Wrap Text
NRD - Trackhedge Summarised Audited Results for the year ended 31 March 2013
TRACKHEDGE PROPRIETARY LIMITED
Registration Number 2003/008245/07
Share code: NRD
ISIN: ZAE000047841
(“Trackhedge Proprietary” or “the ETF”)
Preparer / Compiler : The financial statements were independently compiled by Ernst & Young Advisory Services
Proprietary Limited. Director : Cleedon Botha CA(SA)
Supervised by : These annual financial statements are under the direction and supervision of the Head of Financial Control of Corporate and
Investment Banking and Wealth ("CIBW"), a division of Absa Bank Limited, Francois Rossouw CA(SA)
TRACKHEDGE PROPRIETARY LIMITED
SUMMARISED AUDITED RESULTS FOR THE YEAR ENDED 31 MARCH 2013
STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 31 MARCH 2013
2013 2012
R R
ASSETS
Current assets
Current tax receivable 3 40,998 7,068
Trade and other receivables 4 100,036 9,591
Unlisted investments 5 86,875,141 73,450,695
Cash and cash equivalents 6 9,883 9,581
Total assets 87,126,058 73,476,935
EQUITY AND LIABILITIES
Equity
Share capital 7 1 1
Accumulated loss (112,313) (99,558)
(112,312) (99,557)
Current liabilities
NewRand Index Securities 8 86,875,141 73,450,695
Trade and other payables 9 363,229 125,797
87,238,370 73,576,492
Total Equity and Liabilities 87,126,058 73,476,935
STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2013
2013 2012
R R
Revenue 12 984 51,983
Other income 13 20 -
Operating expenses 14 (8) (12,966)
Operating profit 996 39,017
Fair value adjustment on NewRand Index Securities (13,424,447) (5,490,117)
Unrealised gain on unlisted investment 13,424,447 5,490,117
Profit before tax 996 39,017
Taxation 15 (13,751) (168,148)
Profit for the year (12,755) (129,131)
Other comprehensive income - -
Total comprehensive income for the year (12,755) (129,131)
Total comprehensive income for the year
Owners of the Company (12,755) (129,131)
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO INVESTORS FOR THE YEAR ENDED 31 MARCH 2013
Share Retained
capital income Total equity
R R R
Balance at 1 April 2011 1 29,573 29,574
Changes in equity
Total comprehensive income for the year - (129,131) (129,131)
Dividends paid - - -
Total changes - (129,131) (129,131)
Balance at 01 April 2012 1 (99,558) (99,557)
Changes in equity
Total comprehensive income for the year - (12,755) (12,755)
Dividends paid - - -
Total changes - (12,755) (12,755)
Balance at 31 March 2013 1 (112,313) (112,312)
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2013
2013 2012
R R
Cash flows from operating activities
Cash generated from operations 16 146,999 110,627
Taxation paid 17 (147,681) (162,277)
Trust distribution 51,623
Interest received 984 360
Net cash from operating activities 302 333
Total cash movement for the year 302 333
Cash at the beginning of the 9,581 9,248
Total cash at the end of the year 6 9,883 9,581
NOTES TO THE SUMMARISED FINANCIAL STATEMENTS FOR TRACKHEDGE PROPRIETARY LIMITED FOR THE YEAR ENDED 31 MARCH 2013
Accounting policies
1. Presentation of the financial statements
The significant accounting policies applied in the preparation of these annual financial statements are set out below. These policies have been consistently applied to all the years
presented, unless otherwise stated. The presentation and disclosures of the summarised financial statements are in accordance with IAS 34.
1.1 Statement of compliance
The audited annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee, the listings requirements of the JSE and in a manner required by the Companies Act, 71 of 2008.
1.2 Basis of accounting and measurement
The annual financial statements have been prepared on an accrual basis of accounting. The measurement basis used is the historical cost basis, except for financial assets and
liabilities held at fair value through profit and loss which have been measured at fair value.
1.3 Functional and presentation currency
The annual financial statements are presented in South African Rand, which is the Company's functional currency. All financial information is presented to the nearest Rand.
1.4 Use of estimates, assumptions and judgements
The preparation of financial information requires the use of estimates and assumptions about future conditions. Use of available information and application of judgement are
inherent in the formation of estimates. Actual results in the future may differ from those current estimates reported. The accounting policies that are deemed critical to the
Company's results and financial position, in terms of the materiality of the items to which the policy is applied, and which involve a high degree of judgement including the use of
assumptions and estimation, are discussed below.
1.4.1 Valuation of financial instruments
The best evidence of fair value is a quoted price in an actively traded market. In the event that the market for a financial instrument is not active, a valuation technique is used. The
majority of valuation techniques employ only observable market data, and so the reliability of the fair value measurement is high.
Valuation techniques used to calculate fair values include comparisons with similar financial instruments for which market observable prices exist, discounted cash flow analysis,
option pricing models and other valuation techniques commonly used by market participants. Valuation techniques incorporate assumptions that other market participants would
use in their valuations, including assumptions about interest rate yield curves, exchange rates, volatilities, and prepayment and default rates. When valuing instruments by
reference to comparable instruments, management takes into account the maturity, structure and rating of the instrument with which the position held is being compared.
