| Fri 23 Dec 2011, 10:36 | | 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 2011
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 2011
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 20
2011 2010
Rand Rand
Assets
Non-current assets
Listed investments held at fair 860 098 551 432 015
value through profit and loss 047
Current assets
Trade and other receivables 297 -
Cash and cash equivalents 9 177 020 8 021 723
Total assets 869 275 559 453 738
364
Equity and liabilities
Equity
Net assets attributable to 860 005 553 285 325
investors 026
Current liabilities
Distributions due to investors 8 324 120 5 943 920
Trade and other payables 946 218 224 493
Total equity and liabilities 869 275 559 453 738
364
11
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2011
2011 2010
Rand Rand
Revenue 28 322 775 15 694 674
Other income 43 694 115 13 234 016
Expenses
Management and administrative (3 016 (1 770 529)
expenses 955)
Profit before taxation 68 999 935 27 158 161
Taxation - -
Profit for the year 68 999 935 27 158 161
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2011
2011 2010
Rand Rand
Profit for the year 68 999 27 158 161
935
Other comprehensive income for the - -
year
Total comprehensive income for the 68 999 27 158 161
year 935
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO INVESTORS
FOR THE YEAR ENDED 30 JUNE 2011
Capital Income Total
attributabl attributabl
e to e to
investors Investors
Rand Rand Rand
Balance as at 1 July 2009 125 252 444 - 125 252
444
Creation of BIPS 417 846 000 - 417 846
Government Inflation 000
Linked Bond Fund
securities ("Fund
securities")
Comprehensive income for - 27 158 161 27 158
the year 161
Income distributions - (16 971 (16 971
280) 280)
Balance as at 30 June 2010 543 098 444 10 186 881 553 285
325
Creation of Fund 263 603 037 - 263 603
securities 036
Comprehensive income for - 68 999 935 68 999
the year 935
Income distributions - (25 883 (25 883
270) 270)
Balance as at 30 June 2011 806 701 481 53 303 546 860 005
026
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2011
2011 2010
Rand Rand
Cash flow from operating 26 604 698 17 112 035
activities
Cash utilised in operations (2 295 527) (1 629 774)
Interest received on bank 117 130 48 335
accounts
Income from creations of Fund 577 450 3 047 135
securities
Interest received on assets 28 205 645 15 646 339
measured at fair value through
profit and loss
Cash flow from investing (265 549 (416 078
activities 367) 987)
Investment in listed (265 549 (416 078
investments 367) 987)
Cash flow from financing 240 099 966 405 698 400
activities
Creation of Fund securities 263 603 036 417 846 000
Distributions paid in respect (17 559 150) (11 027
of current year 360)
Distributions paid in respect (5 943 920) (1 120 240)
of prior year
Net increase in cash and cash 1 155 297 6 731 448
equivalents
Cash and cash equivalents at 8 021 723 1 290 275
the beginning of the year
Cash and cash equivalents at 9 177 020 8 021 723
the end of the year
SUMMARISED ACCOUNTING POLICIES
FOR THE YEAR ENDED 30 JUNE 2011
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 IFRS issued by the
International Accounting Standards Board ("the IASB"), and in accordance with
the requirements of the trust deed of the Fund ("the Trust Deed") and 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 rate 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 rate 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. The effective interest rate method is
a method of calculating the amortised cost of a financial asset or financial
liability and of allocating the interest income or interest expense over the
average expected life of the financial instruments or portfolios of financial
instruments. Interest income received on assets measured at fair value through
profit and loss is disclosed separately under revenue, based on cash received
within the period.
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
2011 and early adopted by the Fund in the current financial period:
IAS 24 Related Party Disclosures amendment (effective for periods commencing 1
Jan 2011). The amendment removes certain of the disclosure requirements for
government related entities, clarifies the definition of a related party and
introduces a requirement for entities to disclose commitments to related
parties. This amendment addresses disclosure in the annual financial statements
and will not affect recognition and measurement. The impact of the revised
disclosure is not expected to be significant.
As part of its annual improvements projects, the IASB has issued its 2010 annual
improvement project. 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 2010 is effective for annual periods
commencing on or after 1 January 2011. The Fund has adopted the amendments made
as a result of the annual improvements project for 2010 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 2011
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 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 2011 30 June 2010
Type Level 1 Level Level Level 1 Level Level
2 3 2 3
Listed 860 098 - - 551 432 - -
investments 047 015
held at fair
value
through
profit and
loss
Creation of BIPS Government Inflation Linked Bond securities
A total of 17 600 000 (2010: 29 400 000) Fund securities were issued during the
year at a value of R263 603 036 (2010: R417 846 000). As at 30 June 2011, an
aggregate of 55 800 000 (2010: 38 200 000) Fund securities were issued by the
Fund, with net assets attributable to the investors in an amount of R860 005 026
(2010: R553 285 325).
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 investments of the Fund. During the period a service fee of 36 (thirty six)
basis points of the market value of the investments of the Fund has been
applied.
Distributions
2011 2010
Rand Rand
12.49 cents per security (2010: 16,50
cents per security)
Declared 01 Oct 2010 and paid 4 Oct 2010 5 068 910 1 617 000
(2010: Declared 23 Sep 2009 and paid 5 Oct
2009)
15,20 cents per security (2010: 11,62
cents per security)
Declared 24 Dec 2010 and paid 28 Dec 2010 6 323 200 4 067 000
(2010: Declared 15 Dec 2009 and paid 5 Jan
2010)
11,68 cents per security (2010: 14,52
cents per security)
Declared 1 Apr 2011 and paid 5 Apr 2011 6 167 040 5 343 360
(2010: Declared 23 Mar 2010 and paid 7 Apr
2010)
15,19 cents per security (2010: 15,56
cents per security)
Declared 1 Jul 2011 and paid 5 Jul 2011 8 324 120 5 943 920
(2010: Declared 23 Jun 2010 and paid 5 Jul
2010)
25 883 16 971 280
270
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. 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 are 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:
2011 2010
Rand Rand
Cash and cash equivalents 9 177 020 8 021 723
Trade and other receivables 297 -
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 amount in issue of the current six inflation linked bonds issued by
National Treasury.
Operational risk
The 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 in 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 1/10th 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 R1.00 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 an investor 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.
23 December 2011
Sponsor
Bridge Capital Advisors (Pty) Limited
Trustee
ABSA Bank Limited
Managers
BIPS Investment Managers (Pty) Limited
Auditors
PricewaterhouseCoopers Incorporated
Date: 23/12/2011 10:36:17 Produced by the JSE SENS Department.
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