Wrap Text
Update on Trustco and the JSE'S, International Financial Reporting Standards ("IFRS") Dispute
TRUSTCO GROUP HOLDINGS LIMITED
Incorporated in the Republic of Namibia
(Registration number 2003/058)
Registered as an external company in South Africa
(External registration number 2009/002634/10)
NSX share code: TUC
JSE share code: TTO
OTCQX share code: TSCHY
ISIN Number: NA000A0RF067
(“Trustco” or “the Group”)
UPDATE ON TRUSTCO AND THE JSE'S, INTERNATIONAL FINANCIAL
REPORTING STANDARDS ("IFRS") DISPUTE
Current litigation
1. Trustco refers to the announcement published on SENS on 29 June 2022 where
the Interim Financial Statements were published for the period ended 28
February 2022 ("Interim Results") together with an update on the ongoing
litigation between the JSE and Trustco.
Trustco's executive summary
2. Shareholders have been updated from time to time on the dispute between
Trustco and the JSE. The two remaining matters in dispute between Trustco
and the JSE relate to classification of the gain recognised in profit and loss by
Trustco following two separate loan waivers by the majority shareholder in the
amounts of NAD (Namibia Dollar) 546 million and NAD 1 billion respectively, and
the re-classification of a portion of a property development from inventory to
investment property.
3. The dispute affects only Trustco's investments in the property portfolio entity and
the resources portfolio entity and has no effect on the Net Asset Value (NAV) of
the Group.
4. The JSE contends that Trustco has failed to comply with the JSE’s Listings
Requirements and the relevant IFRS accounting standards and the JSE informed
Trustco to restate its financial statements. Trustco disputes the alleged non-
compliance with IFRS and the JSE’s Listings Requirements and, as a result, the
parties together with their respective IFRS expert advisors remain in
disagreement regarding the correct IFRS accounting treatment for the
transactions in dispute.
5. The JSE (and its advisory body FRIP) disagreed with Trustco's accounting
treatment and applied a substance over form treatment, without the JSE being
able to point to a single accounting standard that has been breached by Trustco.
6. As the Financial Services Tribunal gave deference to the JSE, Trustco has
approached the High Court of South Africa for an urgent interdict against the
JSE.
JSE failure to comply with its own Listings Requirements
7. It is notable that the JSE (and FRIP) did not, as per their mandate and in
accordance with the Listings Requirements, refer the matter to South African
Institute of Chartered Accountants (SAICA), Independent Regulatory Board for
Auditors (IRBA) or any relevant professional body for a further independent
opinion, should an issuer fail to comply with IFRS.
8. Trustco further purports that the decision of the JSE was made by a person not
authorised to make such a decision and imposes a sanction that the JSE was
not empowered to make.
9. The JSE furthermore imposed a sanction that is absent and not provided for in
the JSE Listings Requirements.
10. The Chairperson of the Financial Services Board, contrary to the legislative
requirements, compiled a panel of three representatives consisting only of one
former and two current practising legal practitioners with no financial, accounting
or IFRS experience or qualifications, with the consequence that the Tribunal
failed to interpret certain material considerations that an appropriately qualified
IFRS specialist should have considered.
11. The JSE Listings Requirements feature the business judgement rule, and the
JSE and subsequently the Financial Services Tribunal erred by either not
applying the Business Judgement Rule at all, or by applying the Business
Judgment Rule against Trustco's Board. The Board was best placed to make an
informed decision after considering all relevant facts and after taking professional
advice and guidance from its independent external JSE approved IFRS advisors.
The accounting treatment of the transactions has subsequently been audited by
Trustco’s independent JSE approved auditors and approved by its shareholders
with a 99.99% vote.
Trustco's position
12. Trustco’s Board of directors, having consulted with its external JSE accredited
IFRS experts and auditors, and having concluded multiple unmodified and
unqualified audits by two independent JSE accredited audit firms, maintains their
stance that the transactions were correctly accounted for, reported and
disclosed.
13. The Board (and not the JSE) remains responsible and accountable to
Shareholders for the preparation and presentation of the financial statements
and their compliance with IFRS. The Board cannot abdicate this responsibility to
third parties who are not the Group’s appointed professional advisors.
14. It is important to note that Trustco and the JSE are deadlocked regarding a
difference of opinion on the interpretation and application of IFRS. It is important
to emphasise that the JSE made no allegations of fraud, misconduct, or
wrongdoing by Trustco or its Board.
15. Trustco’s auditors has provided Trustco with unmodified (unqualified) audit
reports for the last 29 years, the latest thereof being published on 31 January
2022.
Status Quo
16. In the interest of transparency and full disclosure, the documentation relating to
the Review Application, the Reconsideration Application, the Suspension
Application, and the Urgent Application can be found at
https://www.tgh.na/downloads/. Shareholders are encouraged to read the
documentation to apprise themselves of the nature of the dispute and the status
thereof.
Shareholders will be kept up to date from time to time and the website will be updated
with the progress on these matters. Shareholders are also welcomed to contact the
company secretary for more information at komada@tgh.na.
Windhoek, Namibia,
15 July 2022
Komada Holdings (Pty) Ltd
Company Secretary and Investor Relations Services to Trustco Group Holdings
Limited
JSE Sponsor
Vunani Sponsors (Pty) Ltd – Johannesburg
NSX Sponsor
Simonis Storm Securities Proprietary Limited – Windhoek
OTCQX Sponsor
J.P Galda & Co – New York
Date: 15-07-2022 01:46:00
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