Wrap Text
Reviewed Interim Results Ended 30 June 2014 And Appointments Of Executive Director And Company Secretary
JSE Limited
(Registration number 2005/022939/06)
Incorporated in the Republic of South Africa
ISIN code: ZAE000079711
Share code: JSE
JSE LIMITED REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2014 AND APPOINTMENTS OF EXECUTIVE DIRECTOR AND OF COMPANY SECRETARY
The financial results have been reviewed by the Group auditors in accordance with all the applicable requirements of the Companies
Act, 2008, and were prepared under the supervision of the Chief Financial Officer, Aarti Takoordeen CA(SA). The directors take full
responsibility for the preparation of this report.
Commentary
JSE Limited ("JSE" or "Group") delivered a pleasing performance in the six months to 30 June 2014, demonstrating the strength of a
diversified revenue base as strong results from our Issuer Regulation and service divisions countered mixed results and lower traded
values in some of our trading divisions. Group operating revenue rose by 9% to R869 million compared with 2013's strong first half
(H1 2013: R794 million). The JSE is also making good progress with a range of strategic initiatives that will strengthen and diversify our
business further, including the colocation offering, which was launched during H1 2014.
To focus on the strong performers:
- A 27% rise in Issuer Regulation revenue resulted from an increase in capital raising (H1 2014: R86 billion; H1 2013: R34 billion) as
well as new listing activity;
- A 22% rise in Post-Trade Services revenue when measured against the revenue from this area post-rebate in 2013; and
- A 16% rise in Market Data revenue derived from a strong growth in new business.
Equity Market revenue rose 5% during the period off last year's high base. Despite a drop in trading value during the period, the mix
of trade types during the period translated into an average effective rate that delivered the revenue increase.
H1 2014 saw a continued focus on cost management, with operating costs up 4% to R508 million (H1 2013: R488 million):
- Personnel costs increased by 1% to R194 million (H1 2013: R192 million), with staff headcount being contained at 505
(H1 2013: 503). Remuneration capitalised to projects increased marginally (H1 2014: R6 million; H1 2013: R4 million). Normalised
for exceptional amounts and assuming no remuneration had been capitalised to projects, gross remuneration increased by
6.4%. This includes an amount paid on the CEO's retainer in H1 2013, which was not repeated in H1 2014, and the forfeiture of
certain accrued employee benefits by employees who left the JSE during H1 2014;
- Other expenses increased by 6% to R314 million (H1 2013: R296 million). Technology costs, which make up the majority of these
other expenses, increased by 12%, reflecting work on various strategic initiatives; and
- The depreciation charges increased 11% to R49 million (H1 2013: R45 million), mainly reflecting the introduction of depreciation
charges related to the colocation investment and new financed leased assets.
Group earnings before interest and tax (EBIT) are up by 10% to R380 million (H1 2013: R345 million). The earnings per share (EPS)
increased by 14% to 389.4c (2013: 341.9c) and headline earnings per share (HEPS) increased by 17% to 391.2c (2013: 333.2c)
respectively.
The Group generated good operating cashflows from ongoing activities of R486 million during the period (H1 2013: R425 million).
Group capital expenditure was R79 million on our various strategic initiatives and R22 million on business as usual. We continue to
maintain cash on the balance sheet for our capital expenditure, among other things.
During the period under review, the Group entered into commitments to the value of R1.5 billion with three local commercial banks
in order to fulfil the liquidity risk management obligations of JSE Clear (Proprietary) Limited, as a qualified central counterparty in
compliance with CPSS-IOSCO. The commitments are renewable on an annual basis and charges incurred are passed on to the clearing
members.
Strategic and operating performance
As we continue the strategic journey towards our 2017 vision, the focus of 2014 remains on projects that are designed to strengthen
the delivery of the JSE's strategic vision. In particular:
- We successfully launched our colocation centre in H1 2014, allowing clients to place their trading equipment in the JSE data centre
for the fastest access to all JSE markets;
- Phase 2 of the move to a three-day settlement period (T+3) for equities is due to be implemented before the end of H2 2014;
- We have made good progress in our collaboration with National Treasury and industry participants to implement the Government
bond electronic trading technology. The request for indications of interest in providing the necessary trading platform was recently
released;
- The automation of the Market Data division is on track;
- We continue to strengthen our Post-Trade services;
- Progress has been made on the work necessary to implement integrated trading and clearing systems for all our products, with the
initial focus being on Equity Derivatives and Currencies;
- We are closely monitoring and responding to the increasing raft of potential regulatory interventions that touch all aspects of our
business: from how we operate our markets to how we will, in future, be required to capitalise the business we do; and
- We continue to be focused on improving the way we meet the needs of our issuers and investors.
