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Abridged Audited Results for the Year End 30 June 2013 - RMBINF
RMB Government Inflation Linked Bond Exchange Traded Fund
A portfolio in the RMB Collective Investment Scheme (“the portfolio”) registered in terms of the Collective
Investment Schemes Control Act, 45 of 2002
(Incorporated in the Republic of South Africa)
(Date of incorporation: 20 May 2009)
Share Code: RMBINF
ISIN: ZAE000164513
ABRIDGED AUDITED RESULTS FOR THE YEAR ENDED 30 JUNE 2013
The RMB 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 RMB Government
Inflation Linked Bond Exchange Traded 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.
On 2 January 2013, Miss Nicolene Maas resigned as a director of RMB CIS Manco Proprietary Limited and Mr
Stuart Yates was appointed as an independent non-executive director to the RMB CIS Manco Proprietary Limited
board.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
2013 2012
Rand Rand
Assets
Non-current assets
Listed investments held at fair-value-through-profit-
1 079 798 452 957 780 954
or-loss
Current assets
Cash and cash equivalents 11 191 054 10 699 318
Total assets 1 090 989 506 968 480 272
Equity and liabilities
Equity
Net assets attributable to investors 1 079 315 399 957 687 934
Current liabilities
Distributions due to investors 9 906 000 9 333 240
Trade and other payables 1 768 107 1 459 098
Total equity and liabilities 1 090 989 506 968 480 272
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2013
2013 2012
Rand Rand
Revenue 30 643 566 27 142 809
Other income 69 182 164 58 099 755
Expenses
Management and administrative expenses (5 001 086) (3 718 739)
Profit before taxation 94 824 644 81 523 825
Taxation - -
Profit for the year 94 824 644 81 523 825
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
2013 2012
Rand Rand
Profit for the year 94 824 644 81 523 825
Other comprehensive income for the year - -
Total comprehensive income for the year 94 824 644 81 523 825
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO INVESTORS
FOR THE YEAR ENDED 30 JUNE 2013
Capital Income
attributable to attributable to Total
investors Investors
Rand Rand Rand
Balance as at 1 July 2011 806 701 480 53 303 546 860 005 026
Creation of Fund securities 491 597 021 - 491 597 021
Cancellation of Fund securities (451 893 700) - (451 893 700)
Comprehensive income for the year - 81 523 825 81 523 825
Income distributions - (23 544 240) (23 544 240)
Balance as at 30 June 2012 846 404 801 111 283 131 957 687 932
Creation of Fund securities 90 532 790 - 90 532 790
Cancellation of Fund securities (38 087 481) - (38 087 481)
Comprehensive income for the year - 94 824 644 94 824 644
Income distributions - (25 642 486) (25 642 486)
Balance as at 30 June 2013 898 850 110 180 465 289 1 079 315 399
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2013
2013 2012
Rand Rand
Cash flow from operating activities 25 951 487 24 057 417
Cash utilised in operations (4 692 079) (3 085 392)
Interest received on bank account 131 968 87 965
Interest received on assets measured at fair-
30 511 598 27 054 844
value-through-profit-or-loss
Cash flow from investing activities (52 835 334) (39 703 320)
Investment in listed investments (52 835 334) (39 703 320)
Cash flow from financing activities 27 375 583 17 168 201
Creation of Fund securities 90 440 155 491 597 021
Cancellation of Fund securities (37 994 846) (451 893 700)
Distributions paid in respect of current year (25 069 726) (14 211 000)
Distributions paid in respect of prior year - (8 324 120)
Net increase in cash and cash equivalents 491 736 1 522 298
Cash and cash equivalents at the beginning of the
10 699 318 9 177 020
year
Cash and cash equivalents at the end of the
11 191 054 10 699 318
year
SUMMARISED ACCOUNTING POLICIES
FOR THE YEAR ENDED 30 JUNE 2013
The preparation of the audited financial results for the year ended 30 June 2013 was supervised by Richard
Pampel CA (SA), a chief financial officer of Ashburton Investments Holdings Limited.
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 (“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-or-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-or-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-or-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-or-loss, are measured at amortised cost, 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.
Creations and redemptions
Creations and redemptions are recorded on trade date, using historic cost, being the previous day closing index
price.
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-or-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.
Distributions
In accordance with the Fund’s Trust Deed, the Fund distributes its distributable income and any other amounts
determined by the Manager of the Fund to security holders in cash.
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 2013
Listed investments held at fair-value-through-profit-or-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 2013 30 June 2012
Type Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Listed investments
held at fair-value-
through-profit-or-
loss 1 079 798 452 - - 957 780 954 - -
Creation of BIPS Government Inflation Linked Bond securities
A total of 4 728 030 (2012: 30 000 000) Fund securities were issued during the year at a value of R90 532 790
(2012: R491 597 021). A total of 2 128 030 (2012: 28 400 000) Fund securities were cancelled during the year at a
value of R38 087 481 (2012: R451 893 700). As at 30 June 2013, an aggregate of 60 000 000 (2012: 57 400 000)
Fund securities were issued by the Fund, with net assets attributable to the investors in an amount of R1 079 315
405 (2011: R957 687 934).
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
2013 2012
Rand Rand
5.74 cents per security (2012: 14.33 cents per security)
Declared 28 Sep 2012 and paid 09 Oct 2012
(2012: Declared 30 Sep 2011 and paid 03 Oct 2011)
3 172 611 6 591 800
16.50 cents per security (2012: 11.02 cents per security)
Declared 19 Dec 2012 and paid 07 Jan 2013
(2012: Declared 23 Dec 2011 and paid 29 Dec 2011) 9 119 875 4 143 520
0 cents per security (2012: 3.38 cents per security
No additional distribution declared
(2012: Declared 23 December 2011 and paid 29 December 2011) - 92 080
6.00 cents per security (2012: 7.69 cents per security)
Declared 27 Mar 2013 and paid 09 Apr 2013
(2012: Declared 30 March 2012 and paid 04 April 2012)
3 444 000 3 383 600
16.51 cents per security (2012: 16.26 cents per security)
Declared 21 Jun 2013 and paid 02 Jul 2013
9 906 000 9 333 240
(2012: Declared 29 Jun 2012 and paid 04 Jul 2012)
25 642 486 23 544 240
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. The Fund is regulated in terms of the Collective Investment Schemes Control Act (“CISCA”/”the Act”).
In terms of the Act, the Manager must appoint a Trustee. The assets of the portfolio are held under the 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. 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 by Standard & Poor. The bank balance is held at ABSA, which is rated BBBpi by Standard &
Poor.
The maximum exposure to credit risk at the reporting date was as follows:
2013 2012
Rand Rand
Cash and cash equivalents 11 191 054 10 699 318
Listed investments held at fair-value-through-profit-or-loss 1 079 798 452 957 780 954
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 five 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, Fund securities 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 securities at prices around the net asset value (“NAV”) of the Fund securities, 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 Fund securities 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 RMB website http://www.rmb.co.za/ourFundsETFs.asp
18 December 2013
Sponsor
Bridge Capital Advisors Proprietary Limited
Trustee
ABSA Bank Limited
Managers
RMB CIS Manco Proprietary Limited
Auditors
PricewaterhouseCoopers Incorporated
Date: 18/12/2013 11:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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