| Fri 2 Oct 2009, 17:00 | | BIPS40 - Bips Top 40 - Abridged Audited Results For The Period |
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JSE BIPS40
BIPS
BIPS40 - Bips Top 40 - Abridged Audited Results For The Period
15 October 2008 To 30 June 2009
Bips Top 40
A portfolio in the Bips Collective Investment Scheme ("the
portfolio") registered in terms of the Collective Investment
Schemes Control Act, 45 of 2002
Share Code: BIPS40
ISIN: ZAE000127767
ABRIDGED AUDITED RESULTS FOR THE PERIOD 15 OCTOBER 2008 TO 30
JUNE 2009
The BIPS Collective Investment Scheme ("the Scheme") was
establish in accordance with the provisions of the
Collective Investment Schemes Control Act (CISCA) with effect
from 12 April 2008. The BIPS FTSE/JSE TOP 40 Index Fund ("the
Fund") was established as a portfolio of the Scheme in accordance
with paragraph A of the Deed of the Scheme on 12 April 2008.
INCOME STATEMENT
FOR THE PERIOD 15 OCTOBER 2008 TO 30 JUNE 2009
2009
R
Revenue 4 322 261
Dividend income 3 574 748
Fee income: Securities lending 581 726
Interest income 165 787
Other operating income
Fair value adjustment on financial 20 935 397
instruments designated at fair
value through profit or loss
Expenses
Management and administrative (669 854)
expenses
Profit before taxation 24 587 804
Taxation -
Profit for the period 24 587 804
BALANCE SHEET
AS AT 30 JUNE 2009
2009
R
Assets
Non-current assets
Listed investments held at fair 363 372 620
value through profit and loss
Current assets 875 936
Trade and other receivables 64 125
Cash and cash equivalents 811 811
Total assets 364 248 556
Equity and liabilities
Equity
Net assets attributable to 363 372 620
investors
Current liabilities
Trade and other payables 875 936
Total equity and liabilities 364 248 556
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO INVESTORS
FOR THE PERIOD 15 OCTOBER 2008 TO 30 JUNE 2009
Capital Income
attributable attributabl
to investors e to Total
R Investors R
R
Balance as at 15 October - -
2008
Creations of BIPS 342 437 223 - 342 437 223
FTSE/JSE Top 40
securities
Profit for the period - 24 587 804 24 587 804
Income distributions - (3 652 407) (3 652 407)
Balance as at 30 June 342 437 223 20 935 397 363 372 620
2009
CASH FLOW STATEMENT
FOR THE PERIOD 15 OCTOBER 2008 TO 30 JUNE 2009
2009
R
Cash flow from operating activities 3 850 027
Cash generated by operations 109 492
Dividend income 3 574 748
Interest income 165 787
Cash flow from investing activities (342 437 223)
Investments in listed equities (342 437 223)
Cash flow from financing activities 339 399 007
Creation of securities 342 437 223
Distributions to participatory (3 038 216)
interest holders
Net increase in cash and cash 811 811
equivalents
Cash and cash equivalents at the -
beginning of the period
Cash and cash equivalents at the end 811 811
of the period
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD 15 OCTOBER 2008 TO 30 JUNE 2009
1. Accounting policies
The financial statements incorporate the principal policies set
out below.
1.1 Basis of preparation
The financial statements are prepared on a historic cost basis,
except for financial instruments, which are accounted for as set
out below. No comparative figures have been presented as this is
the fund`s first period of operations.
1.2 Statement of compliance
The financial statements are prepared in accordance with
International Financial Reporting Standards issued by the
International Standards Board (IASB), and in accordance with the
requirements of the Collective Investment Schemes Control Act No
45 of 2002.
1.3Financial instruments
Measurement
Financial instruments, being securities and futures, are
recognised when, and only when, the Fund becomes a party to the
contractual provisions of that particular instrument. Financial
instruments are initially measured at fair value, and for
instruments not at fair value through profit and loss, any
directly attributable transaction costs.
Subsequent to initial recognition these instruments are measured
as set out below.
Investments
Listed investments are measured at fair value through profit and
loss. Fair value is determined with reference to listed bid
prices at the balance sheet date, as published in the financial
press at reporting date.
Trade and other receivables
Trade and other receivables originated by the Fund are measured
at amortised cost using the effective interest method, less
impairments losses. Trade and other receivables are short term in
nature and are not discounted.
Cash and cash equivalents
Cash and cash equivalents are measured at amortised cost.
Financial liabilities
Financial liabilities, other than those held at fair value
through profit and loss, are measured using the effective
interest method. Financial liabilities arsing from the securities
issued by the Fund are carried at fair value representing the
investor`s right to a residual interest in the Fund`s net assets,
i.e. the Net Asset Value of the Fund.
