Wrap Text
Abridged Audited Results for the Year Ended 30 June 2013
RMB MidCap 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: 26 June 2012)
Share Code: RMBMID
ISIN: ZAE000164521
ABRIDGED AUDITED RESULTS FOR THE PERIOD 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 MidCap
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 12 April 2008.
The investment objective of the Fund is to track the price and performance yield of the FTSE/JSE Mid Cap
Index (“Mid Cap Index”) on the JSE Limited.
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 (Pty) Limited
board.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
2013
Rand
Assets
Non-current assets
Listed investments held at fair-value-through-profit-
98 285 868
and-loss
Current assets 3 710 119
Trade and other receivables 2 779 925
Cash and cash equivalents 930 194
Total assets 101 995 987
Equity and liabilities
Equity
Net assets attributable to investors 98 253 399
Current liabilities
Trade and other payables 3 742 588
Total equity and liabilities 101 995 987
INCOME STATEMENT
FOR THE PERIOD ENDED 30 JUNE 2013
2013
Rand
Revenue 3 324 728
Dividend income 2 432 143
Interest income on financial instruments designated
874 495
at fair-value-through-profit-or-loss
Interest income on bank account 18 090
Other operating income 3 955 926
Fair value adjustment on financial instruments
4 326 465
designated at fair-value-through-profit-or-loss
Rebalancing profit/(loss) (370 539)
Expenses
Management and administrative expenses (804 268)
Profit before taxation 6 476 386
Taxation -
Profit for the year 6 476 386
STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 30 JUNE 2013
2013
Rand
Profit for the year 6 476 386
Other comprehensive income for the year -
Total comprehensive income for the year 6 476 386
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
Creation of securities 93 926 933 - 93 926 933
Comprehensive income for the period - 6 476 386 6 476 386
Income distributions - (2 149 920) (2 149 920)
Balance as at 30 June 2013 93 926 933 4 326 466 98 253 399
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 30 JUNE 2013
2013
Rand
Cash flow from operating activities 3 112 584
Cash utilised in operations (212 144)
Dividend income 2 432 143
Interest income on bank account 18 090
Interest income on financial instruments designated at
874 495
fair-value–through-profit-or-loss
Cash flow from investing activities (93 959 403)
Purchase of listed investments (93 959 403)
Cash flow from financing activities 91 777 013
Distributions to participatory interest holders (2 149 920)
Creation of fund securities 93 926 933
Net increase in cash and cash equivalents 930 194
Cash and cash equivalents at the end of the
930 194
period
SUMMARISED ACCOUNTING POLICIES
FOR THE PERIOD 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 (“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 securities and futures, 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
listed bid prices at the end of the reporting period, as published in the financial press at the end of the reporting
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 impairments 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 the 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.
Financial liabilities are 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 income from securities lending activities and investment income.
Securities lending fee income
The fees earned for the administration of securities lending activities are accounted for on an accrual basis in
the year in which the services are rendered.
Investment income
Interest income on financial instruments 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. Dividends and interest in respect of listed securities are recognised when the right to receive
payment is established. This is on the “last-day-to-trade” for listed shares and on the “date-of-declaration” for
unlisted shares.
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.
Securities lending
The Fund is authorised to engage in securities lending activities up to 50% of the assets under management.
Collateral is held by the relevant lending units.
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.
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.
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.
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 PERIOD 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 equities
The fair value of listed equities is determined using unadjusted quoted prices. The Fund therefore classifies the
fair value measurement of the listed equities in the Level 1 category on the basis that the fair value of the listed
equities is determined using unadjusted quoted prices.
IFRS 7 Fair value hierarchy
30 June 2013
Type Level 1 Level 2 Level 3
Listed investments
held at fair-value-
through-profit-or-loss 98 285 868 - -
Creation and cancellation of RMB MidCap securities
A total of 18 000 000 Fund securities were issued during the period at a value of R90 990 000. A total of Nil
Fund securities were cancelled during the period at a value of RNil. As at 30 June 2013, an aggregate of
18 000 000 Fund securities were issued by the Fund, with net assets attributable to the investors in an amount
of R99 188 852.
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, based on the market value of the investments of the Fund. A service fee of 50 (fifty)
basis points of the market value of the investments of the Fund has been applied.
Distributions
The Fund effects quarterly distributions made out of income received by the Fund.
2013
Rand
12.21 cents per security
Declared 28 Sep 2012 and paid 09 Oct 2012
217 080
03.10 cents per security
Declared 19 Dec 2012 and paid 07 Jan 2013
557 640
04.11 cents per security
Declared 15 Apr 2013 and paid 22 Apr 2013
739 800
03.53 cents per security
Declared 21 Jun 2013 and paid 02 Jul 2013
635 400
Total distributions 2 149 920
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
Exposure to investment, index, credit, secondary trading, market and operational risks arise in the normal
course of investment activities in listed securities. The Fund’s acceptance of risk is directly attributable to the
risks associated with any investment in equities.
