| Mon 4 Oct 2010, 17:22 | | BIPINF - Bips Government Inflation Linked Bond Fund - Abridged audited results |
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JSE BIPINF
BIPS
BIPINF - Bips Government Inflation Linked Bond Fund - Abridged audited results
for the year ended 30 June 2010
Bips Government Inflation Linked Bond Fund
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: BIPINF
ISIN: ZAE000134185
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 Government Inflation Linked
Bond Fund ("the Fund") was established as a portfolio of the Scheme in
accordance with paragraph A of the deed of the scheme on 5 March 2009.
The Fund is a passive investment fund with the aim of providing returns linked
to the performance of the Government Inflation Linked Bond Index ("GILBx") in
terms of both price performance, as well as income from the component securities
in the index. The portfolio will aim to track the performance of the index.
STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2010
2010 2009
Rand Rand
Assets
Non-current assets
Listed investments held at fair 551 432 015 125 166 147
value through profit and loss
Current assets
Cash and cash equivalents 8 021 723 1 290 275
Total assets 559 453 738 126 456 422
Equity and liabilities
Equity
Net assets attributable to investors 553 285 325 125 252 444
Current liabilities
Distributions due to investors 5 943 920 1 120 240
Trade and other payables 224 493 83 738
Total equity and liabilities 559 453 738 126 456 422
INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2010
2010 For the period 1
Jun 2009 to 30
Jun 2009
Rand Rand
Revenue 15 694 674 1 066 994
Other income 13 234 016 136 984
Expenses
Management and administrative expenses (1 770 529) (83 738)
Profit before taxation 27 158 161 1 120 240
Taxation - -
Profit for the year/period 27 158 161 1 120 240
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2010
2010 For the period 1
Jun 2009 to 30
Jun 2009
Rand Rand
Profit for the year/period 27 158 161 1 120 240
Other comprehensive income for the - -
year/period
Total comprehensive income for the 27 158 161 1 120 240
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 1 June 2009 - - -
Creation of BIPS 125 252 444 - 125 252
Government Inflation 444
Linked Bond Fund
securities ("Fund
securities")
Comprehensive income for - 1 120 240 1 120 240
the period
Income distributions - (1 120 240) (1 120
240)
Balance as at 30 June 2009 125 252 444 - 125 252
444
Creation of Fund 417 846 000 - 417 846
securities 000
Comprehensive income for - 27 158 161 27 158
the year 161
Income distributions - (16 971 280) (16 971
280)
Balance as at 30 June 2010 543 098 444 10 186 881 553 285
325
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2010
2010 For the
period 1
Jun 2009 to
30 Jun 2009
Rand Rand
Cash flow from operating 17 112 035 1 203 978
activities
Cash utilised in operations (1 629 774) -
Interest received on bank 48 335 5 727
accounts
Income from creations of Fund 3 047 135 136 984
securities
Interest received on assets 15 646 339 1 061 267
measured at fair value through
profit and loss
Cash flow from investing (416 078 987) (125 166
activities 147)
Investment in listed (416 078 987) (125 166
investments 147)
Cash flow from financing 405 698 400 125 252 444
activities
Creation of Fund securities 417 846 000 125 252 444
Distributions paid in respect (11 027 360) -
of current year
Distributions paid in respect (1 120 240) -
of prior period
Net increase in cash and cash 6 731 448 1 290 275
equivalents
Cash and cash equivalents at 1 290 275 -
the beginning of the
year/period
Cash and cash equivalents at 8 021 723 1 290 275
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 government bonds, 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 quoted market prices at the end of the
reporting period, as published in the financial press at the end of the
reporting period. Interest received on listed investments measured at fair
value through profit and loss is disclosed separately under revenue, based on
cash received within the period.
Trade and other receivables
Trade and other receivables originated by the Fund are measured at amortised
cost using the effective interest method, less impairment 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.
A financial liability is 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 interest income.
Interest income
Interest income on assets recognised at amortised cost is recognised in profit
or loss, using the effective interest rate method, taking into account the
expected timing and amount of cash flows. Interest income received on assets
measured at fair value through profit and loss is disclosed separately under
revenue.
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.