Fair value gains and losses on subsequent measurement
Unrealised gains and losses arising from a change in the fair
value on financial instruments are included in net profit or loss
in the period in which the change arises.
Offset
Financial assets and financial liabilities are offset and the net
amount reported in the balance sheet when the Fund has a legally
enforceable right to set off the recognised amounts, and intends
either to settle on a net basis, or to realise the asset and
settle the liability simultaneously.
Derecognition of financial instruments
The Fund derecognising financial assets when and only when:
- The contractual right to the cash flows arsing from the
financial assets have expired or have been forfeited by the Fund;
or
- It transfers the financial assets including substantially
all the risks and rewards of ownership of the assets; or
- It transfers the financial assets, neither retaining nor
transferring substantially all the risks and reward of ownership
of the asset, but no longer retains control of the assets.
Financial liabilities are derecognised when and only when the
liability is extinguished. This is when the obligation specified
in the contract is discharged, cancelled or has expired.
The difference between the carrying amount of a financial
liability (or part thereof) extinguished or transferred to
another party and consideration paid, including any non-cash
assets transferred or liabilities assumed, is recognised in the
income statement.
1.4Revenue
Revenue comprises income from securities lending activities and
investment income.
Securities lending fee income
The fees earned for the administration of securities lending
activities are accounted for on an accrual basis in the period in
which the services is rendered.
1.5Investment income
Interest income is recognised in the income statement, using the
effective rate method taking into account the expected timing and
amount of cash flows.
Dividends in respect of script out on loan are recognised when
the right to receive payment is established.
1.6Taxation
Under the current system of taxation in South Africa, the Fund is
exempt from paying tax on income or capital gains. Both income
and capital gains are taxed in the hands of the investors.
1.7Securities lending
The portfolio engages in securities lending activities up to 50%
of the assets under management. Collateral is held by the
relevant lending desks - refer to note 11.
1.8Expenses
Expenses are recognised as incurred.
1.9Impairment
Financial assets that are stated at cost or amortised cost are
reviewed at each balance sheet date to determine whether there is
objective evidence of impairment. If any such indication exists,
an impairment loss is recognised in the income statement as the
difference between the asset`s carrying amount and the present
value of estimated future cash flows discounted at the financial
asset`s original effective interest rate. If in a subsequent
period the amount of an impairment loss recognised on a financial
asset carried at amortised cost decrease can be linked
objectively to an event occurred after the write down, the write
down is reversed through the income statement.
1.10 Finance costs
Distributions payable on redeemable units are recognised in the
income statement as finance costs under distributions.
1.11 New standards and interpretations adopted in the current
financial period
The following standard is effective for annual periods on or
after 1 January 2009 and early adopted by management in the
current financial period:
IAS 32 (Amendment) Financial instruments; Presentation, and IAS 1
(Amendment), Presentation of the financial statements - Puttable
financial instruments and obligations arising on liquidation. The
amended standards requires entities to classify puttable
financial instruments and instruments or components of
instruments that impose on the entity on obligation to deliver to
another party a pro-rata share of the net assets of the entity
only on liquidation as equity provided the financial statements
have particular features and meet specific conditions.
1.12. Standards and interpretations not yet effective
The following new standards and interpretations are not yet
effective for the current financial period. The fund will comply
with the new statements from the effective date:
IFRS 7 Financial Instruments: Disclosures (effective for periods
commencing 1 January 2009). The amendments to IFRS 7 will require
enhanced disclosures about fair value measurements and liquidity
risk. The amendment addresses disclosure in the financial
statements and will not affect recognition and measurement.
IAS 1 (revised) presentation of Financial Statements (effective
for periods commencing 1 January 2009) The main change in the
revised IAS 1 is the requirement to present all non-owner
transactions in the statement of comprehensive income. The
amendment also requires two sets of comparative numbers to
provide for the financial position in any year where there has
been a restatement or reclassification of balances.
Standards and interpretations not yet effective and which will
not be applicable to the fund are:
- IFRS 1 and IAS 27 (revised) cost of an investment in a
subsidiary jointly controlled entity or associate
- IFRS 2 (amended) conditions and cancellations
- IFRIC 15 Real Estate Sales
- IFRIC 16 Hedges of a Net Investment of a Foreign
Operation
- IFRIC 17 Distribution of Non-Cash Assets to Owners
- IFRIC 18 Transfers of Assets from Customer
- IFRIC 3 and IAS 27 (revised) Business Combinations and
Consolidated and Separate Financial Statement.
