 million) relating to gains arising from the investments in Trilantic and withholding and corporate taxes of EUR 21 million (31 March 2016: EUR 18 million) relating to the investment in United States land development and mortgages. Accruals and other payables amount to some EUR 8 million (31 March 2016: EUR 10 million).
No provision has been made in respect of a performance fee as at 30 September 2016 (31 March 2016: EUR 5 million) as the conditions required to pay a fee had not been met at that date.
The performance fee, if applicable, and management fee are payable to Reinet Investment Advisors Limited.
CONSOLIDATED INCOME STATEMENT
+----------------------+-------------------------+-----------------------+
| | Six-month period| Six-month period|
| | ended| ended|
| | 30 September 2016| 30 September 2015|
+----------------------+------------------+------+----------------+------+
| | EUR m| EUR m| EUR m| EUR m|
+----------------------+------------------+------+----------------+------+
|Income | | | | |
+----------------------+------------------+------+----------------+------+
|BAT dividends | 127| | 149| |
+----------------------+------------------+------+----------------+------+
|Interest and other | 16| | 15| |
|investment income | | | | |
+----------------------+------------------+------+----------------+------+
|Realised gains | 4| | 73| |
|on investments | | | | |
+----------------------+------------------+------+----------------+------+
|Realised (loss)/gains | (4)| | 1| |
|on foreign exchange | | | | |
|contracts | | | | |
+----------------------+------------------+------+----------------+------+
|Carried interest | 4| 147| 2| 240|
|earned on investments | | | | |
+----------------------+------------------+------+----------------+------+
| | | | | |
+----------------------+------------------+------+----------------+------+
|Expenses | | | | |
+----------------------+------------------+------+----------------+------+
|Management fee | (23)| | (23)| |
+----------------------+------------------+------+----------------+------+
|Operating expenses, | (3)| | (3)| |
|foreign exchange and | | | | |
|transaction-related | | | | |
|costs | | | | |
+----------------------+------------------+------+----------------+------+
|Interest expense | (6)| | (6)| |
+----------------------+------------------+------+----------------+------+
|Tax (expense)/income | (4)| (36)| 2| (30)|
+----------------------+------------------+------+----------------+------+
|Realised investment | | 111| | 210|
|income, net | | | | |
|of expenses | | | | |
+----------------------+------------------+------+----------------+------+
| | | | | |
+----------------------+------------------+------+----------------+------+
|Fair value adjustments| | | | |
+----------------------+------------------+------+----------------+------+
|BAT - unrealised | 362| | 85| |
|gain on shares held | | | | |
+----------------------+------------------+------+----------------+------+
Other investments | (68)| | (260)| |
+----------------------+------------------+------+----------------+------+
Derivative instruments | (104)| | (6)| |
+----------------------+------------------+------+----------------+------+
Borrowings | 31| 221| 15| (166)|
+----------------------+------------------+------+----------------+------+
| | | 332| | 44|
+----------------------+------------------+------+----------------+------+
|Effect of | | (11)| | (2)|
|exchange rate | | | | |
|changes on | | | | |
|cash balances | | | | |
+----------------------+------------------+------+----------------+------+
|Net profit | | 321| | 42|
+----------------------+------------------+------+----------------+------+
|Minority interest | | -| | (4)|
+----------------------+------------------+------+----------------+------+
|Profit attributable | | 321| | 38|
|to the shareholders of| | | | |
|the Company | | | | |
+----------------------+------------------+------+----------------+------+
INCOME
Dividends received from BAT decreased from EUR 149 million (GBP 110 million) during the period to September 2015 to EUR 127 million (GBP 103 million) during the period under review. The decrease is due to the reduction in the number of BAT shares held following the sales in February and March 2016 together with the weakening of the sterling/euro exchange rate at the time of the dividend payments, offset by an increase of GBP 0.06 in the total dividend per BAT share. The dividends received from BAT during the period represent the final 2015 dividend paid in May 2016, as well as the interim 2016 dividend paid in September 2016.
Interest income is earned on bank deposits and loans made to underlying investments.
Total realised gains on investments of EUR 4 million was in respect of investments realised by the Trilantic funds.
Carried interest of EUR 4 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 2017 if certain conditions are met. 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 2017, 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 2016 amounts to EUR nil (30 September 2015: EUR nil).
The management fee for the period ended 30 September 2016 amounts to EUR 23 million (30 September 2015: EUR 23 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 expense of EUR 4 million includes corporate and withholding taxes payable in respect of gains realised on Trilantic investments, together with an increase in the deferred tax provision related to unrealised gains, expected distributions and accrued interest in respect of the Trilantic funds and other US investments.