In this vein, we are restructuring the JSE's operating model so as to better integrate our business and to enable us to respond both
faster and more cost efficiently to the competitive threats and opportunities that we anticipate. This will incur one-off costs that are
still to be completely quantified, although we do not expect these costs to be material.
Changes to Directorate and Executive Committee
In 2014, to the date of this announcement, there have been a number of changes to our Board of Directors and Executive Committee:
- Humphrey Borkum retired as Chairman of the JSE on 8 May 2014 after a long and distinguished career in the industry;
- Bobby Johnston retired as a Board member on 10 June 2014 to concentrate on his other interests. Bobby has been a long-standing
member of the JSE community, having also served as Chairman of the JSE when it was an Association of Members;
- Gary Clarke, JSE Group Company Secretary for more than 12 years, announced his resignation on 8 July 2014;
- Graeme Brookes, the JSE's Director of Governance, Risk and Compliance, was appointed as Group Company Secretary with effect from
14 August 2014;
- Leila Fourie, the JSE's Director of Post-Trade and Information Services, was appointed to the JSE Board as an executive director with effect
from 14 August 2014; and
- Donna Oosthuyse, previously the Managing Director and Chief Country Officer of Citi South Africa, joined the JSE Executive as the
Director: Capital Markets on 4 August 2014.
Prospects
The JSE is a largely fixed-cost business. Costs are tightly controlled and the necessary capital investments are made in areas that will
enhance the Group's sustainability, with a number of sizeable capital intensive projects ahead. The Group's revenues are variable
and largely driven by activity on the various markets the Group operates. For this reason, the Board makes no projections regarding
the Group's financial performance in H2 2014, although it does note client sentiment that trade values are likely to drop in line with
declining trade values on international exchanges.
Review conclusion
The consolidated interim financial statements of JSE Limited for the six months ended 30 June 2014 have been reviewed by the
company's auditors, KPMG Inc. In its review report dated 14 August 2014, which is available for inspection at the Company's Registered
Office, KPMG Inc states that its review was conducted in accordance with the International Standard on Review Engagements 2410,
Review of the Interim Information Performed by the Independent Auditor of the Entity, and has expressed an unmodified conclusion
on the consolidated interim financial statements.
The auditor's report does not necessarily report on all of the information contained in this announcement/these financial results.
Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditor's engagement, they
should obtain a copy of the auditor's report together with the accompanying financial information from the issuer's registered office.
Consolidated interim statement of comprehensive income for the six months ended 30 June 2014
JSE Group
Six months ended Year ended
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
Notes R'000 R'000 R'000
Revenue 8 868 757 793 571 1 577 552
Other income 18 537 39 004 76 587
Personnel expenses 9 (194 271) (192 240) (426 678)
Other expenses 10 (313 720) (295 596) (649 779)
Profit before net finance income 379 303 344 739 577 682
Finance income 672 867 438 925 992 304
Finance costs (613 467) (396 156) (874 236)
Net finance income 59 400 42 769 118 068
Share of profit of equity accounted investees
(net of income tax) 18 286 21 869 39 788
Profit before income tax 456 989 409 377 735 538
Income tax expense 11 (124 262) (116 670) (228 910)
Profit for the period 332 727 292 707 506 628
Other comprehensive income
Change in fair value of available-for-sale financial assets 18 232 15 840 49 987
Change in fair value of available-for-sale financial assets
reclassified to profit or loss 1 419 (7 434) (15 875)
Other comprehensive income for the period, net of
income tax 19 651 8 406 34 112