- IFRS 8 Operating Segments
- IAS 23 (amended) Borrowing Costs
- IAS 39 (amended) Eligible Hedging items
1.13 Critical accounting estimates and judgements in applying
accounting policies
Assumptions and estimates form an integral part of financial
reporting and have an impact on the amounts reported. Assumptions
are based on historical experience and expectations of future
outcomes and anticipated changes in the environment.
No significant accounting estimates and judgements have been
applied in the financial statements of the fund.
2. Management and administration expenses
The Manager is entitled to a service charge for the administration
of the scheme, as determine by the Manager from time to time,
based on the market value of the total assets of the portfolio.
During the period, a service fee of 10 (ten) basis points of the
total market value of the portfolio has been applied, although
some of it has been waived to achieve efficient tracking.
The Manager has decided to waive a portion of the service fees in
order to achieve efficient tracking of the FTSE/JSE Top 40 Index.
3. Distributions
The Fund effects quarterly distributions. All distributions are
made out of income received by the Fund. The record dates for the
below distributions were 16 January, 09 April and 03 July.
9.56 cents per security
Declared 9 January 2009 and paid 23 987 937
January 2009
19.84 cents per security
Declared 2 April 2009 and paid 15 April 2 050 279
2009
3.35 cents per security
Declared 26 June 2009 and paid 8 July 614 191
2009
Total distributions 3 652 407
4. Taxation
Any taxable income realised during the year, whether of a capital
or revenue nature, has been distributed to the holders of the
BIPS40 securities. As a result, both income and capital gains are
taxed in the hands of the investors.
5. Securities lending
The manager of the fund has at its discretion engaged in
securities lending in respect of securities held at the fund
subject to the following limitations:
- Not more than 50% of the market value of all securities held in
the portfolio can be lent; and
- Securities that may be lent to one borrower are limited in
accordance with the limits determined by the Registrar for the
inclusion of money market instruments in a portfolio; and
- Collateral security for the securities loaned must have an
aggregate value that exceeds the market value of the securities
loaned by not less than 5%, and
- May consist of cash, other securities, or a combination of cash
and other securities. Securities may not be lent for a period
longer than 12 months.
During the year, Rand Merchant Bank, a division of FirstRand Bank
Limited ("RMB") acted as a securities lending agent for the BIPS40
fund. At the balance sheet date there were no securities out on
loan.
6. Risk analysis
Exposure to investment, index, credit, secondary trading, market
and operational risks arise in the normal course of investment
activities in listed securities. The entity`s acceptance of risk
is directly attributable to the risks associated with any
investment in equities.
The objectives for managing the risks associated with financial
instruments held for investment purposes as well as a brief
description of the relevant risks and methods adopted to mitigate
these risks are outlined in more detail below. The Fund is
regulated in terms of the Collective Investment Schemes Control
Act ("CISCA"). In terms of the Act the Manager must appoint a
Trustee. The assets of the portfolio are held under control of
the Trustee.
Management monitors compliance in terms of the CISCA requirements
and reports are submitted to the Financial Services Board (FSB)
on a monthly basis. Capital adequacy requirements as required by
CISCA are maintained by the Manager of the fund.
Daily pricing of the Fund is publicly available.
The Audit Committee oversees management`s compliance with the
Fund`s risk management framework in relation to the risks faced
by the portfolio.
The investment policy of the portfolio is to track the FTSE/JSE
Top 40 Index as closely as possible, by buying only FTSE/JSE Top
40 securities in the weighting in which they are included in the
FTSE/JSE Top 40 Index and selling only securities, which are
excluded from the Index from time to time as a result of
quarterly Index reviews or corporate actions or which are
required to be sold to ensure that the portfolio holds FTSE/JSE
Top 40 securities in the same weighting as they included in the
FTSE/JSE Top 40 Index. However, the portfolio is also entitled,
at its discretion and only on a temporary basis; to employ such
other investment techniques and instruments as will most
effectively give effect to the object or the investment policies
of the portfolio. The portfolio will not be managed according to
traditional methods of active management, which involve buying
and selling of securities based on economic, financial and market
analysis and investing judgement. The portfolio will not buy or
sell securities for trading purposes or for any purpose other
than to track the FTSE/JSE Top 40 Index as closely as possible.
As a further objective, the securities held by the portfolio will
be managed to generate income for the benefit of investors, for
instance, income is generated from scrip lending which is applied
to reduce expenses and the related tracking error.
The Fund portfolio will be adjusted as determined by the
stipulations of the JSE`s Index calculation methodology to
conform to changes in the basket of securities comprising the
relevant portfolio so as to substantially reflect the composition
and weighting of the securities comprising the Index at all
times.