The fair value of financial instruments is described in note 20.
1.4.2 Income taxes
There are transactions and calculations for which the ultimate tax treatment is uncertain and cannot be determined until resolution has been reached with the relevant tax
authority. These uncertain tax positions are managed in accordance with the Company's Tax Principal Risk Framework. The Company recognises liabilities for anticipated tax
audit issues based on estimates of whether additional taxes will be due after taking into account external advice, where appropriate.
1.5 Financial instruments
Financial instruments are initially measured at fair value and are subsequently measured on the basis as set out below. Transaction costs of instruments carried at fair value
through profit or loss are recognised immediately through the profit and loss component of the statement of comprehensive income. For other categories of financial instruments,
transaction costs (incremental costs directly attributable to the acquisition, issue or disposal of a financial instrument) and transaction income (i.e. initiation fees) are capitalised to
the initial carrying amount.
Financial instruments are recognised on the date when the Company enters into contractual arrangements with counterparties to purchase or sell the financial instruments.
The Company is required to group financial instruments into classes that are appropriate to the nature of the information disclosed and take into account the characteristics of
those financial instruments. Classes of financial instruments have been determined by referring to the nature and extent of risks arising from the financial instruments and how
these are managed.
The Company generally adopts an approach of not reclassifying financial instruments between different categories subsequent to initial recognition. In exceptional circumstances,
where such reclassifications do occur, the Company will apply the requirements of the IAS 39 amendments for reclassifications together with the IFRS 7 required disclosures.
1.5.1 Financial instruments at fair value through profit or loss
Financial instruments, other than those held for trading, are designated as at fair value through profit and loss, if they meet one or more of the criteria set out below at initial
recognition, and are so designated by management. The Company may designate financial instruments at fair value through profit or loss when the designation results in more
relevant information, as follows:
- It eliminates or significantly reduces valuation or recognition inconsistencies that would arise from measuring financial assets or financial liabilities,
or recognising gains or losses on them, on different bases.
- When groups of financial assets, financial liabilities or combinations thereof are managed, and their performance evaluated, on a fair value basis in accordance with a
documented risk management or investment strategy, and where information about the groups of financial instruments is reported to management on that basis. Under this
criterion, certain private equity and other investments are the main class of financial instruments so designated. The Company has documented risk
management and investment strategies designed to manage such assets at fair value, taking into consideration the relationship of assets to liabilities in a way that
mitigates market risks.
Measurement is initially at fair value, with transaction costs taken directly to the profit and loss component of the statement of comprehensive income. Subsequent to initial
recognition, the fair value is remeasured, and gains and losses from changes therein are recognised in 'fair value adjustment on NewRand Index securities' and 'unrealised gain
on unlisted Investments'. Included in this classification is the 'unlisted investment' and the 'NewRand Index Securities'.
1.5.2 Loans and receivables
Loans and receivables are non derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, loans and
receivables are subsequently measured at amortised cost using the effective interest method, less allowance for impairment. Amortised cost is calculated by taking into account
any transaction costs on acquisition and fees and costs that are an integral part of the effective interest rate. The amortisation is included in „Interest income? which is part of
revenue in the profit and loss component of the statement of comprehensive income. The carrying amount of loans and receivables considered to be impaired on the statement of
financial position is reduced through the use of an appropriate impairment methodology.
Once a loan or receivable has been written down as a result of an impairment loss, interest income is thereafter recognised using the rate of interest used to discount the future
cash flows for the purpose of measuring the impairment loss.
1.5.3 Cash and cash equivalents
For the purposes of the statement of cash flows, cash comprises cash on hand and demand deposits. Cash equivalents comprise highly liquid investments that are convertible
into cash with an insignificant risk of changes in value with original maturities of less than three months. Cash and cash equivalents are measured at amortised cost.
1.5.4 Financial liabilities
Financial liabilities are measured at amortised cost, except for liabilities designated at fair value, which are held at fair value through profit or loss. The fair value of a financial
liability with a demand feature (e.g. a demand deposit) is not less than the amount payable on demand, discounted from the first date that the amount could be required to be paid.
The NewRand Index Securities are held at fair value. Refer to note 1.5.1 for the accounting policy. Financial liabilities measured at amortised cost include trade and other
payables.
1.5.5 Impairment of financial assets at amortised cost
A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is an objective evidence of impairment as a result of one or more events that have
occurred after the initial recognition of the asset (an incurred 'loss event') and that loss event has an impact on the estimated future cash flows of the financial asset or the group
of financial assets that can be reliably estimated.
Evidence of impairment may include indications that the debtor, or a group of debtors, is experiencing significant financial difficulty, default or delinquency in interest or principal
payments, the probability that they will enter bankruptcy or other financial reorganisation and, where observable data indicate that there is a measurable decrease in the estimated
future cash flows, such as changes in arrears or economic conditions that correlate with defaults. If there is objective evidence that an impairment loss has been incurred, the
amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future expected credit
losses that have not yet been incurred) discounted using the asset's original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance
account and the amount of the loss is recognised in profit or loss as 'Credit loss expense'.
Impaired debts, together with the associated allowance, are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been
transferred to the Company. If, in a subsequent period, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment
was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a previous write off is later recovered, the recovery is
credited to profit and loss.