Total comprehensive income for the period 352 378 301 113 540 740
Earnings per share
Basic earnings per share (cents) 12.1 389.4 341.9 592.1
Diluted earnings per share (cents) 12.2 386.1 340.2 588.6
Headline earnings per share (cents) 12.3 391.2 333.2 644.6
Consolidated interim statement of financial position as at 30 June 2014
JSE Group
as at as at
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
Notes R'000 R'000 R'000
Assets
Non-current assets 939 294 884 969 868 074
Property and equipment 181 586 145 944 162 171
Intangible assets 13 284 584 307 180 259 178
Investments in equity accounted investees 140 675 124 250 142 169
Other investments 274 660 230 829 248 786
Loan to the JSE Empowerment Fund Trust 14 316 14 349 14 022
Deferred taxation 43 473 62 417 41 748
Current assets 27 066 558 18 866 155 20 507 267
Trade and other receivables 270 171 214 358 216 692
Income tax receivable 13 952 29 287 17 108
JSE Clear Derivatives Default Fund collateral deposits 505 869 502 914 516 870
Margin and collateral deposits 24 974 282 17 011 956 18 377 645
Cash and cash equivalents 1 302 284 1 107 640 1 378 952
Total assets 28 005 852 19 751 124 21 375 341
Equity and liabilities
Total equity 2 159 877 1 936 148 2 188 466
Share capital 8 541 8 533 8 533
Share premium 63 348 84 678 84 671
Reserves 15 437 467 383 899 431 075
Retained income 1 650 521 1 459 038 1 664 187
Non-current liabilities 152 146 126 916 120 841
Finance lease 10 597 – 11 352
Borrowings 16 593 21 634 19 055
Employee benefits – 5 408 –
Deferred taxation 9 279 4 929 12 324
Operating lease liability 66 676 48 475 57 807
Deferred income 49 001 46 470 20 303
Current liabilities 25 693 829 17 688 060 19 066 034
Trade and other payables 264 787 218 284 214 541
Due to Safex members 1 318 1 256 1 286
Employee benefits 53 442 55 361 62 534
Operating lease liability – 1 203 28
JSE Clear Derivatives Default Fund collateral deposits 400 000 400 000 410 000
Margin and collateral deposits 24 974 282 17 011 956 18 377 645
Total equity and liabilities 28 005 852 19 751 124 21 375 341
Consolidated interim statement of changes in equity for the six months ended 30 June 2014
Non-
Total distri- JSE LTIS
Share Share share butable 2010 Total Retained Total
capital premium capital reserve reserve reserves earnings equity
Group Notes R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Balance at 31 December 2012 8 571 102 858 111 429 336 183 32 719 368 902 1 390 690 1 871 021
Total comprehensive income for the period
Profit for the period – – – – – – 292 707 292 707
Other comprehensive income – – – 8 406 – 8 406 – 8 406
Total comprehensive income for the period – – – 8 406 – 8 406 292 707 301 113
Transactions with owners recognised directly
in equity
Contributions by and distributions
to owners
Allocation 1 – shares vested 16 – 11 108 11 108 – (11 108) (11 108) – –
Distribution from the BESA Guarantee
Fund Trust(1) – – – (1 349) – (1 349) 1 349 –
Dividends paid to owners – – – – – – (217 072) (217 072)
Equity settled share based payment 16 – – – – 10 412 10 412 – 10 412
Transfer of profit from investor
protection funds – – – 8 636 – 8 636 (8 636) –
Sale of treasury shares 8 5 919 5 927 – – – – 5 927
Treasury shares (46) (35 117) (35 163) – – – – (35 163)
Treasury shares – share issue costs – (90) (90) – – – – (90)
Total contributions by and distributions
to owners of the Company recognised
directly in equity (38) (18 180) (18 218) 7 287 (696) 6 591 (224 359) (235 986)
Balance at 30 June 2013 8 533 84 678 93 211 351 876 32 023 383 899 1 459 038 1 936 148
Total comprehensive income for the year
Profit for the year – – – – – – 213 921 213 921
Other comprehensive income – – – 25 706 – 25 706 – 25 706
Total comprehensive income for the year – – – 25 706 – 25 706 213 921 239 627
Transactions with owners recognised
directly in equity
Contributions by and distributions
to owners
Distribution from BESA Guarante
Fund Trust(1) – – – (1 408) – (1 408) 1 408 –
Dividends – – – – – – (19) (19)
Equity settled share based payment 16 – – – – 12 717 12 717 – 12 717
Sale of treasury shares – 7 7 – – – – 7
Transfer of profit from investor
