| Tue 15 Nov 2011, 8:00 | | REI - Reinet Investments S.C.A. Depositary Receipts - Consolidated unaudited |
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REI
REI
REI - Reinet Investments S.C.A. Depositary Receipts - Consolidated unaudited
financial results for the six-month period ended 30 September 2011
Reinet Investments S.C.A. Depositary Receipts
issued by Reinet Securities SA
(Incorporated in Switzerland)
ISIN: CH0045793657
Depositary Receipt Code: REI
CONSOLIDATED UNAUDITED FINANCIAL RESULTS FOR THE SIX-MONTH PERIOD ENDED 30
SEPTEMBER 2011
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 2011.
Key financial data
- Net asset value at 30 September 2011: EUR 3 179 million, an increase of 14 per
cent from 31 March 2011
- Net asset value per ordinary share at 30 September 2011: EUR 16.23 (31 March
2011: EUR 14.21)
- Reinet`s investment in British American Tobacco increased in value by EUR 291
million during the period
- Profit for the period: EUR 393 million
- New investments with funding commitments of EUR 166 million closed during the
period
Consolidated Net Asset Value (`NAV`)
30 September 2011 31 March 2011
EUR m % EUR m %
Listed investments
British American Tobacco 2 678 84.2 2 387 85.7
p.l.c.
Other 2 - 7 0.2
Cash and liquid funds 157 4.9 236 8.5
Unlisted investments
Trilantic Capital Partners 102 3.2 72 2.6
funds (1)
US land development and 76 2.4 53 1.9
mortgages(1)
Vanterra Flex Investments 23 0.7 13 0.5
Vanterra C Change TEM 21 0.7 10 0.4
Jagersfontein and other 69 2.2 49 1.8
diamond interests
36 South 100 3.1 88 3.2
Other 53 1.7 42 1.5
444 14.0 327 11.9
Funding by minority (30) (0.9) (21) (0.8)
partners
Borrowings (49) (1.5) (46) (1.7)
Fees payable and other (17) (0.5) (102) (3.7)
liabilities, net of other
assets
3 185 100.2 2 788 100.1
Minority interest (6) (0.2) (4) (0.1)
3 179 100.0 2 784 100.0
(1)This amount represents the 100 per cent investment, whereas the comments
below use figures which represent Reinet`s 80 per cent investment.
All of the underlying assets are held by Reinet Fund S.C.A., F.I.S. (`Reinet
Fund` or `the Fund`).
BUSINESS REVIEW
DEVELOPMENTS DURING THE PERIOD UNDER REVIEW
Reinet`s net asset value grew by EUR 395 million over the six-month period ended
30 September 2011. This largely reflects the increase in value of its principal
investment, British American Tobacco p.l.c. Cash and liquid funds decreased by
EUR 79 million, as investment income was utilised to fund new investments and
meet commitments in respect of existing investments. Since its creation in
October 2008, Reinet has entered into new funding commitments of EUR 689 million
and has remaining commitments of EUR 355 million in entities held in its
portfolio.
LISTED INVESTMENT IN BRITISH AMERICAN TOBACCO P.L.C. (`BAT`)
Reinet remains one of the largest shareholders in BAT, holding some 84 million
shares representing 4.3 per cent of BAT`s capital. At 30 September 2011, the
value of the investment in BAT in the balance sheet of Reinet was EUR 2 678
million, being 84 per cent of Reinet`s NAV. The BAT share price on the London
Stock Exchange increased from GBP 25.02 to GBP 27.29 during the six months ended
30 September 2011.
Reinet received dividends from BAT during the period amounting to EUR 114
million (GBP 100 million), being BAT`s final 2010 dividend and its 2011 interim
dividend.
CASH AND LIQUID FUNDS
During the period, dividend income and other inflows were offset by new
investments and operating costs. At 30 September 2011, net cash and liquid funds
amounted to EUR 157 million (31 March 2011: EUR 236 million).
In addition to deposits held principally in European banks, Reinet has invested
EUR 82 million in a euro-denominated government bond fund. This holds
exclusively short-dated bonds issued by western European (principally French and
German) governments and short-term loans backed by government bonds.
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 investors. In
evaluating these opportunities, Reinet applies a minimum hurdle rate of return,
recognising the expected performance target set by the investment in BAT.
To date, funding commitments in the amount of EUR 689 million have been entered
into in respect of the businesses detailed below, excluding the smaller
investments transferred from Richemont when Reinet was established.