1.5.6 Derecognition of financial assets
A financial asset (or, where applicable, a part of a financial asset or a part of a group of similar financial assets) is derecognised where:
- the rights to receive cash flows from the asset have been discharged, cancelled or have expired; or
- the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under
a pass through arrangement; or
- the Company has transferred its rights to receive cash flows from the asset and either:
- has transferred substantially all of the risks and rewards of the asset; or
- has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
Where the Company has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor
transferred control of the asset, the asset is recognised to the extent of the Company?' continuing involvement in the asset. Continuing involvement that takes the form of a
guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of the consideration that the Company could
be required to repay.
Where continuing involvement takes the form of a written and/or purchased option (including a cash settled option or similar provision) on the transferred asset, the extent of the
Company's continuing involvement is the amount of the transferred asset that the Company may repurchase, except that in the case of a written put option (including a cash
settled option or similar provision) on an asset measured at fair value, the extent of the Company's continuing involvement is limited to the lower of the fair value of the transferred
asset and the option exercise price.
1.5.7 Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. Where an existing financial liability is replaced by another from the
same party on substantially different terms, or the terms of an existing liability are substantially modified (taking into account both quantitative and qualitative factors), such an
exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is
recognised in the profit and loss component of the statement of comprehensive income.
Where the terms of an existing liability are not substantially modified, the liability is not derecognised. Costs incurred on such transactions are treated as an adjustment to the
carrying amount of the liability and are amortised over the remaining term of the modified liability.
1.5.8 Offsetting
Financial instruments are offset and the net amount reported in the statement of financial position when the entity holds a current legally enforceable right to set off the recognised
amounts and has an intention to either settle on a net basis, or realise the asset and settle the liability simultaneously.
1.6 Share capital
Ordinary share capital
Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity.
1.7 Revenue
Revenue is recognised at the fair value of consideration received or receivable to the extent that it is probable that the economic benefits will flow to the Company and the revenue
can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Net interest income
Interest income and expense for all interest bearing financial instruments, except for those held at fair value through profit or loss, are recognised in the statement of
comprehensive income using the effective interest rates of the financial assets or financial liabilities to which they relate.
The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expense over
the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts through the expected life of the financial instrument
or, when appropriate, a shorter period to the net carrying amount on initial recognition. When calculating the effective interest rate, the Company estimates the cash flows
considering all contractual terms of the financial instrument but does not consider future credit losses. The calculation includes all fees and points paid or received between parties
to the contract that are an integral part of the effective interest rate and includes the following:
- Origination fees relating to the creation or acquisition of a financial asset which may include compensation for activities such as evaluating the borrower?s financial condition,
evaluating and recording guarantees, collateral and other security arrangements, negotiating the terms of the instruments, preparing and processing documents and
closing the transaction.
- Origination fees received on issuing financial liabilities measured at amortised cost.
- Commitment fees received by the Company to originate a loan and the commitment fee received are regarded as compensation for an ongoing involvement with
the acquisition of the financial instrument.
1.8 Tax
Current tax
The current tax liability or asset is the expected tax payable or recoverable, using tax rates and tax laws enacted or substantively enacted at the reporting date, and any
adjustment to tax payable in respect of prior years.
The taxation charge in the financial statements for amounts due to fiscal authorities in the various territories in which the Company operates, includes estimates based on a
judgement of the application of law and practice in certain cases to determine the quantification of any liability arising. In arriving at such estimates, management assesses the
relative merits and risks of the tax treatment for similar classes of transactions, taking into account statutory, judicial and regulatory guidance and, where appropriate, external
advice.
2. New standards and interpretations
2.1 Standards and interpretations effective and adopted in the current year
The application of the Company's accounting policies are consistent with those adopted in the prior year, except for those standards and amendments listed below which became
effective in the current year. All other standards and amendments which became effective in the current year were assessed and have no impact on the annual financial
statements.
IFRS 7 Amendments to IFRS 7 – Transfers of financial assets
The amendments are applicable to financial periods beginning on or after 1 July 2011. The amendment requires additional quantitative and qualitative disclosures in respect of
risk exposures arising from transferred financial assets. The amendments include a requirement to disclose by class of asset: the nature, carrying amount and a description of the
risks and rewards of financial assets that have been transferred to another party yet remain on the entity's statement of financial position. Disclosures are also required to enable a
user to understand the amount of any associated liabilities, and the relationship between the financial assets and associated liabilities. Comparative disclosures are not required
for any period beginning before the effective date.
This amendment did not impact the financial performance or position of the Company.
2.2 Standards and interpretations not yet effective and not adopted
A number of new standards, amendments to standards and interpretations issued are not yet effective for the current reporting period and have not been applied in preparing
these annual financial statements. Only those standards, amendments and interpretations which were assessed to be applicable to the Company are discussed below:
IFRS 9 Financial Instruments (IFRS 9)
This standard was initially published in November 2009 as the first step in replacing IAS 39 and contains new requirements for the classification and measurement requirements
for financial assets. The classification and measurement requirements of financial liabilities were added to IFRS 9 in October 2010.