It is recorded that the portfolio`s ability to replicate the
price and yield performance of the FTSE/JSE Top 40 Index will be
affected by the costs and expenses incurred by the portfolio.
Costs and expenses may result in the index not being replicated
perfectly by the portfolio.
The Fund is exposed to the following risks from its use of
financial instruments:
- Credit risk;
- Investment risk;
- Index risk;
- Secondary trading risk
- Operational risk;
- Liquidity risk; and
- Market risk.
The abovementioned risks have been addressed below in more
detail.
6.1Credit risk
The Fund`s exposure to credit risk could be as a result of a
counterparty transaction failing to meet its contractual
obligations. This could arise primarily from the Fund`s
investment and securities lending activities.
In terms of CISCA, the Manager may, subject to the requirements
of section 95, lend or offer to lend assets included in the
portfolio within the limits or on the conditions determined by
the Trust Deed. The Trustee of the Fund gives authority to the
Manager to lend or offer to lend securities with a value not
exceeding 50% of the market value of all securities included in
the portfolio. The Manager has proceeded to engage in securities
lending in respect of the securities held by the Fund on this
basis.
In terms of the Trust Deed, the Manager may engage in securities
lending under section 85 of CISCA subject to the following limits
and conditions:
- The securities lending must be beneficial to all investors;
- The Manager may lend or offer to lend securities with a value
not exceeding 50 per cent of the market value of all securities
included in a portfolio;
- The securities that may be lent to one borrower are limited in
accordance with the limits determined by the Registrar for the
inclusion of the money market instruments in a portfolio;
- Collateral security for the securities loaned must have an
aggregate value that exceeds the market value of the securities
loaned by not less than five per cent at all times and may only
consist of -
- Cash; or
- Other securities; or
- A combination of cash and other securities
- Securities may not be lent for a period longer than
12 months; and
- Securities may not be lent unless subject to a right
of recall.
In terms of the securities lending agreements, it is the duty of
the agent to take delivery of the collateral assets, any
appropriate instruments of transfer of instrument of title in
respect of the Service Level Agreement (SLA). Collateral assets
and instruments of transfer or title are held on behalf of, and
for the benefit of, the principal as represented by the Fund.
The portfolio could be exposed to credit risk to the extent that
inadequate collateral is held on the underlying assets. If a
borrower fails to perform its obligations, the Fund may be unable
to recover the loaned securities. However, the Manager only
engages in securities lending with A-rated financial
institutions.
6.2 Investment risk
There can be no assurance that the Fund will achieve its
investment objectives of replicating the price and yield
performance of the FTSE/JSE Top 40 Index.
The following factors could impact negatively on the investment
performance of the Fund:
- Certain costs and expenses incurred by the Fund could cause
the underlying portfolio to mis-track against the Index;
- Temporary unavailability of securities in the secondary
market or other extraordinary circumstances could cause
deviations from the extract weightings of the Index;
- In circumstances where securities comprising of the Index
are suspended from trading or other market disruptions occur,
it may be impossible to rebalance the portfolio of securities
held by the Fund and this may lead to tracking error; and
- Misinterpretation of information on the calculation of the
Index could result in mistracking of the Index.
6.3 Index risk
There is no assurance that the Index will continue to be
calculated and published on the same or similar basis
indefinitely. The Index was created by the JSE Ltd as a measure
of market performance and not for the purposes of trading Fund
Index Securities. The past performance of the Index is not
necessarily a guide to its future performance.
The Index may be adjusted from time to time as a result of
mergers, re-organisations, schemes or arrangement or other
corporate activity involving constituent companies. Any
adjustments to the Index will be implemented as determined from
time to time in terms of the relevant Index stipulations, for
example, if a constituent company pays a special dividend.
The adjustments may require the removal of a constituent company
from the Index and the substitution thereof with a new
constituent company while at the same time, if necessary,
adjusting the base level. The adjustments to the portfolio will
be made in such a way that the portfolio will remain
substantially aligned with the Index Level at all times.
6.4Tracking risk
The risk that the index may not be appropriately tracked is
managed in the following manner:
- Check announcements made on JSE website for any events that
may change the Top 40 index and rebalance if necessary;
- Check corporate actions schedule for any events that may
change the Top 40 index and rebalance if necessary;
- Check the positions report versus what theoretically should
be held with ETF trading application and rebalance if necessary;
and
- During daily NAV process check if the BIPS40 ex-closing
price = 1/1000 of the Top 40 Index Closing level -
reasonability check.