Trilantic Capital Partners funds
Original commitment: USD 104 million plus EUR 68 million
Early in 2009, Reinet announced its decision to invest in the private equity
management business formerly owned by Lehman Brothers. Reinet bought this
interest, in conjunction with the management team, from the bankruptcy estate
for USD 10 million. This business is now known as Trilantic Capital Partners
(`Trilantic`).
Reinet has an 80 per cent interest in the holding company ("Reinet TCP") which
holds the Trilantic interest, with its two partners holding the balance and
sharing in the investment commitments. Reinet TCP holds an interest in the
Trilantic management company and is committed to invest in Trilantic`s Fund IV
Global and Fund IV Europe funds.
The investment in the Trilantic management company provides that Reinet and its
partners will not pay any management fees or carried interest cost on
substantially all of its investments in funds under Trilantic management. In
addition, the agreement provides for Reinet and its partners to receive a share
of the carried interest payable to the Trilantic management company on the
realisation of investments held in the funds, once a hurdle rate has been
achieved. Reinet`s share of any carried interest earned by the Trilantic
management company is 10 per cent, after the minority partners` share.
Up to 30 September 2011, Reinet and its partners had invested the equivalent of
EUR 7.6 million in the initial Trilantic management company investment, EUR 2.1
million to acquire a further interest in Trilantic Fund IV Europe and EUR 72
million, net of capital repayments, in the funds under Trilantic management.
The investment in Trilantic is carried at the estimated fair value of EUR 102
million at 30 September 2011, based on audited valuations provided by Trilantic.
Of the period-end valuation of EUR 102 million, some EUR 20 million is
attributable to Reinet`s partners.
At 30 September 2011, Reinet had remaining commitments of EUR 86 million, being
USD 57 million and EUR 43 million to invest in funds under Trilantic management,
after taking into account the amounts payable by Reinet`s minority partners.
During the period under review, Reinet and its partners earned carried interest
of EUR 7.8 million and realised gains of EUR 6.4 million before tax on their
share of investments sold by the Trilantic funds. Of these amounts, EUR 11.4
million was attributable to Reinet and EUR 2.8 million to the minority partners.
United States land development and mortgages
Original commitment: USD 100 million
Recognising the depressed state of the property market in the United States,
Reinet has co-invested with partners in acquiring real estate development
projects - usually properties where infrastructure services have been laid but
where construction of properties has not yet commenced - and mortgage debt on
such developments and undeveloped sites. The investments are principally in
Florida and the North and South Carolinas with one investment in Colorado.
The mortgage debts were acquired from local lenders at substantial discounts to
nominal value, reflecting the economic situation and the risk that the
development companies may not be able to meet their obligations. During the
period under review certain assets were acquired, which were already encumbered
with mortgages totalling USD 10 million. These mortgages payable are included in
borrowings in the balance sheet. Reinet is working closely with its partners and
co-investors in the United States, who have considerable experience in managing
such projects, recognising that this is an area where industry knowledge is
critical to making the right investment decisions. At 30 September 2011, Reinet
had invested a total of USD 84 million (EUR 63 million) in these projects. At
that date, these were valued at EUR 76 million of which EUR 61 million is
attributable to Reinet and EUR 15 million to its partners.
Reinet is committed to invest a further USD 16 million (EUR 12 million) to
acquire further mortgage debt and to fund development projects.
Vanterra Flex Investments L.P.
Original commitment: USD 100 million
Reinet is an investor in Vanterra and in its general partner.
Vanterra was established in March 2010 to invest in listed and unlisted funds
and to make direct investments in the United States and emerging markets.
Vanterra has invested alongside Reinet in Trilantic and in the United States
land development and mortgages. It is also an investor in Vanterra C Change
Transformative Energy & Materials I, L.P. Vanterra will seek to construct a
globally diversified private equity portfolio providing investors with long-term
capital appreciation.
As at 30 September 2011, USD 31 million (EUR 23 million) of committed funds plus
an additional USD 2 million (EUR 1.5 million) in respect of expenses had been
invested in the fund. The investment is carried at the estimated fair value of
EUR 23 million at 30 September 2011. Reinet is committed to invest a further USD
69 million (EUR 51 million) in Vanterra.
Vanterra C Change Transformative Energy & Materials I, L.P. (`TEM`)
Original commitment: USD 65 million
Reinet is an investor in TEM and in its general partner.
In July 2010, Reinet entered into an agreement to invest in TEM. TEM is a newly
created fund, established 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.