In light of the impairment and hedging components of IFRS 9 not having been finalised, a decision was reached by the IASB on 16 December 2011 to change the effective date to
annual periods beginning on or after 1 January 2015. The IASB decided not to require the restatement of comparative financial statements for the initial application of the
classification and measurement requirement of IFRS 9, but instead to require modified disclosures on transition from the classification and measurement requirements of IAS 39 to
those of IFRS 9.
The transition disclosures (amendments to IFRS 7) depend on when IFRS 9 is adopted and it affects the extent of comparative information required to be disclosed.
This standard is not expected to have a material impact on the Company's annual financial statements
IFRS 10 Consolidated Financial Statements
This standard which is applicable to financial periods beginning on or after 1 January 2013, requires a parent to present consolidated financial statements as those of a single
economic entity, replacing the requirements previously contained in IAS 27 and SIC 12. The standard sets out how to apply the control principle to voting rights, circumstances
involving agency relationships and circumstances when the investor has control over specified assets of the investee. Consolidation principles have remained unchanged and are
now incorporated as part of IFRS 10. The standard is required to be applied retrospectively and will therefore impact the 31 March 2013 and 31 March 2012 comparatives.
It is unlikely that the standard will have a material impact on the company's financial statements.
IAS 27 Separate Financial Statements
IAS 27 (2011), is the amended version of IAS 27 which is applicable to financial periods beginning on or after 1 January 2013. The revised IAS 27 now only deals with the
requirements for separate financial statements, and the requirements for consolidated financial statements are now contained in IFRS 10. The standard requires that when an
entity prepares separate financial statements, investments in subsidiaries, associates and jointly controlled entities are accounted for either at cost, or in accordance with IFRS 9.
The standard also deals with the recognition of dividends, certain group reorganisations and includes a number of disclosure requirements. The standard may be applied to an
earlier accounting period; however this fact must be disclosed.
The impact of this amendment is currently being assessed.
IFRS 12 Disclosure of Interests in Other Entities
This standard which is applicable to financial periods beginning on or after 1 January 2013, requires extensive disclosures relating to an entity's interest in a subsidiary, joint
arrangement, associates, jointly controlled entities and unconsolidated structured entities. Disclosure should enable a user to evaluate the nature of the risks associated with the
interest in these entities and are intended to assist users to understand the effects of an entity's interest in other entities on its financial position, financial performance and cash
flows. The standard is required to be applied retrospectively and will impact the comparative information presented in the 31 March 2014 consolidated financial statements.
The impact of this standard is currently being assessed
IFRS 13 Fair Value Measurement
This standard which is applicable to financial periods beginning on or after 1 January 2013, replaces guidance on fair value measurement in existing IFRS accounting standards
by providing a single source of guidance to prescribe how fair value should be measured. The standard requires (with some exceptions) entities to classify fair value
measurements into a 'fair value hierarchy' based on the nature of the inputs. The standard also requires entities to make various disclosures depending on the nature and level of
the fair value measurement.
The impact of this standard is currently being assessed.
IAS 1 Presentation of Financial Statements
This amendment is applicable to financial periods beginning on or after 1 July 2012. The amendment revises the way other comprehensive income is presented by: preserving the
amendments made to IAS 1 in 2007 which require profit or loss and other comprehensive income to be presented together or as a separate 'statement of profit or loss' and
'statement of comprehensive income'; requiring entities to group items presented in other comprehensive income based on whether they are potentially reclassifiable to profit or
loss or not; and requiring the tax associated with items presented before tax to be shown separately for each of the two groups of other comprehensive income items, without
changing the option to present items of other comprehensive income either before tax or net of tax.
This amendment is not expected to have a material impact on the Company's annual financial statements.
IAS 32 (amendments) (2011)
IAS 32 (amendments) (2011) Offsetting Financial Assets and Financial Liabilities, was issued in December 2011 and is effective for annual periods beginning on or after 1 January
2014. The offsetting requirements in IAS 32 have been retained, such that a financial asset and a financial liability shall be offset and the net amount presented in the statement of
financial position when, and only when, an entity currently 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. The amendment to IAS 32 provides more application guidance on when the criterion for offsetting would be considered to be met.
The amended standard is applicable to financial periods beginning on or after 1 January 2014. An entity shall apply the amendments retrospectively. Earlier application is
permitted. If an entity applies these amendments from an earlier date, it shall disclose that fact and shall also make the disclosures required by Disclosures – Offsetting Financial
Assets and Financial Liabilities (Amendments to IFRS 7) issued in December 2011.
This amendment is not expected to have a material impact on the Scheme's financial statements.
IFRS 7 (amendments) (2011)
IFRS 7 (amendments) (2011) Offsetting Financial Assets and Financial Liabilities, was issued in December 2011 and is effective for annual periods beginning on or after 1
January 2013. The amendments require the disclosures to include information that will enable users of an entity's financial statements to evaluate the effect or potential effect of
netting arrangements, including rights of set off associated with the entity's recognised financial assets and recognised financial liabilities, on the entity's financial position. These
disclosures are intended to facilitate comparison between entities preparing IFRS financial statements and entities preparing financial statements under US GAAP. An entity shall
apply these amendments for annual periods beginning on or after 1 January 2013 and for interim periods within these annual periods. An entity shall provide the disclosures
required by these amendments retrospectively.