protection funds – – – 10 161 – 10 161 (10 161) –
Treasury shares – share issue costs – (14) (14) – – – – (14)
Total contributions by and distributions to
owners of the Company recognised directly
in equity – (7) (7) 8 753 12 717 21 470 (8 772) 12 691
Balance at 31 December 2013 8 533 84 671 93 204 386 335 44 740 431 075 1 664 187 2 188 466
Total comprehensive income for the period
Profit for the period – – – – – – 332 727 332 727
Other comprehensive income – – – 19 651 – 19 651 – 19 651
Total comprehensive income for the period – – – 19 651 – 19 651 332 727 352 378
Transactions with owners recognised
directly in equity
Contributions by and distributions
to owners
Allocation 1 – shares vested 16 35 11 365 11 400 – (11 400) (11 400) – –
Allocation 2 – shares vested 16 16 10 442 10 458 – (10 458) (10 458) – –
Distribution from the BESA Guarantee
Fund Trust(1) – – – (1 563) – (1 563) 1 563 –
Dividends paid to owners – – – – (347 461) (347 461)
Equity settled share based payment 16 – – – – 9 667 9 667 – 9 667
Transfer of profit from investor
protection funds – – 495 – 495 (495) –
Treasury shares (43) (42 974) 43 017) – – – – (43 017)
Treasury shares – share issue costs – (156) (156) – – – – (156)
Total contributions by and distributions
to owners of the Company recognised
directly in equity 8 (21 323) 21 315) (1 068) (12 191) (13 259) (346 393) (380 967)
Balance at 30 June 2014 8 541 63 348 71 889 404 918 32 549 437 467 1 650 521 2 159 877
Note
(1) The BESA Guarantee Fund Trust Deed makes specific provision for the utilisation of excess funds for the purpose of reducing the risk of claims being made
against the Trust. To this effect, R1.6m (December 2013: R2.8m) (June 2013: R1.3m) before intercompany adjustments was transferred to the JSE Limited for
the defrayment of market regulatory expenditure.
Consolidated interim statement of cash flows for the six months ended 30 June 2014
JSE Group
Six months ended Year ended
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Cash flows from operating activities
Cash generated by operations 486 386 425 236 757 971
Interest received 655 054 424 738 965 042
Interest paid (578 733) (381 792) (850 457)
Dividends received 2 189 1 574 3 946
Taxation paid (125 876) (118 877) (190 871)
Net cash generated by operating activities 439 020 350 879 685 631
Cash flows from investing activities
Proceeds from sale of other investments 21 932 14 116 40 935
Acquisition of other investments (29 571) (14 048) (24 675)
Dividends from equity accounted investees 19 779 17 523 17 523
Investment in JSE Clear Derivatives Default Fund – (500 000) (516 870)
Proceeds from disposal of property and equipment – 60 172
Leasehold improvements (5 621) (32) (32)
Acquisition of intangible assets (46 339) (13 546) (33 384)
Acquisition of property and equipment (50 159) (5 795) (48 079)
Net cash used in investing activities (89 979) (501 722) (564 410)
Cash flows from financing activities
Contributions received from JSE Clear Derivatives Default Fund – 400 000 410 000
Acquisition of treasury shares (43 173) (35 163) (35 252)
Proceeds from sale of treasury shares – 5 934 5 919
Loan repaid (2 462) (2 081) (4 660)
Dividends paid (347 461) (217 091) (217 091)
Net cash (used in)/generated from financing activities (393 096) 151 599 158 916
Net (decrease)/increase in cash and cash equivalents (44 055) 756 280 137
Cash and cash equivalents at 1 January 1 378 952 1 128 776 1 128 776
Effect of exchange rate fluctuations on cash held (32 613) (21 892) (29 961)
Cash and cash equivalents at end of period 1 302 284 1 107 640 1 378 952
Notes to the condensed consolidated interim financial statements for the six months ended 30 June 2014
1 Reporting entity
JSE Limited (the "Company", the "JSE" or the "Exchange") is a company domiciled in the Republic of South Africa. The condensed
consolidated interim financial statements of the Company as at and for the six months ended 30 June 2014 comprise the
Company and its subsidiaries (together referred to as the "Group") and the Group's interests in associates. The JSE is licensed as
an exchange in terms of the Financial Markets Act, 2012.
