| Mon 4 Oct 2010, 17:10 | | BIPS40 - Bips Top 40 - Abridged audited results for the year ended 30 June 2010 |
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JSE BIPS40
BIPS
BIPS40 - Bips Top 40 - Abridged audited results for the year ended 30 June 2010
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 YEAR ENDED 30 JUNE 2010
The BIPS Collective Investment Scheme ("the Scheme") was established 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.
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010
2010 2009
Rand Rand
Assets
Non-current assets
Listed investments held at fair value 403 794 348 363 372 620
through profit and loss
Current assets 2 137 166 875 936
Trade and other receivables 115 040 64 125
Cash and cash equivalents 2 022 126 811 811
Total assets 405 931 514 364 248 556
Equity and liabilities
Equity
Net assets attributable to investors 403 794 348 363 372 620
Current liabilities
Trade and other payables 2 137 166 875 936
Total equity and liabilities 405 931 514 364 248 556
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2010
2010 For the period
15 Oct 2008 to
30 Jun 2009
Rand Rand
Revenue 6 729 707 4 322 261
Dividend income 6 067 520 3 574 748
Income from creations of Fund 421 637 -
securities
Fee income: Securities lending - 581 726
Interest income 240 550 165 787
Other operating income
Fair value adjustment on 38 560 908 20 935 397
financial instruments designated
at fair value through profit or
loss
Expenses
Management and administrative (900 770) (669 854)
expenses
Profit before taxation 44 389 845 24 587 804
Taxation - -
Profit for the year/period 44 389 845 24 587 804
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010
2010 For the period
15 Oct 2008 to
30 Jun 2009
Rand Rand
Profit for the year/period 44 389 845 24 587 804
Other comprehensive income for the - -
year/period
Total comprehensive income for the 44 389 845 24 587 804
year/period
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO INVESTORS
FOR THE YEAR ENDED 30 JUNE 2010
Capital Income Total
attributable attributable
to investors to investors
Rand Rand Rand
Balance as at 15 October - - -
2008
Creation of BIPS 342 437 223 - 342 437 223
FTSE/JSE Top 40
securities ("Fund
securities")
Comprehensive income for - 24 587 804 24 587 804
the period
Income distributions - (3 652 407) (3 652 407)
Balance as at 30 June 342 437 223 20 935 397 363 372 620
2009
Creation of Fund 195 818 020 - 195 818 020
securities
Cancellation of Fund (193 957 200) - (193 957 200)
securities
Comprehensive income for - 44 389 845 44 389 845
the year
Income distributions - (5 828 937) (5 828 937)
Balance as at 30 June 344 298 043 59 496 305 403 794 348
2010
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2010
2010 For the period
15 Oct 2008 to
30 Jun 2009
Rand Rand
Cash flow from operating 7 039 252 3 850 027
activities
Cash generated by operations 309 545 109 492
Dividend income 6 067 520 3 574 748
Income from creations of Fund 421 637 -
securities
Interest income 240 550 165 787
Cash flow from investing (1 860 820) (342 437 223)
activities
Investment in listed (195 818 020) (342 437 223)
investments
Disposal of listed 193 957 200 -
investments
Cash flow from financing (3 968 117) 339 399 007
activities
Creation of Fund securities 195 818 020 342 437 223
Cancellation of Fund (193 957 200) -
securities
Distributions to (5 828 937) (3 038 216)
participatory interest
holders
Net increase in cash and cash 1 210 315 811 811
equivalents
Cash and cash equivalents at 811 811 -
the beginning of the
year/period
Cash and cash equivalents at 2 022 126 811 811
the end of the year/period
SUMMARISED ACCOUNTING POLICIES FOR THE YEAR ENDED 30 JUNE 2010
The financial statements incorporate the principal policies set out below, which
have been consistently applied to all years presented, unless otherwise stated.
Statement of compliance
The financial statements are prepared in accordance with International Financial
Reporting Standards (IFRS) issued by the International Accounting Standards
Board (IASB), and in accordance with the requirements of the Collective
Investment Schemes Control Act No 45 of 2002.
Financial 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 end of the
reporting period, as published in the financial press at the end of the
reporting period.
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.
Fair value gains and losses on subsequent measurement
Gains and losses arising from a change in the fair value on financial
instruments are included in net profit or loss in the year in which the change
arises.
Offset
Financial assets and financial liabilities are offset and the net amount
reported in the statement of financial position 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 derecognises financial assets when and only when:
* The contractual right to the cash flows arising 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 profit or loss.
Revenue
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 year in which the services are
rendered.
Investment income
Interest income is recognised in profit or loss, using the effective rate
method, taking into account the expected timing and amount of cash flows.
Dividends in respect of scrip out on loan are recognised when the right to
receive payment is established.