FAIR VALUE ADJUSTMENTS
The investment in 68.1 million BAT shares increased in value by EUR 362 million during the period under review. Of this, EUR 660 million was attributable to the increase in value of the underlying BAT shares in sterling terms offset by EUR 298 million due to the weakening of sterling against the euro during the period under review.
The unrealised fair value adjustment of EUR 68 million in respect of other investments includes a decrease in the estimated fair value of the investment in Pension Corporation of EUR 29 million, primarily due to the application of market multiples (refer above for a full description of the overall movement of Pension Corporation during the period), a decrease in the estimated fair value in respect of the Trilantic funds of EUR 1 million, a decrease in the estimated fair value of the investment in United States land development and mortgages of EUR 30 million, an increase in the estimated fair value of the investment in Diamond interests of EUR 5 million together with decreases of EUR 13 million in respect of the estimated fair value 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 estimated fair value of the collar financing derivative liability increased by EUR 103 million during the period, reflecting the increase in the price of the BAT shares underlying the put and call options. The estimated fair value of the derivative asset in respect of the forward exchange contracts decreased by EUR 1 million; the contracts were settled on 30 September 2016 resulting in a loss of EUR 4 million.
Borrowings are carried at estimated fair value reflecting the discounted cash flow value of future principal and interest payments taking into account prevailing interest rates. An unrealised loss of EUR 3 million arose in respect of the South African rand borrowing due to the strengthening of the South African rand during the period. An unrealised gain of EUR 34 million arose in respect of the sterling borrowing. Of this, a gain of EUR 33 million is due to the weakening of sterling against the 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 111 million (30 September 2015: EUR 210 million). Net profit attributable to shareholders, taking into account unrealised fair value adjustments, was EUR 321 million (30 September 2015: EUR 38 million).
DIVIDEND
A cash dividend of EUR 0.161 per share totalling some EUR 32 million was paid in September 2016, following approval at the annual general meeting on 30 August 2016. No interim dividend is proposed in respect of the six months ended 30 September 2016.
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 consolidated unaudited financial statements at 30 September 2016, on which this announcement is based, have been approved by the Board of the General Partner on 10 November 2016. The printed Reinet Interim Report and Accounts will be available upon request from early December 2016.
SHARE INFORMATION
Primary Listing
The Company's ordinary shares are listed and traded on the Luxembourg Stock Exchange with the ISIN number LU0383812293 (symbol 'ReinetInvest'). Thomson Reuters code REIT.LU. The Company's ordinary shares are included in the 'LuxX' index of the principal shares traded on the Luxembourg Stock Exchange.
The Company's share price increased by 7 per cent in the period from EUR 17.31 at 31 March 2016 to EUR 18.51 at 30 September 2016, with the highest trade being at EUR 23.00 during the period. The share price reflects a total shareholder return of 15 per cent per annum compared to the Initial Price together with dividends paid.
Secondary Listing
The depository receipts issued by Reinet Securities SA in respect of the Company's ordinary shares 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 the Company.
The price of depository receipts issued by Reinet Securities SA in respect of the Company's ordinary shares decreased from ZAR 31.74 at 31 March 2016 to ZAR 29.92 at 30 September 2016, the decrease of almost 6 per cent reflects in part the weakening of the euro against the South African rand in the period.
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Reinet Investments Manager S.A.
General Partner
For and on behalf of Reinet Investments S.C.A.
15 November 2016
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
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 2016 of 15.4296 and a rate of 16.8075 as at 31 March 2016.
30 September 2016 31 March 2016
Net asset value ZAR 85 017 m ZAR 87 752 m
Net asset value per share ZAR 433.88 m ZAR 447.92
Using the average euro/rand exchange rate for the six-month period ended 30 September 2016 of 16.3161 and an average rate of 13.9292 for the six-month period ended 30 September 2015.
30 September 2016 30 September 2015
Profit for the period ZAR 5 237 m ZAR 529 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 2016 30 September 2015
Unadjusted earnings per share EUR 1.64 EUR 0.19
Headline earnings per share * EUR 1.64 EUR 0.19
Unadjusted earnings per share ZAR 26.76 ZAR 2.65
Headline earnings per share * ZAR 26.76 ZAR 2.65
* There are no dilutive instruments
Dividends paid
September 2016 September 2015
Gross dividend per DR EUR 0.0161 EUR 0.0157
Gross dividend per DR ZAR 0.2600231 ZAR 0.2292969
Euro/rand exchange rate 16.1505 14.6049
Date: 15/11/2016 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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