The Group currently consists of the Company, its subsidiary companies (JSE Clear (Proprietary) Limited, JSE Trustees (Proprietary)
Limited, Nautilus MAP Holdings (Proprietary) Limited, Nautilus MAP Operations (Proprietary) Limited and JSE Clear Derivatives
Default Fund (Proprietary) Limited), structured entities (JSE Guarantee Fund Trust, JSE Derivatives Fidelity Fund Trust and BESA
Guarantee Fund Trust) and its interest in Strate Limited, an associated company.
BESA Limited, BESA Investments (Proprietary) Limited and Bond Clear Limited are dormant and are in the process of deregistration.
The consolidated financial statements of the Group as at and for the year ended 31 December 2013 are available on request
from the Company's registered office at One Exchange Square, Gwen Lane, Sandown, or at www.jse.co.za.
2 Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34, International
Financial Reporting Standards, Interim Financial Reporting and the Financial Reporting Guides issued by the Accounting Practices
Board of SAICA as well as section 29 of the Companies Act (No 71 of 2008). They do not include all of the information required
for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group
as at and for the year ended 31 December 2013.
These condensed consolidated interim financial statements were approved by the Board of Directors on 14 August 2014.
3 Significant accounting policies
All accounting policies applied by the Group in these condensed consolidated interim financial statements are the same as those
applied by the Group in the consolidated financial statements as at and for the year ended 31 December 2013.
4 Comparative figures
Unless otherwise indicated, comparative figures refer to the six months ended 30 June 2013 and the year ended
31 December 2013.
5 Use of estimates and judgements
The preparation of interim financial statements requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual
results may differ from these estimates.
In preparing these condensed consolidated interim financial statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to
the consolidated financial statements as at and for the year ended 31 December 2013.
6 Financial risk management
The Group's financial risk management objectives and policies are consistent with those disclosed in the consolidated financial
statements as at and for the year ended 31 December 2013.
7 Operating segments
Information about reportable segments
Equity and
Cash currency Commodity Interest rate
equities(1) derivatives derivatives products(2) Market data Other(3) Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
For the period ended
30 June 2014
External revenues 547 549 84 093 25 613 32 039 95 431 84 032 868 757
For the period ended
30 June 2013
External revenues 489 901 79 230 24 954 32 540 81 971 84 975 793 571
For the year ended
31 December 2013
External revenues 965 856 155 765 48 750 61 954 176 641 168 586 1 577 552
(1) Comprises equities trading fees, risk management, clearing and settlement fees, membership fees, issuer regulation and back-office services (BDA).
(2) Includes R9.8m (2013: R8.2m) of issuer regulation listing fees relating to the bond market.
(3) Comprises funds management and Strate ad valorem fees and issuer service fees.
8 Revenue Six months ended Year ended
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Back-office services (BDA) 125 252 119 640 237 556
Commodity derivatives fees 25 613 24 954 48 750
Currency derivatives fees 12 361 14 348 23 858
Equity derivatives fees 71 732 64 882 131 907
Equity market fees 205 155 194 092 374 283
Funds management 35 681 32 210 68 379
Interest rate market fees 22 196 24 288 45 954
Issuer regulation 65 842 51 879 109 685
Market data fees 95 431 81 971 176 641
Membership fees 5 828 5 583 11 108
Post-trade services 155 314 126 979 249 224
Total revenue before Strate ad valorem fees 820 405 740 826 1 477 345
Strate ad valorem fees 48 352 52 745 100 207
Total revenue 868 757 793 571 1 577 552
9 Personnel expenses Six months ended Year ended
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Remuneration paid 184 026 180 922 398 432
Gross amount paid 189 914 185 015 411 585
Less: Capitalised on intangible assets (5 888) (4 093) (13 153)
Long-term incentive schemes 10 245 11 318 28 246
194 271 192 240 426 678
10 Other expenses Six months ended Year ended
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Impairment of intangible assets(1) – – (48 138)
Other operating expenses (265 368) (242 851) (491 518)
Strate ad valorem fees (48 352) (52 745) (110 123)
(313 720) (295 596) (649 779)
(1) The impairment loss of R48m in the 2013 financial year relates to the carrying value of the surveillance components of SRP.