Taxation
Under the current system of taxation in South Africa, the Fund is exempt from
paying taxation on income or capital gains. Both income and capital gains are
taxed in the hands of the investors.
Securities lending
The Fund engages in securities lending activities up to 50% of the assets under
management. Collateral is held by the relevant lending units.
Expenses
Expenses are recognised as incurred.
Impairment
Financial assets that are stated at cost or amortised cost are reviewed at the
end of the reporting period to determine whether there is objective evidence of
impairment. If any such indication exists, an impairment loss is recognised in
profit or loss 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 year the amount of an impairment loss recognised on a
financial asset carried at amortised cost decreases, and the decrease can be
linked objectively to an event that occurred after the write down, the write
down is reversed through the statement of comprehensive income.
Finance costs
Distributions payable on redeemable units are recognised in profit or loss as
finance costs under distributions.
Redeemable securities
All redeemable securities issued by the Fund provide investors with the right to
require redemption for the cash or in specie at the value proportionate to the
investors` share. Such instruments give rise to equity instruments for the net
asset value of the redemption amount in the statement of financial position. In
accordance with the trust deed of the Fund ("the trust deed") and the Collective
Investment Schemes Control Act, the Fund is contractually obliged to redeem
securities at the net asset value.
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:
IFRS 7: Financial Instruments: Disclosures (amended) was amended in 2008 and
these amendments are effective for annual periods commencing on or after 1
January 2009. The amendments require enhanced disclosures about the fair value
measurements, and have established a three-level hierarchy for making fair value
measurements. These enhanced disclosures do not have an impact on the
recognition or measurement of amounts relating to financial instruments. The
enhanced disclosures are only required for the period in which the amendments
are effective and there is no requirement for comparative amounts to be
presented.
IAS 1: Presentation of Financial Statements (revised) is effective for annual
periods beginning on or after 1 January 2009. The revised Standard prescribes
the basis of the presentation of general purpose financial statements,
guidelines for their structure and minimum requirements for their content. The
adoption of this Standard will affect the presentation of the financial
statements for both the current and comparative period, but will not affect
recognition and measurement of any amounts recognised in the financial
statements.
As part of its annual improvements projects, the IASB has issued its editions of
annual improvements. The annual improvement projects aim is to clarify and
improve the accounting standards. The improvements include those involving
terminology or editorial changes with minimal effect on recognition and
measurement.
The annual improvements project for 2009 is effective for annual periods
commencing on or after 1 January 2010. The Fund has adopted the amendments made
as a result of the annual improvements project for 2009 during the current
financial year. These amendments have not had a significant impact on the
Fund`s results nor has it resulted in the restatement of prior year numbers.
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.
SUMMARISED NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010
Listed investments held at fair value through profit and loss
The following principle methods and assumptions are used to determine the fair
value of the financial instruments that are carried at fair value:
Listed equities
The fair value of listed equities is determined using unadjusted quoted prices.
The Fund therefore classifies the fair value measurement of the listed equities
in the Level 1 category on the basis that the fair value of the listed equities
is determined using unadjusted quoted prices.
IFRS 7 Fair value hierarchy
30 June 2010 30 June 2009
Type Level 1 Level Level Level 1 Level Level
2 3 2 3
Listed 403 794 348 - - 363 372 620 - -
investments
held at fair
value
through
profit and
loss
Creation and cancellation of BIPS FTSE/JSE TOP 40 securities
A total of 8 000 000 (2009: 18 334 067) BIPS FTSE/JSE TOP 40 securities were
issued during the year at a value of R195 818 020 (2009: R342 437 223).
A total of 9 000 000 (2009: Nil) BIPS FTSE/JSE TOP 40 securities were cancelled
during the year at a value of R193 957 200 (2009: RNil).
Management and administration expenses
The Manager is entitled to a service charge for the administration of the
Scheme, as determined by the Manager from time to time, based on the market
value of the total assets of the Fund.
During the 2010 financial year, a service fee of 10 (ten) basis points of the
total market value of the total assets has been applied, although some of the
fees have been waived to achieve efficient tracking. (2009: The Manager waived a
portion of the service fees in order to achieve efficient tracking of the
FTSE/JSE Top 40 Index).
Distributions
The Fund effects quarterly distributions made out of income received by the
Fund.