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 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
The following principle methods and assumptions are used to determine the fair
value of the financial instruments that are carried at fair value:
Listed government stock
The fair value of listed government stock is determined using unadjusted quoted
prices. The Fund therefore classifies the fair value measurement of the listed
government bonds in the Level 1 category, on the basis that the fair value of
the listed government bonds 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 551 432 - - 125 166 - -
investments 015 147
held at fair
value
through
profit and
loss
Creation of BIPS Government Inflation Linked Bond securities
A total of 29 400 000 (2009: 8 800 000) Fund securities were issued during the
year at a value of R417 846 000 (2009: R125 252 444).
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 of the market value of
the total assets of the portfolio.
During the period a service fee of 39 (thirty nine) basis points of the total
market value of the portfolio has been applied.
Distributions
16,50 cents per BIPS Inflation-X security (2009: 1 617 000 -
Nil)
Declared 23 Sep 2009 and paid 5 Oct 2009 (2009:
None)
11,62 cents per BIPS Inflation-X security (2009: 4 067 000 -
Nil)
Declared 15 Dec 2009 and paid 5 Jan 2010 (2009:
None)
14,52 cents per BIPS Inflation-X security (2009: 5 343 360 -
Nil)
Declared 23 Mar 2010 and paid 7 Apr 2010 (2009:
None)
15,56 cents per BIPS Inflation-X security (2009: 5 943 920 1 120 240
12,73 cents)
Declared 23 Jun 2010 and paid 5 Jul 2010 (2009:
Declared 24 Jun 2009 and paid 6 Jul 2009)
16 971 280 1 120 240
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
The Fund is a passive investor in inflation linked bonds issued by the
government of the Republic of South Africa in percentages to which each bond
contributes to the Government Inflation Linked Bond Index ("the Index"). The
risk that management must control is that the Fund does not track the Index.
Exposure to investment, credit, market and operational risks arise in the
normal course of investment activities in government bonds. The Fund`s
acceptance of risk is directly attributable to the risks associated with any
investment in government bonds.
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.
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 Fund.
The Fund has exposure to the following risks from its use of financial
instruments:
- Credit risk;
- Investment risk;
- Tracking 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 to a
transaction failing to meet its contractual obligations. This could arise
primarily from the Fund`s investment activities.
Credit risk is considered to be low as assets of the Fund are government
inflation linked bonds rated AAA. The bank balance is held at ABSA, which is
rated AAA.
The maximum exposure to credit risk at the reporting date was as follows:
2010 2009
Rand Rand
Cash and cash equivalents 8 021 723 1 290 275
Investment risk
There can be no assurance that the Fund will achieve its investment
objectives.
Tracking risk
The Fund portfolio is reweighted monthly and rebalanced quarterly in line with
the nominal in issue of the current four inflation linked bonds issued by
National Treasury.
Operational risk
The asset manager purely executes and administers trades. The asset
management function relies on the Asset Liability Matching system that the
Manager uses for its own internal risk management. Assets are held in custody
at ABSA Trust. Trades are all in listed government bonds, which settle
through STRATE and are held on immobilised form at STRATE.
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
dividend distributions are calculated and approved by the Manager.
In the primary market, participatory interests are created and destroyed
through the delivery of the underlying bonds. There is no obligation to
accept or deliver cash to unit holders who wish to create or destroy units.
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 the net asset value ("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 Fund securities from the
market makers.
Market risk
The Fund is an index tracking fund. It aims to match the performance of the
Index.
Market risk exists where the significant changes in government bond prices
will affect the value of the Fund`s financial instruments. The investment
mandates indicates that the Fund is passively managed and as a result the
management of market risk is not possible.
The value of participatory interests and distributions payable by the Fund
will rise and fall as the capital values of the underlying securities housed
in the Fund`s portfolio and the income flowing there from fluctuates.
Prospective investors should be prepared for the possibility that they may
sustain a loss.
Sensitivity analysis
All the Fund`s underlying investments are listed on the Bond Exchange of South
Africa ("BESA"), now administered and owned by the JSE Limited. The price of
the Fund securities is closely correlated to the movements in the underlying
Government Inflation-Linked Bond 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 NAV of the Fund securities is expected to
approximate 1/100th of the Index level, plus an amount which reflects a pro-
rata portion of any accrued distribution amount within the portfolio, net of
accrued expenses. Therefore, a 10 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 200 000 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.
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.
4 October 2010
Sponsor
Bridge Capital Advisors (Pty) Ltd
Trustee
ABSA Bank Limited
Managers
BIPS Investment Managers (Pty) Limited
Date: 04/10/2010 17:22:51 Produced by the JSE SENS Department.
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