The adoption of this amendment is not expected to impact on the results of the Company, but may result in more disclosure than is currently provided in
the annual financial statements
Annual improvements project May 2012
The following improvements was issued in terms of the improvements project in May 2012. It is effective for periods beginning on or after 1 January 2013 and it is to be applied
retrospectively:
Amendments to IAS 1 Presentation of Financial Statements – When an entity provides comparative information that is in excess of the minimum requirements in the current
period, comparative information is required for all amounts reported, including narrative and descriptive information where this is relevant to understanding the current period
financial statements. Where an entity changes accounting policies, or makes retrospective restatements or reclassifications and such changes have a material effect on the
statement of financial position, an opening statement of financial position would be required as at the beginning of the required comparative period but related notes would not be
required.
The adoption of this amendment is not expected to impact on the results of the Company, but may result in more disclosure than is currently provided in the annual financial
statements.
2013 2012
3. Current tax receivable R R
Current tax receivable 140,998 7,068
4. Trade and other receivables
Trackhedge Managers Proprietary Limited 100,011 9,591
Sundry debtors 25 -
100,036 9,591
5. Unlisted investments
The investment in the NewRand Trust is designated at fair value through profit and loss as the investment is managed on a fair value basis and to reduce an accounting mismatch
that would otherwise exist. The market value of the underlying securities in NewRand Trust represents the fair value of the investment.
Proceeds received from the issue of NewRand Index Securities are invested in the NewRand Trust to hedge Trackhedge Proprietary Limited's obligation to the holders of these
securities.
Opening balance - fair value 73,450,695 641,322,370
Fair value adjustments 13,424,446 5,490,117
Creation of securities - 23,938,418
Liquidation of securities - (597,300,210)
Closing balance - fair value 86,875,141 73,450,695
Undistributed income in the NewRand Trust (29,366) 345,703
The undistributed income represents income accrued to the Trust, distributable at the discretion of the NewRand Trust trustees.
6. Cash and cash equivalents
Cash and cash equivalents consist of:
Call account 9,883 9,581
7. Share capital
Authorised
1,000 Ordinary shares of R1 each 1,000 1,000
Issued
1 Ordinary share of R1 each 1 1
Authorised shares
There were no changes to authorised share capital during the current reporting period.
Unissued shares
The unissued shares are under the control of the directors as at the reporting date, in terms of a general authority to allot and issue them on such terms and conditions and at
such times as they deem fit.
Shares issued during the current reporting period
There were no shares issued during the current reporting period.
Shares issued during the prior reporting period
There were no shares issued during the prior reporting period.
All shares issued by the Company were paid in full.
8. Trade and other payables 2013 2012
R R
NewRand Trust - reimbursement for the payment of expenses 363,229 125,797
9. NewRand Index Securities
This liability is in respect of the Company's obligation to deliver the underlying baskets of shares constituting 3,019,966 (2012: 3,019,966) NewRand Index Securities listed on the
exchange traded funds sector of the JSE. The liability is designated at fair value through profit or loss as the liability is managed on a fair value basis.
Investors have a right to redeem NewRand Index Securities for cash with a value of R10 million or more. The Company will match cash redeemers (sellers) with cash subscribers
(buyers) with the net sell/buy position in the secondary market. Investors will be entitled to an amount in cash equal to the proceeds realised by the management company net of
brokerage.
Investors holding blocks of 1 million NewRand Index Securities are also entitled to the delivery of the underlying shares in kind. All trades of smaller value are traded on the
secondary market as NewRand Index Securities on the JSE.
Fair value movements of financial liabilities
The fair value movement is the difference between the carrying value of the liability and the amount Trackhedge Proprietary Limited is contractually required to pay to the holder of
the obligation on demand. The fair value of the liability is based on the value of the underlying securities held by NewRand Trust.
Fair value movements include current year fair value changes of R13,424,447 (2012: R5,490,117) and cumulative fair value changes of R846,177,210 (2012: R832,752,763).
Number of NewRand Index Securities in issue 3,019,966 3,019,966
Value of the NewRand Index Securities 86,875,141 73,450,695
Net asset value per NewRand Index Security, after distributable amounts 28.76 24.51
Change in the fair value of the liability that is attributable to changes in credit risk is Rnil (2012: Rnil).
The constant credit spread approach was applied from the date that the assets and liabilities originated. No changes were noted in the credit risk of the assets and liabilities and
the applicable credit spreads after origin.
Contractual maturity of NewRand Index Securities - undiscounted basis:
All NewRand Index Securities are payable on demand.
Reconciliation of fair value
Opening balance - fair value 73,450,695 641,322,370
Total fair value adjustments 13,424,446 5,490,117
Creations of securities during the year - 23,938,418
Liquidation of securities during the year - (597,300,210)
Closing balance - fair value 86,875,141 73,450,695
Distributions
Index securities will effect quarterly distributions at the discretion of the trustees of the NewRand Trust. All distributions are made out of the income of the NewRand Trust. The
record dates are 5 business days following the third Friday of June, September, December and March.
10. Quarterly review of NewRand net asset value (cents per unit)
NAV
30 June 2011 2,325
30 September 2011 2,290
31 December 2011 2,358
31 March 2012 2,451
30 June 2012 2,484
30 September 2012 2,290
31 December 2012 2,665
31 March 2013 2,938
2,876
11. Creation and liquidation of securities
There were no creations or redemptions in the period under review.