2010 2009
Rand Rand
15.70 cents per security (2009: Nil
cents per security)
Declared 2 Oct 2009 and paid 05 Oct 1 473 451 -
2009 (2009: Nil)
6.10 cents per security (2009: 9.56
cents per security)
Declared 31 Dec 2009 and paid 05 Jan 996 606 987 937
2010
(2009: Declared 9 Jan 2009 and paid 23
Jan 2009)
9.58 cents per security (2009: 19.84
cents per security)
Declared 1 Apr 2010 and paid 7 Apr 1 564 804 2 050 279
2010
(2009: Declared 2 Apr 2009 and paid 15
Apr 2009)
10.35 cents per security (2009: 3.35
cents per security)
Declared 02 Jul 2010 and paid 05 Jul 1 794 076 614 191
2010
(2009: Declared 26 Jun 2009 and paid 8
Jul 2009)
Total distributions 5 828 937 3 652 407
Taxation
Any taxable income realised during the year, whether of a capital or revenue
nature, has been distributed to the holders of the Fund securities. As a
result, both income and capital gains are taxed in the hands of the investors.
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 Fund`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 Manager`s 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 Fund is to track the FTSE/JSE Top40 Index
("the Index") as closely as possible, by buying only FTSE/JSE Top40 securities
in the weighting in which they are included in the 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 Top40 securities in the
same weighting as they are included in the Index. However, the Fund 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 Fund. The Fund`s
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 Fund will not
buy or sell securities for trading purposes or for any purpose other than to
track the Index as closely as possible. As a further objective, the securities
held by the Fund 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`s 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 Fund`s portfolio so as to substantially reflect
the composition and weighting of the securities comprising the Index at all
times.
It is recorded that the Fund`s ability to replicate the price and yield
performance of the Index will be affected by the costs and expenses incurred by
the Fund. Costs and expenses may result in the Index not being replicated
perfectly by the Fund`s 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.
Credit risk
Credit risk is the risk of loss due to non-performance of a counterparty in
respect of any financial or performance obligation. For fair value portfolios
the definition of credit risk is expanded to include the risk of losses through
fair value changes arising from changes in credit spreads.
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 Fund`s 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 Fund`s
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 the Fund`s
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 a service level agreement
("the 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.
Credit risk is only applicable to the financial assets of the Fund. The credit
risk is considered to be low. The carrying amounts of financial assets
represent the maximum credit exposure. None of the Fund`s financial assets are
considered past due or impaired.
The maximum exposure to credit risk at the reporting date was as follows:
2010 2009
Rand Rand
Trade and other receivables 115 040 64 125
Cash and cash equivalents 2 022 126 811 811
Investment risk
There can be no assurance that the Fund will achieve its investment objectives
of replicating the price and yield performance of the 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 mis-tracking of the Index.
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 Limited 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.
Tracking risk
The risk that the Index may not be appropriately tracked is managed in the
following manner:
* Check announcements made on the JSE website for any events that may change
the Index and rebalance, if necessary;
* Check corporate actions schedule for any events that may change the Index
and rebalance, if necessary;
* Check the positions report versus what theoretically should be held with
the ETF trading application and rebalance, if necessary; and
* During daily net asset value ("NAV") calculation process, check if the
BIPS40 ex-closing price = 1/1000 of the Top40 Index closing level, i.e. do
a reasonability check.
Secondary trading risk
There can be no guarantee that the Fund securities will remain listed on the JSE
Limited. Despite the presence of market makers, the liquidity of the Fund
securities cannot be guaranteed.
The participatory interests may trade at a discount or premium to their 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.
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 is lifted.
If the computer facilities or other facilities of the JSE malfunction,
calculation and trading in the Fund 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 securities.
Liquidity risk
Liquidity risk is the risk that the Fund 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 Fund would be able
to pay suitable distributions to investors on a quarterly basis. All
distributions are calculated and approved by the Manager.
The Fund 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 is not possible to acquire certain
securities comprising the Index due to there being no sellers of such
securities.
The Fund securities are listed instruments; that are bought and sold on the JSE
Limited 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.
Market risk
Market risk exists where significant changes in equity prices will affect the
value of the Fund`s financial instruments. The investment mandates indicate
that the Fund`s portfolio is passively managed and as a result the management
of the market risk is not possible. There is no guarantee that the Fund`s
portfolio will achieve its investment objective of perfectly tracking the
Index.
The value of participatory interests and distributions payable by the Fund`s
portfolio will rise and fall as the capital values of the underlying securities
housed in the Fund and the income flowing there-from fluctuates. Prospective
investors should be prepared for the possibility that they may sustain a loss.
The Fund`s 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
Sensitivity analysis
All the Fund`s underlying investments are listed on the JSE Limited. 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 is 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 Fund`s portfolio. Therefore, a 100
point movement in the Index would result in a R0,10 movement in the NAV per unit
of the Fund. 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.
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 CISCA, some risks may be 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.
04 October 2010
Sponsor
Bridge Capital Advisors (Pty) Ltd
Trustee
ABSA Bank Limited
Managers
BIPS Investment Managers (Pty) Limited
Date: 04/10/2010 17:10:01 Produced by the JSE SENS Department.
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