As at 30 September 2011, capital contributions of USD 31 million (EUR 23
million) had been made to the fund. The investment is carried at the estimated
fair value of EUR 21 million at 30 September 2011. Reinet is committed to invest
a further USD 34 million (EUR 25 million) in TEM.
Jagersfontein and other diamond interests
Project cost: ZAR 967 million
Reinet is an investor in an entity which will process and extract diamonds from
the waste tailings from mining operations carried out up to 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.
As at 30 September 2011, Reinet had provided loans of ZAR 540 million to finance
the acquisition of the tailings and plant to process the tailings. Limited
processing operations began in July 2011 and should reach full capacity by
December 2011.
Reinet has also invested in a company which has acquired assets and assumed
liabilities pertaining to mining rights and related activities to source
diamonds on another property in South Africa. As at 30 September 2011, Reinet
had provided loans of ZAR 165 million to the company to finance the acquisition
of these rights and the equipment required in respect of the mining operations.
These investments are carried at the estimated fair value of EUR 69 million at
30 September 2011. Reinet is committed to invest a further ZAR 262 million (EUR
24 million). Once the final investment holding structures have been determined,
it is anticipated that Reinet will have an equity interest of between 40 and 49
per cent in each of the ventures referred to above. The exposure to the South
African rand has been largely hedged by borrowings in that currency.
36 South global macro/volatility funds
Original commitment: EUR 88 million
Reinet has co-invested with the 36 South management team in the fund management
and distribution companies. It is also an investor in the funds under
management. These funds are established through an Irish-registered umbrella
fund - 36 South Funds PLC.
36 South is an absolute return fund manager which specialises in managing global
macro/volatility funds. The fund management philosophy is to invest when market
estimates of volatility are mis-priced. The volatility may apply to a wide
range of underlying asset classes ranging from currencies and interest rates to
equities.
In March 2011, Reinet invested its full commitment of EUR 88 million in 36
South. Of this, EUR 15 million represented the initial investment in and loans
to the jointly-held fund management activities; the balance of EUR 73 million
being Reinet`s investment in the funds under management. The investment in 36
South Funds PLC is carried at its fair value of EUR 100 million at 30 September
2011.
Other unlisted investments
This portfolio includes small businesses with growth potential as well as
investments in specialised investment funds focused on developing markets and
niche sectors. The portfolio is valued at its fair value of EUR 53 million in
the balance sheet at 30 September 2011, based on a detailed evaluation of each
of the investments.
Other developments
Earlier this year, Reinet announced plans for a co-investment with Mr William T.
Winters and RIT Capital Partners to establish an investment advisory and
management business to be known as Renshaw Bay. Agreements have now been
concluded and, in October 2011, Reinet invested GBP 2 million in the Renshaw Bay
advisory and management business alongside Mr Winters and RIT Capital Partners.
Reinet owns 25.01 per cent of the business and is committed to invest a further
GBP 8 million. In addition to partnering in the advisory and management company,
it is anticipated that Reinet will co-invest in future opportunities to be
determined by the partners.
During the period, Reinet committed USD 152 million (EUR 113 million) to
Milestone China Opportunities Fund III L.P. (`Milestone III`), its associated
management company and co-investment opportunities. As at 30 September 2011 no
investment had been made in Milestone III, USD 13 million was invested in
October 2011.
Committed Funds
The table below summarises Reinet`s outstanding investment commitments as at 30
September 2011.
Commitment Change in New Funded
as at 31 commitments commitments in Remaining
March 2011 in period in period current commitment
EUR m (2) EUR m period EUR m
EUR m EUR m
Trilantic 100 3 - (17) 86
Capital
Partners
funds(1)
US land 26 2 - (16) 12
development
and
mortgages
Vanterra 58 3 - (10) 51
Flex
Investments
Vanterra C 36 1 - (12) 25
Change TEM
Jagersfontei 15 (2) 34 (23) 24
n and other
diamond
interests
Renshaw Bay 11 - - - 11
(3)
Milestone - - 113 - 113
III
Smaller 29 2 11 (20) 22
commitments
275 9 158 (98) 344
Other 13 (1) 8 (9) 11
investments
(4)
288 8 166 (107) 355
(1) The remaining amount represents 80 per cent of the initial commitment
assumed by Reinet, 20 per cent having been sold to co-investors.
(2) The change in the period reflects exchange rate fluctuations.
(3) Represents advisory and management company only.
(4) Represents portfolio of investments transferred from Richemont in 2008.