Number of units Number of units
2013 2012
Opening balance 3,019,966 27,019,966
In-specie creations - 1,000,000
In-specie redemptions - (25,000,000)
Closing balance 3,019,966 3,019,966
12. Revenue
Interest income 335 360
Trust distribution - 51,623
Interest Income: SARS 649 -
984 51,983
13. Other Income
Recovery - receivable 20 -
14. Operating expenses
Bank charges 8 27
Write off - receivable - 12,939
8 12,966
15. Taxation
Major components of the tax expense
Current
Local income tax - current period 40,604 168,148
Local income tax - prior period (26,853) -
13,751 168,148
Reconciliation of the tax expense
Reconciliation between applicable tax rate and average effective tax rate.
Applicable tax rate 28.00% 28.00%
Under provision prior year (2,514.00)% 3.63%
Vesting profit effects of tax expense 4,013.00% 0.00%
1,527.00% 31.63%
Taxation was overpaid by R140,998 at the end of the current year. Refer to SARS receivable (note 3).
16. Cash generated from operations
Profit before taxation 996 39,017
Adjustments for:
Unrealised gain on unlisted investments (13,424,447) (5,490,117)
Trust distributions received - (51,623)
Interest received (984) (360)
Fair value adjustment on NewRand Index Securities 13,424,447 5,490,117
Changes in working capital:
Trade and other receivables (90,445) 38,777
Trade and other payables 237,432 84,816
146,999 110,627
17. Taxation Paid
Balance at beginning of the year 7,068 12,939
Current tax for the year recognised in profit or loss (13,751) (168,148)
Balance at end of the year (140,998) (7,068)
(147,681) (162,277)
18. Related parties
Relationships
Ultimate holding company Barclays Bank Plc.
Holding company NewRand Owner Trust
Founder beneficiary NewRand Trust
Key management personnel Trackhedge Manager Proprietary Limited
Trackhedge Proprietary Limited is the founder beneficiary of NewRand Trust. Trackhedge Manager Proprietary Limited manage NewRand Trust as well as Trackhedge Proprietary
Limited. NewRand Trust has entered into a forward sale agreement with Trackhedge Proprietary Limited to deliver the underlying portfolio of shares held by the Trust, consisting of
shares of the constituent companies in the same weighting as they are included in the index. The agreement allows Trackhedge Proprietary Limited's obligation to deliver baskets
of shares to holders to be hedged. Trackhedge Proprietary Limited's holding entity is NewRand Owner Trust, which is establish and domiciled in the Republic of South Africa.
The company does not have key management personnel except for the non?executive director listed in the Directors' Report (refer to detailed annual financial statements). No
transactions took place with the non-executive directors during the year.
Related party balances
Trackhedge Managers Proprietary Limited
Trade and other receivables 100,011 9,591
NewRand Trust
Trade and other payables 363,229 125,797
Related party transactions
NewRand Trust
Trust Distribution - 51,623
All transactions entered into are on the same commercial terms and conditions as in the normal course of business.
19. Directors' emoluments
No emoluments were paid to the directors or any individuals holding a prescribed office during the year.
20. Fair value of financial instruments
The financial instruments consist mainly of an investment in NewRand Trust, bank deposits, NewRand Index Securities and trade and other payables. At 31 March 2013, for all the
below, the carrying amounts approximate the fair values of the respective assets and liabilities.
The table below summarises the carrying amounts and fair values of those financial instruments not held at fair value:
Financial assets held at amortised cost and loans and receivables
Cash and cash equivalents 9,883 9,581
Trade and other receivables 100,036 9,591
Carrying value and approximate fair value 109,919 19,172
Financial liabilities held at amortised cost
Trade and other payables 363,229 125,797
Carrying value and approximate fair value 363,229 125,797
21. Fair value hierarchy disclosures
The table below shows the Company's financial instruments that are recognised and subsequently measured at fair value and are analysed by valuation techniques. The
classification of instruments is based on the lowest level input that is significant to the fair value measurement in its entirety. A description of the nature of the techniques used to
calculate valuations based on observable inputs and valuations based on unobservable inputs is set out in the table below:
2013 Valuations with Valuations based on Valuations based on Total
reference to observable inputs unobservable inputs R
observable prices
Level 1 Level 2 Level 3
R R R
Financial assets designated at fair value through profit and loss
Investment in NewRand Trust - 86,875,141 - 86,875,141
Total financial assets - 86,875,141 - 86,875,141
2013 Valuations with Valuations based on Valuations based on Total
reference observable inputs unobservable inputs R
observable prices
Level 1 Level 2 Level 3
R R R
Financial assets designated at fair value through profit and loss
NewRand Index Securities - 86,875,141 - 86,875,141
Total financial assets - 86,875,141 - 86,875,141
2012 Valuations with Valuations based on Valuations based on Total
reference observable inputs unobservable inputs R
observable prices
Level 1 Level 2 Level 3
R R R
Financial assets designated at fair value through profit and loss
Investment in NewRand Trust - 73,450,695 - 73,450,695
Total financial assets - 73,450,695 - 73,450,695
2012 Valuations with Valuations based on Valuations based on Total
reference to observable inputs unobservable inputs R
observable prices
Level 1 Level 2 Level 3
R R R
Financial assets designated at fair value through profit and loss
NewRand Index Securities - 73,450,695 - 73,450,695
Total financial assets - 73,450,695 - 73,450,695
Valuations based on observable inputs
Valuations based on observable inputs include:
Level 1
Financial instruments valued with reference to unadjusted quoted prices for identical assets or liabilities in active markets where the quoted price is readily available and the price
represents actual and regularly occurring market transactions on an arm's length basis.