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 portfolio.
The investment policy of the Fund is to track the FTSE/JSE Mid Cap Index (“the Index”) as closely as possible,
by buying only FTSE/JSE Mid Cap securities in the weighting in which they are included in the Index, and
selling only securities which are excluded from the Index from time to time as a result of quarterly Index reviews
or corporate actions, or which are required to be sold to ensure that the portfolio holds FTSE/JSE Mid Cap
securities in the same weighting as they are included in the Index. However, the Fund is also entitled, at its
discretion and only on a temporary basis; to employ such other investment techniques and instruments as will
most effectively give effect to the object or the investment policies of the Fund. The Fund’s portfolio will not be
managed according to traditional methods of active management, which involve buying and selling of securities
based on economic, financial and market analysis and investing judgement. The Fund will not buy or sell
securities for trading purposes or for any purpose other than to track the Index as closely as possible. As a
further objective, the securities held by the Fund will be managed to generate income for the benefit of
investors, for instance, income is generated from scrip lending, which is applied to reduce expenses and the
related tracking error.
The Fund’s portfolio will be adjusted as determined by the stipulations of the JSE’s Index calculation
methodology to conform to changes in the basket of securities comprising the Fund’s portfolio so as to
substantially reflect the composition and weighting of the securities comprising the Index at all times.
It is recorded that the Fund’s ability to replicate the price and yield performance of the Index will be affected by
the costs and expenses incurred by the Fund. Costs and expenses may result in the Index not being replicated
perfectly by the Fund’s portfolio.
The Fund is exposed to the following risks from its use of financial instruments:
• Credit risk;
• Investment risk;
• Index risk;
• Secondary trading 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 transaction failing to meet its
contractual obligations. This could arise primarily from the Fund’s investment and securities lending activities.
In terms of CISCA, the Manager may, subject to the requirements of section 95, lend or offer to lend assets
included in the Fund’s portfolio within the limits or on the conditions determined by the Trust Deed. The trustee
of the Fund gives authority to the Manager to lend or offer to lend securities with a value not exceeding 50% of
the market value of all securities included in the Fund’s portfolio. The Manager has proceeded to engage in
securities lending in respect of the securities held by the Fund on this basis.
In terms of the Trust Deed, the Manager may engage in securities lending under section 85 of CISCA, subject to
the following limits and conditions:
• The securities lending must be beneficial to all investors;
• The Manager may lend or offer to lend securities with a value not exceeding 50 per cent of the market
value of all securities included in the Fund’s portfolio;
• The securities that may be lent to one borrower are limited in accordance with the limits determined by the
Registrar for the inclusion of the money market instruments in a portfolio;
• Collateral security for the securities loaned must have an aggregate value that exceeds the market value
of the securities loaned by not less than five per cent at all times and may only consist of –
• Cash; or
• Other securities; or
• A combination of cash and other securities
• Securities may not be lent for a period longer than 12 months; and
• Securities may not be lent unless subject to a right of recall.
In terms of the securities lending agreements, it is the duty of the agent to take delivery of the collateral assets,
any appropriate instruments of transfer or instrument of title in respect of a service level agreement. Collateral
assets and instruments of transfer of title are held on behalf of, and for the benefit of, the principal as
represented by the Fund.
The portfolio could be exposed to credit risk to the extent that inadequate collateral is held on the underlying
assets. If a borrower fails to perform its obligations, the Fund may be unable to recover the loaned securities.
However, the Manager only engages in securities lending with A-rated financial institutions.
Credit risk is only applicable to the financial assets of the Fund. The credit risk is considered to be low. The
carrying amounts of financial assets represent the maximum credit exposure. None of the Fund’s financial
assets are considered past due or impaired.
The maximum exposure to credit risk at the reporting date was as follows:
2013
Rand
Trade and other receivables 2 779 925
Cash and cash equivalents 930 194
Investment risk
There can be no assurance that the Fund will achieve its investment objectives of replicating the price and yield
performance of the Index.
The following factors could impact negatively on the investment performance of the Fund:
• Certain costs and expenses incurred by the Fund could cause the underlying portfolio to mis-track against
the Index;
• Temporary unavailability of securities in the secondary market or other extraordinary circumstances could
cause deviations from the extract weightings of the Index;
• In circumstances where securities comprising of the Index are suspended from trading or other market
disruptions occur, it may be impossible to rebalance the portfolio of securities held by the Fund and this
may lead to a tracking error; and
• Misinterpretation of information on the calculation of the Index could result in mis-tracking of the Index.