FEES PAYABLE AND OTHER LIABILITIES, NET OF OTHER ASSETS
Fees payable and other liabilities comprise principally a provision of EUR 2
million in respect of the performance fee and an accrual of EUR 10 million in
respect of the management fee payable as at 30 September 2011, together with
taxes and other operating expenses payable. The performance fee and management
fee are payable to Reinet Investment Advisors Limited.
Details of the basis of calculation of the performance fee are given in note 11
to the financial statements, which form part of this report.
The management fee for the period under review amounted to EUR 12 million, of
which EUR 10 million was payable at 30 September 2011.
Other assets include amounts receivable from Trilantic Capital Partners in
respect of carried interest and gains.
SUMMARISED CONSOLIDATED INCOME STATEMENT
30 September 30 September
2011EUR m 2010EUR m
BAT dividends received 114 103
Interest income, net of 2 -
interest expense
Operating expenses, foreign (15) (15)
exchange and transaction-
related costs
101 88
Realised gains on investments 15 -
Unrealised fair value
adjustments
BAT 291 149
Other investments (7) -
Unrealised foreign exchange 5 -
gain on borrowings
Performance fee (2) (35)
Tax expense (8) -
Minority interest (2) -
Profit attributable to the 393 202
shareholders of the Company
Operating expenses include EUR 12 million in respect of the management fee for
the period ended 30 September 2011. Also included are EUR 0.5 million in charges
from Reinet Investments Manager S.A. (the `General Partner`) and transaction-
related expenses, including legal and other advisory fees, which amounted to EUR
2 million.
The investment in BAT increased in value by EUR 291 million during the period
under review. Of this, EUR 217 million was attributable to the increase in value
of the underlying BAT shares in sterling terms and EUR 74 million arose due to
the appreciation of sterling against the euro over the course of the year. The
unrealised fair value adjustment in respect of other investments reflects the
decision to further write down the carrying value of certain small investments,
offset to some extent by increases in the value of others.
A performance fee may be payable on 31 March 2012 if certain conditions are met.
As detailed above, a provision of EUR 2 million has been made in the period
under review.
The tax expense of EUR 8 million includes corporate and withholding taxes
provided for in respect of realised gains on Trilantic investments plus a
deferred tax provision in respect of unrealised gains and anticipated
distributions related to Trilantic investments.
The minority interest arises in respect of the 20 per cent minority partners
holding in the vehicles which own the Trilantic and US land and development
interests as described above.
Profit attributable to shareholders of the Company for the period amounted to
EUR 393 million.
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 2011, on
which this announcement is based, were approved by the Board of the General
Partner on 10 November 2011 and will be available on the Reinet website from 15
November 2011. The printed Reinet Interim Report will be available upon request
from early December 2011.
Statutory information
Primary listing
Reinet Investments S.C.A. shares are listed on the Luxembourg Stock Exchange
with the ISIN number LU0383812293. Thomson Reuters code REIT.LU and Bloomberg
code REIN.LX. Reinet shares are included in the `LuxX` index of the principal
shares traded on the Luxembourg exchange.
Secondary listing
Reinet Investments S.C.A. South African Depository Receipts are traded on the
stock exchange in Johannesburg under the ISIN number CH 0045793657. Thomson
Reuters code REIJ.J and Bloomberg code REI.SJ. The South African Depository
Receipts are included in the JSE `Top 40` Share Index.
Website: www.reinet.com
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. (the `Fund`), a specialised investment
fund also incorporated in Luxembourg
Notes for South African editors
Acknowledging the interest in Reinet`s results on the part of South African
investors, set out below are key figures from the results expressed in rand.
Using the closing euro/rand exchange rate prevailing as at 30 September 2011 of
10.8421, and a rate of 9.5936 as at 31 March 2011.
30 September 31 March 2011
2011
Net asset value ZAR 34 469 m ZAR 26 709 m
Net asset value per ordinary share ZAR 175.92 ZAR 136.33
Using the average euro/rand exchange rate for the six-month period ended 30
September 2011 of 9.9377 and an average rate of 9.5222 for the six-month period
ended 30 September 2010.
30 September 30 September
2011 2010
Profit for the period ZAR 3 906 m ZAR 1 923 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 2011 30 September
2010
Unadjusted earnings per share EUR 2.01 EUR 1.03
Headline earnings per share EUR 2.01 EUR 1.03
15 NOVEMBER 2011
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 15/11/2011 08:00:09 Produced by the JSE SENS Department.
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