An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis
This category includes highly liquid government and other bonds, active listed equities, exchange-traded commodities and exchange-traded derivatives.
Level 2
Financial instruments valued using inputs other than quoted prices as described above for Level 1 but which are observable for the asset or liability, either directly or indirectly,
such as:
- quoted price for similar assets or liabilities in active in an active market;
- quoted price for identical or similar assets or liabilities in inactive markets;
- valuation model using observable inputs; and
- valuation model using inputs derived from/corroborated by observable market data.
The value of the unlisted investment in NewRand Trust is based on the underlying securities held by NewRand Trust.
The value of the NewRand Index securities is linked to the value of the underlying securities held by the NewRand Trust. The valuation is done with reference to the fair value of the
underlying securities in NewRand Trust as market observable inputs.
Level 3
Financial instruments valued using inputs that are not based on observable market data (unobservable data) such as an entity?s own assumptions about assumptions of market
participants in pricing the asset or liability.
22. Risk management
Financial risks
The financial instruments consist mainly of an investment in NewRand Trust, bank deposit, NewRand Index Securities and trade and other payables. The risks arising from
financial instruments to which the entity is exposed are financial risks, which include credit risk, liquidity risk and market risk.
The Company's business involves taking on risks in a targeted manner and managing them professionally. The core functions of the Company?s risk management are to identify
risks for the Company, manage the risk positions and determine capital allocations. The Company regularly reviews its risk management policies and systems to reflect changes in
markets, products and best market practices.
The Company's aim is to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Company's financial performance. The Company
defines risk as the possibility of losses or profits forgone which may be caused by internal or external factors.
Credit risk
Credit risk is the risk of suffering financial loss, should any of the Company's customers, client or market counterparties fail to fulfil their contractual obligations to the Company.
Credit risk for the Company mainly arises from the investment in NewRand Trust, trade and other receivables and cash and cash equivalents.
Collateral
The Company employs a range of policies and practices to mitigate credit risk. Receivables are generally unsecured.
The carrying amount of the financial assets represents that maximum credit exposure. The maximum exposure to credit risk at the reporting period represented below is the worst
case scenario of credit risk exposure.
Financial assets exposed to credit risk at year end were as follows:
Financial assets at fair value through profit and loss 86,875,141 73,450,695
Trade and other receivables 100,036 9,591
Cash and cash equivalents 9,883 9,581
86,985,060 73,469,867
Concentration of risks of financial assets with credit risk exposure:
Industry sectors
Other 100,036 9,591
Financial Services 86,885,024 73,460,276
86,985,060 73,469,867
Impairment losses
The credit quality of all the financial assets that were neither past due nor impaired are as follows:
Neither past due nor impaired 100,036 9,591
The credit quality of all the financial assets that are neither past due nor impaired can be assessed by reference to external credit rating (if available) or past information about
counterparty defaults rates.
Market risk
Market risk is the risk that the Company's earnings or capital, or its ability to meet its objectives, will be adversely affected by changes in the level or volatility of market rates or
prices such as interest rate, foreign exchange rate, equity prices, commodity prices and credit spreads. The Company's market risk management objectives include:
- the protection and enhancement of the statement of financial position and statement of comprehensive income and facilitating business growth within a controlled and
transparent risk management framework.
Interest rate risk
Interest rate risk is the risk that the Company may be exposed to fluctuations in interest rates. The Company's exposure to interest rate risk is not material.
Investment risk
There can be no assurance that the Index Securities will achieve their investment objectives of replicating the price and yield performance of the NewRand Index. The net asset
value of Index Securities will rise and fall as the value of the underlying portfolio fluctuates. The return achieved on Index Securities can be expected to fluctuate in response to
changes in the return achieved by the underlying portfolio.
On a quarterly basis, the Index is adjusted to ensure that the Constituent Companies in the index are the top performing companies. Thus adjustments such as removing a
company that is not performing well or changes in the weighting of the shares occur.
Equity price risk
All the portfolio's underlying investments of the Trust are listed on the JSE. NewRand Index Securities are created with an objective to track the performance of NewRand Index, a
customized index of Rand hedge shares created by Absa Bank Limited and provided and calculated by FTSE and the JSE Limited ("JSE").
Actual market values may be affected by supply and demand and other market factors, however the ability of a holder to switch out of NewRand securities by redeeming them in
specie for one or more baskets of the constituent securities, subject to a minimum of 1 million NewRand Index (RANDI) (1 basket) being delivered, should operate to substantially
avoid or minimise any differential which may otherwise arise between relevant basket and the value at which the NewRand Index securities trade from time to time.