6.5Secondary trading risk
There can be no guarantee that the Fund index securities will
remain listed on the JSE Limited. Despite the presence of market
makers, the liquidity of the Fund index securities cannot be
guaranteed.
The participatory interests may trade at a discount or premium to
their Net Asset Value (NAV).
There is no guarantee that the Fund participatory interests will
remain listed on the JSE Limited. Any termination of a listing
would be subject to the JSE listing requirements.
6.6 Operational risk
If shares in the underlying companies are suspended or cease
trading for any reason, the suspended shares will not be
delivered to a holder exercising its right to take delivery of
the underlying shares until the suspension on the trading in
respect of those shares lifted.
If the computer facilities or other facilities of the JSE
malfunction, calculation and trading in the Fund index securities
may be suspended for a period of time.
Issuers, redemptions and adjustments to rebalance the underlying
portfolio of shares in the Fund could affect the value of the
underlying shares constituting the Index and thereby also impact
on the value of the Fund index securities.
6.7 Liquidity risk
Liquidity risk is the risk that the portfolio will not be able to
meet its financial obligations towards investors when they fall
due.
The approach to managing liquidity risk is to ensure that the
portfolio would be able to pay suitable distributions to
investors on a quarterly basis. All dividend distributions are
approved by the Trustee and calculated by the Manager.
The portfolio could also be exposed to liquidity risk in cases
where insufficient funds are available to effect the necessary
changes in Index constituents. The need to employ alternative
investment techniques would only arise in the event of a
liquidity problem, for example, if it`s not possible to acquire
certain securities comprising the Index due to there being no
sellers of such securities.
The Fund securities are listed instruments; they are bought and
sold on the JSE Ltd through a JSE member. The participatory
interests can be sold to the Manager, which is obligated to buy
them from the investor.
Market makers will attempt to maintain a high degree of liquidity
through continuously offering to buy and sell the Fund
participatory interests at prices around NAV of the participatory
interest, thereby ensuring tight buy and sell spreads. Under
normal circumstances and conditions, the investor will be able to
buy or sell the Fund securities from market makers.
6.8 Market risk
Market risk exists where significant changes in equity prices
will affect the value of the portfolio`s financial instruments.
The investment mandates indicate that the portfolio is passively
managed and as a result the management of the market risk is not
possible.
There is no guarantee that the Fund portfolio will achieve its
investment objective of perfectly tracking the Index.
The value of participatory interests and distributions payable by
the Fund portfolio will rise and fall as the capital values of
the underlying securities housed in the portfolio and the income
flowing there-from fluctuates. Prospective investors should be
prepared for the possibility that they may sustain a loss.
The Fund portfolio may not be able to perfectly replicate the
performance of the Index because -
- The fund is liable for certain costs and expenses not taken
into account in the calculation of the Index; or
- Certain Index constituents may become temporarily
unavailable; or
- Other extraordinary circumstances may result in a deviation
from precise index weightings
7. Sensitivity analysis
All the portfolio`s underlying investments are listed on the JSE
Ltd. The price of the Fund securities is closely correlated to
the movements in the Index. Any movement or adjustment in the
Index, or the underlying constituents of the Index, will have an
impact on the price of the securities. At any point in time the
market value of a Fund security may be expected to reflect
1/1000th of the Index level, plus an amount which reflects a pro
rata portion of any accrued distribution amount within the
portfolio.
Actual market values may be affected by supply and demand and
other market factors, but the ability of a holder to switch out
of the Fund securities by redeeming them in specie for one or
more baskets of constituent securities, subject to a minimum of 1
million participatory interests being delivered, should operate
to substantially avoid or minimise any differential which may
otherwise arise between the relevant basket and/or Index Level
and the value at which the Fund securities trade from time to
time.
At the financial year end, a 100 point move in the Index would
result in a minimal move in the NAV.
8. Investment in derivatives
The Manager may invest in derivatives from time to time. While
an investment in derivatives will only be employed within the
investment restrictions stipulated in the Trust Deed and the
CISCA, some risks maybe associated with investments in these
instruments.
No significant investments in derivatives were used for the
financial period under review.
These financial statements have been audited by the independent
auditors, PricewaterhouseCoopers Incorporated, and their
unqualified audit opinion is available for inspection at the
company`s registered head office. A full copy of the financial
statements is available on the BIPS website www.bipsetf.co.za.
30 September 2009
Sponsor
Bridge Capital Advisors (Pty) Limited
Trustee
ABSA Bank Limited
Managers
Bips Investment Managers (Pty) Limited
2 October 2009
Date: 02/10/2009 17:00:50 Produced by the JSE SENS Department.
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