| Tue 20 Jan 2009, 8:58 | | REI - Reinet Investments S.C.A. Depositary Receipts - Information on the |
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REI
REI
REI - Reinet Investments S.C.A. Depositary Receipts - Information on the
taxation of South African holders of Reinet depositary receipts on the Reduction
of Capital of Reinet Investments S.C.A.
Reinet Investments S.C.A. Depositary Receipts
issued by Richemont Securities AG
(Incorporated in Switzerland)
ISIN: CH0045793657
Depositary Receipt Code: REI
Information on the taxation of South African holders of Reinet depositary
receipts on the Reduction of Capital of Reinet Investments S.C.A.
QUARTERLY MANAGEMENT STATEMENT
FOR THE PERIOD ENDED 31 DECEMBER 2008
Key information
* Reinet established 20 October 2008 on separation from Compagnie Financiere
Richemont SA luxury business
* 195 941 286 Reinet shares in issue post successful rights issue
* Net asset value at 31 December 2008 Euro 1 974.4 million
million
* Net asset value per share Euro 10.08 10.08
* Market price per share at 31 December 2008 Euro 07.00 7.00
* Discount to net asset value as at 31 December 2008 - 30.6 %
Net asset value (`NAV`)
The NAV of Reinet Investments S.C.A.
comprises:
Euro million
* Listed portfolio investment
* British American Tobacco plc 1586.6 80.3 %
* Cash and liquid funds 343.4 17.4 %
* Other assets net of other liabilities 44.4 2.3 %
--------- ----------
1974.4 _100 %
Net asset value per share Euro 10.08
Given the impact of the rights issue, which was effected at a discount to the
prevailing NAV per share, it is difficult to make a direct comparison between
the net asset value per share at 31 December 2008 and the NAV per share of Euro
17.06 published in the Prospectus when the company was established.
Commentary
Global equity markets have faced a period of virtually unprecedented falls as a
consequence of the material de-leveraging seen over the past year. The
volatility in share prices was particularly marked in the final quarter of the
year.
Like the United States, Great Britain has been very severely hit by the credit
squeeze. Sterling interest rates are now at all time lows and one consequence of
this is that sterling has fallen dramatically against the euro over the last
three months since Reinet was established. Sterling has weakened from GBP 0.7766
per euro on 20 October to GBP 0.9564 per euro on 31 December, a fall of 23 per
cent.
Currently, Reinet`s principal asset is its holding in British American Tobacco
plc (`BAT`), representing 4 per cent of that company`s capital. The BAT share
price has faired reasonably well in recent months, despite the dramatic fall in
equity markets generally. However, the value of the BAT investment in euro terms
has declined significantly as a result of the weakening of sterling. On 20
October, the BAT share traded at GBP 17.14, which was the equivalent then Euro
22.07; as at 31 December 2008, BAT`s share price was GBP 18.00 or Euro 18.82.
The 5 per cent increase in the price of the BAT share in sterling since 20
October translated into a fall of 15 per cent in euro terms. Reinet does not
hedge its currency exposure in respect of the investment in BAT; consequently
the full effect of the decline in euro terms has impacted Reinet`s NAV per
share.
Although sterling has strengthened since the beginning of January, we do not
expect it to recover further to any significant extent, at least in the short-
term. However, BAT is well positioned to benefit from the weakness of sterling.
Virtually all of its revenues stem from its international businesses and the
company has a very small exposure to the domestic UK market. This should be
positive for profitability and, ultimately, the BAT share price.
Reinet`s liquid funds have been prudently invested with western European banks
and in euro-denominated European government securities. Although the yields on
these funds are minimal, we consider for the time being that the security of the
funds themselves is a more important factor than the return on capital.
Reinet`s other portfolio investments represent principally development capital
for a small number of companies which we believe have good growth potential.
Given the difficult economic conditions facing them currently, these companies
have revised their growth expectations downwards. The investments have been the
subject of a critical review and evaluation by independent specialists and we
believe that it is prudent to carry such investments at as low a value as is
consistent with the `fair value` principles of international accounting
standards.
The overall value of the smaller investments, taking into account further
capital invested both by Richemont prior to 20 October and by Reinet in the
period since separation, is estimated to be Euro 46.0 million, some Euro 9.5
million below the valuation placed on those assets at 30 May 2008, as used in
the Reinet Information Memorandum and Prospectus. We consider this to be a
conservative valuation, which is appropriate in the current circumstances.
Other net liabilities amounted to Euro 1.6 million and include accrued costs and
fees as well as share transfer tax payable in connection with the injection of
further BAT shares pursuant to the rights issue in December.
Reinet market capitalisation
The Reinet share price has been significantly impacted during the period since
its first quotation on 20 October 2008 by the corporate actions involving the
distribution of BAT shares and the two subsequent capital increases. As at 31
December 2008, the closing market price for the Reinet share on the Luxembourg
Stock Exchange was Euro 7.00; the market capitalization of Reinet on that date
was Euro 1 371.6 million.
The major developments in terms of the number of shares in issue and the number
of BAT shares held by Reinet have been:
Number of ordinary
2008 Corporate action shares in issue
20 October Detwinning of Richemont units
and creation of Reinet
Investments SCA 574 200 000
3 November Distribution of BAT shares and
related capital reduction - 495 599 271
Contribution of BAT shares by
Remgro Ltd and related capital
increase 30 255 541
108 856 270
17 December Capital increase following
implementation of rights issue 87 085 016
Number of shares in issue as at
31 December 2008 195 941 286
The number of BAT shares transferred from Richemont to Reinet on 20 October 2008
was 390.0 million. That figure decreased to 60.4 million shares on 3 November
following the distribution of 90 per cent of its initial BAT stake to Reinet
shareholders, offset by the injection of 21.4 million BAT shares by Remgro. A
further 23.9 million shares were contributed to Reinet in terms of the rights
issue in December, bringing the total holding of BAT at 31 December to 84.3
million shares.
Regulatory issues
At its first formal meeting, held on 13 November 2008, the Board of Overseers
elected Mr Yves-Andre Istel to be its Chairman.
On 23 October 2008, the Public Investment Corporation (`PIC`), a South African
entity, formally notified the Company that it or funds under its control held
316 365 354 shares, representing at that time (prior to the first capital
reduction, the capital increase and the rights issue) 6.06 per cent of the
ordinary capital and voting rights in the Company. PIC have advised that their
effective interest remains in the band between the notification thresholds of 5
per cent and 10 per cent of the shares in issue following the capital events
detailed above.
On 19 December 2008, the Anton Rupert Trust, representing the interests of the
Rupert family, formally notified the Company that it held, directly and
indirectly, 47 908 782 shares, representing 24.45 per cent of the ordinary
capital and voting rights in the Company.
Johann Rupert
Chairman
Reinet Investments Manager SA
for and on behalf of Reinet Investments SCA
Further information: Mr Alan Grieve
Chief Financial Officer
Reinet Investments SCA
Tel: +352 22 7252
Website: www.reinet.com
19 JANUARY 2009
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 20/01/2009 08:58:07 Produced by the JSE SENS Department.
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