11 Income tax expense
The Group's income tax charge of R124m (30 June 2013: R117m and 31 December 2013: R229m) represents an effective tax rate
for the six months ended 30 June 2014 of 27% (for the six months ended 30 June 2013: 28%; for the year ended 31 December 2013: 31%).
The reason for the higher effective tax rate for the year ended 31 December 2013 was the deferred tax impact as a result of
the decision to impair the surveillance portion of SRP.
12 Earnings and headline earnings per share Six months ended Year ended
12.1 Basic earnings per share 30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Profit for the period attributable to ordinary shareholders 332 727 292 707 506 628
Weighted average number of ordinary shares:
Issued ordinary shares at 1 January 86 877 600 86 877 600 86 877 600
Effect of own shares held (JSE LTIS 2010) (1 425 119) (1 258 908) (1 315 623)
Weighted average number of ordinary
shares at 30 June/31 December 85 452 481 85 618 692 85 561 977
Basic earnings per share (cents) 389.4 341.9 592.1
12.2 Diluted earnings per share Six months ended Year ended
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Profit for the period attributable to ordinary
shareholders 332 727 292 707 506 628
Weighted average number of ordinary
shares (diluted):
Weighted average number of ordinary
shares at 30 June/31 December (basic) 85 452 481 85 618 692 85 561 977
Effect of share options in issue 730 001 420 359 514 487
Weighted average number of ordinary
shares (diluted) 86 182 482 86 039 051 86 076 464
Diluted earnings per share (cents) 386.1 340.2 588.6
The average market value of the Exchange's shares for purposes of calculating the dilutive effect of share options was
based on quoted market prices for the period that the options were outstanding.
12.3 Headline earnings per share Six months ended Year ended
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Reconciliation of headline earnings:
Profit for the period attributable to ordinary shareholders 332 727 292 707 506 628
Adjustments are made to the following:
Loss/(Profit) on disposal of property and equipment 128 (27) 27
Gross amount 178 (37) 38
Taxation (50) 10 (11)
Impairment of intangible assets – – 60 795
– Gross amount – – 48 138
– Taxation effect – – 12 657
Net realised losses/(gains) on disposal of available-for-sale 1 419 (7 434) (15 875)
financial assets (no taxation effect)
Headline earnings 334 274 285 246 551 575
Headline earnings per share (cents) 391.2 333.2 644.6
12.4 Diluted headline earnings per share Six months ended Year ended
30 June 31 December
2014 2013 2013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Diluted headline earnings per share (cents) 387.9 331.5 640.8
13 Intangible assets
Included in the intangible assets of R285m (30 June 2013: R259m) are newly developed intangible assets of R46m
(2013: R13.5m), mainly in respect of T+3 and integrated trading and clearing. In H2 2013, the impairment to the carrying value of the
surveillance components of SRP amounted to R48m.
14 Financial instruments
The carrying amount of all financial instruments approximates the fair value.
15 Reserves Six months ended Year ended
30 June 31 December
2014 2013 2 013
(reviewed) (reviewed) (audited)
R'000 R'000 R'000
Strate Limited 10 058 10 058 10 058
Investor protection funds(1) 394 860 341 818 376 277
– BESA Guarantee Fund Trust 103 803 102 362 103 023
– JSE Derivatives Fidelity Fund Trust 147 101 117 814 136 655
– JSE Guarantee Fund Trust 143 956 121 642 136 599
Non-distributable reserves 404 918 351 876 386 335
JSE LTIS 2010 reserve 32 549 32 023 44 740
Total reserves 437 467 383 899 431 075
(1)These funds were established for the purpose of investor protection in the event of a member defaulting in the Equity Derivatives and Bond Markets.