Sensitivity analysis
A 10% increase in the underlying equity investment assets housed in the NewRand Trust at the reporting date would increase Trackhedge (Pty) Ltd's unlisted investment in
NewRand Trust by R8,687,514 (2012: R7,345,070), with a corresponding increase in Trackhedge (Pty) Ltd?s NewRand Index Securities liability amounting to R8,687,514 (2012:
R7,345,070).
A 10% decrease in the underlying equity investment assets housed in the NewRand Trust at the reporting date would decrease Trackhedge (Pty) Ltd's unlisted investment in
NewRand Trust by R8,687,514 (2012: R7,345,070), with a corresponding decrease in Trackhedge (Pty) Ltd's NewRand Index Securities liability amounting to R8,687,514 (2012:
R7,345,070).
Liquidity risk
Liquidity risk results from both the differences between the magnitude of assets and liabilities and the disproportion in their maturities. Liquidity risk is the risk that operations
cannot be funded and financial commitments cannot be met timeously and cost effectively. Liquidity risk management deals with the overall time profile of the current statement of
financial position as well the expected future structure.
Liquidity risk management process
The availability of funding from NewRand Trust ensures that the Company has the ability to fund day-to-day operations. The following are the contractual maturities of financial
liabilities, including estimated interest payments and excluding the impact of netting agreements:
2013 Carrying amount Contractual cash On demand Within 1 year From 1
flows year to 5 years
Trade and other receivable 100,036 100,036 100,036 - -
Cash and cash equivalent 9,883 9,883 9,883 - -
Unlisted investments 86,875,141 86,875,141 86,875,141
NewRand Index Securities (86,875,141) (86,875,141) (86,875,141) - -
Trade and other payables (363,229) (363,229) (363,229) - -
(253,310) (253,310) (253,310) - -
2012 Carrying amount Contractual cash On demand Within 1 year From 1
flows year to 5 years
Trade and other receivable 9,591 9,591 9,591 - -
Cash and cash equivalent 9,581 9,581 9,581 - -
Unlisted investments 73,450,695 73,450,695 73,450,695 - -
NewRand Index Securities (73,450,695) (73,450,695) (73,450,695) - -
Trade and other payables (125,797) (125,797) (125,797) - -
(106,625) (106,625) (106,625) - -
Capital risk management
The Company manages capital based on the relationship between debt and equity. The Company's objectives when managing capital are to safeguard the company's ability to
continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of
capital. In order to maintain the capital structure, the company may adjust the amount of ordinary dividends paid to shareholders. There are no externally imposed capital
requirements on the Company.
Capital consists of:
Share capital 1 1
23. Segment reporting
Trackhedge Proprietary Limited offers only one product, being the NewRand Index securities tracking the performance of a customised index of Rand hedge shares, created by
Absa Capital (a division of Absa Bank Limited) and provided and calculated by FTSE and the JSE Limited ("JSE") with the objective to maximise long term correlation with the
Rand/USD exchange rate. Information regarding the reporting segment is disclosed as currently set out in the financial statements, which is aligned with the monthly management
reporting to the chief decision taker.
24. Events after the reporting period
The directors are currently assessing the entity's intention and ability to continue operating in the foreseeable future. See detailed information in Note 25 Going Concern.
The annual financial statements were approved by the directors on 30 September 2013.
The directors are not aware of any other events after the reporting date and the date of authorisation of these annual financial statements (as defined per IAS 10: Events After The
Reporting Period) that would impact on these annual financial statements.
25. Going concern
The implications of the reduction in the Underlying Portfolio and corresponding Liabilities as set out in the Directors report in Paragraph 11 (refer to detailed annual financial
statements), gives rise to a material uncertainty in the ability of the Company, without causing unnecessary potential losses to Investors, to continue as a going concern. This
may cast significant doubt on the ability of the Company to realise the assets and discharge the liabilities in the ordinary course of business.
Investors should be advised that their investment is physically backed by the Underlying Portfolio. In the event of an orderly winding up of the company the liability to investors
can substantially be met by the sale of the securities in the Underlying Portfolio and is therefore highly unlikely to be prejudicial to the Investors.
Urgent steps are being taken by the Board to explore the best way to protect investors. The financial statements are prepared on the basis of accounting policies applicable to a
going concern. This basis presumes that realisation of assets and liabilities will occur in the normal course of business.
Corporate governance statement
The Company is fully committed to the principles of the Code of Corporate Practices and Conduct (“the Code”) as set out in the King III Report on Corporate Governance.
Audit report
Ernst & Young, Trackhedge (Proprietary) Limited's independent auditor, has audited the annual financial statements of Trackhedge (Proprietary) Limited from which the
summarised results contained in this announcement have been derived, and has expressed an unmodified opinion emphasizing material uncertainty on the Company's ability to
continue as a going concern on the annual financial statements. This has been disclosed in the audit report and the going concern note in the complete set of financial statements.
Their audit report is available for inspection at the Trackhedge's registered office.
The complete set of financial statements as at 31 March 2013 are available on Absa Capital’s website (www.absacapitaletfs.com).
Copies of the full announcement may be requested by emailing etf@absacapital.com
30 September 2013
Sponsor
Absa Bank Limited (acting through its Corporate and Investment Banking division)
Date: 30/09/2013 05:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