Index risk
There is no assurance that the Index will continue to be calculated and published on the same or similar basis
indefinitely. The Index was created by the JSE Limited as a measure of market performance and not for the
purposes of trading fund index securities. The past performance of the Index is not necessarily a guide to its
future performance.
The Index may be adjusted from time to time as a result of mergers, re-organisations, schemes or arrangement
or other corporate activity involving constituent companies. Any adjustments to the Index will be implemented
as determined from time to time in terms of the relevant Index stipulations, for example, if a constituent
company pays a special dividend.
The adjustments may require the removal of a constituent company from the Index and the substitution thereof
with a new constituent company while at the same time, if necessary, adjusting the base level. The adjustments
to the portfolio will be made in such a way that the portfolio will remain substantially aligned with the Index level
at all times.
Tracking risk
The risk that the Index may not be appropriately tracked is managed in the following manner:
• Check announcements made on the JSE website for any events that may change the Index and
rebalance, if necessary;
• Check corporate actions schedule for any events that may change the Index and rebalance, if necessary;
• Check the positions report versus what theoretically should be held with the ETF trading application and
rebalance, if necessary; and
• During daily net asset value (“NAV”) calculation process, check if the RMB MidCap ex-closing price =
1/1000 of the Mid Cap Index closing level, i.e. do a reasonability check.
Secondary trading risk
There can be no guarantee that the Fund securities will remain listed on the JSE Limited. Despite the presence
of market makers, the liquidity of the Fund securities cannot be guaranteed.
The participatory interests may trade at a discount or premium to their NAV.
There is no guarantee that the Fund participatory interests will remain listed on the JSE Limited.
Any termination of a listing would be subject to the JSE listing requirements.
Operational risk
If shares in the underlying companies are suspended or cease trading for any reason, the suspended shares
will not be delivered to a holder exercising its right to take delivery of the underlying shares until the suspension
on the trading in respect of those shares is lifted. If the computer facilities or other facilities of the JSE Limited
malfunction, calculation and trading in the Fund securities may be suspended for a period of time. Issuers,
redemptions and adjustments to rebalance the underlying portfolio of securities in the Fund could affect the
value of the underlying securities constituting the Index and thereby also impact on the value of the Fund
securities.
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 distributions are calculated and approved by the Manager.
The Fund could also be exposed to liquidity risk in cases where insufficient funds are available to effect the
necessary changes in Index constituents. The need to employ alternative investment techniques would only
arise in the event of a liquidity problem, for example, if it is not possible to acquire certain securities comprising
the Index due to there being no sellers of such securities. The Fund securities are listed instruments; that are
bought and sold on the JSE Limited through a JSE member. The Fund securities can be sold to the Manager,
which is obligated to buy them from the investor. Market makers will attempt to maintain a high degree of
liquidity through continuously offering to buy and sell the Fund securities at prices around 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 the Fund securities from market makers.
Market risk
Market risk exists where significant changes in equity prices will affect the value of the Fund’s financial
instruments. The investment mandates indicate that the Fund’s portfolio is passively managed and as a result
the management of the market risk is not possible. There is no guarantee that the Fund’s portfolio will achieve
its investment objective of perfectly tracking the Index.
The value of Fund securities and distributions payable by the Fund’s portfolio will rise and fall as the capital
values of the underlying securities housed in the Fund and the income flowing there-from fluctuates.
Prospective investors should be prepared for the possibility that they may sustain a loss.
The Fund’s portfolio may not be able to perfectly replicate the performance of the Index because -
• The Fund is liable for certain costs and expenses not taken into account in the calculation of the Index; or
• Certain Index constituents may become temporarily unavailable; or
• Other extraordinary circumstances may result in a deviation from precise Index weightings
Sensitivity analysis
All the Fund’s underlying investments are listed on the JSE Limited. The price of the Fund securities is closely
correlated to the movements in the 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 market value of a Fund security is expected to reflect 1/1000th of the Index level, plus
an amount which reflects a pro-rata portion of any accrued distribution amount within the Fund’s portfolio.
Therefore, a 100 point movement in the Index would result in a R0,10 movement in the NAV per unit of the
Fund. Actual market values may be affected by supply and demand and other market factors, but the ability of
a holder to switch out of the Fund securities by redeeming them in specie for one or more baskets of constituent
securities, subject to a minimum of 1 million Fund securities 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.
Investment in derivatives
The Manager may invest in derivatives from time to time. While an investment in derivatives will only be
employed within the investment restrictions stipulated in the Trust Deed and the Act, some risks may be
associated with investments in these instruments. No significant investments in derivatives were used for the
financial period under review.
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 12:10:00 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 