16 Share-based payments
Vesting of Allocation 1
The first award ("Allocation 1") under LTIS 2010 was granted in May 2010, with the following vesting profile:
Tranche 1: 50% of the total award, which vested on 1 May 2013, Tranche 2: 50% of the total award, which vested on 1 May 2014
(during the period under review)
The vesting of Tranche 1 was completed in the prior period. As at 30 June 2014, details of Tranche 2 were as follows:
Corporate
Retention performance Total
shares shares shares
Tranche 2
Original number of Tranche 2 shares awarded in May 2010 163 700 77 750 241 450
Forfeited by leavers to date (30 750) (10 850) (41 600)
Forfeited by good leavers (per LTIS rules) to date (1 167) (2 182) (3 349)
Accelerated for good leavers to date (1 633) (4 368) (6 001)
Tranche 2 shares forfeited for missing corporate
performance targets – (4 219) (4 219)
Tranche 2 shares vested on 1 May 2014 (130 150) (56 131) (186 281)
Tranche 2 shares available for vesting in May 2014 – – –
All available Tranche 2 retention shares (130 150 shares) vested for those participants still in the employ of the JSE on 1 May 2014.
In respect of Tranche 2 corporate performance shares, the Board assessed performance over the four-year vesting term against
the pre-set financial and strategic targets and determined that 93% (2013: 54%) of these Tranche 2 shares should vest for those
participants still in the employ of the JSE on 1 May 2014. The remainder of the Tranche 2 corporate performance shares (being
4 219 shares) was forfeited by participants.
Vesting of Allocation 2
The second award ("Allocation 2") under LTIS 2010 was granted in May 2011 with the following vesting profile:
Tranche 1: 50% of the total award, which vested on 1 May 2014
Tranche 2: 50% of the total award, vesting on 1 May 2015
The vesting of Tranche 1 was completed during the period under review. As at 30 June 2014, details of Tranche 1 were as follows:
Corporate
Retention performance Total
shares shares shares
Tranche 1
Original number of Tranche 1 shares awarded in May 2011 158 750 54 700 213 450
Forfeited by leavers to date (24 200) (15 250) (39 450)
Tranche 1 shares forfeited for missing corporate
performance targets – (11 835) (11 835)
Tranche 1 shares vested on 1 May 2014 (134 550) (27 615) (162 165)
Tranche 1 shares fully vested – – –
All available Tranche 1 retention shares (134 550 shares) vested for those participants still in the employ of the JSE on 1 May 2014.
In respect of Tranche 1 corporate performance shares, the Board assessed performance over the four-year vesting term against
the pre-set financial and strategic targets and determined that 70% of these Tranche 1 shares should vest for those participants
still in the employ of the JSE on 1 May 2014. The remainder of the Tranche 1 corporate performance shares (being 11 835 shares)
was forfeited by participants.
Grant of Allocation 5 share awards during the period under review
At the annual general meeting held on 8 May 2014, shareholders approved two special resolutions authorising the acquisition
of shares for the purposes of awards under the LTIS 2010 scheme as well as the provision of financial assistance to the JSE LTIS
2010 Trust for a period of two years, for the purpose of acquiring such JSE ordinary shares in the open market for allocation to
selected employees in accordance with the rules of LTIS 2010. In accordance with the terms of these resolutions, the Board
approved a fresh annual allocation of shares ("Allocation 5") to selected employees for the 2014 year, and these individual
allocations were all accepted by scheme participants by 23 May 2014. Allocation 5 comprised a total of 422 870 JSE ordinary
shares and these shares were acquired in the open market by 29 May 2014.
Notwithstanding the fair value grant date of 23 May 2014, a charge to profit and loss in respect of Allocation 5 has been brought
to account as from 1 June 2014, based on the materiality principle. Information on Allocation 5 is as follows:
Corporate
performance
shares
Share price at grant date (rands per share) 102.27
Dividend yield 3%
Grant date 23 May 2014
Total number of shares granted 422 870
Vesting profile:
50% of the shares awarded vest on 1 June 2017 211 435
50% of the shares awarded vest on 1 June 2018 211 435
Included in the total number of shares granted of 422 870, a total of 271 010 corporate performance shares has been granted
to members of the JSE's executive committee. No personal performance shares were allocated under Allocation 5.
Notes to the condensed consolidated interim financial statements for the six months ended 30 June 2014
Fair value charge to profit and loss
The profit or loss fair value charge for the period, calculated using the Black-Scholes valuation methodology, in respect of all
allocations granted under LTIS 2010 is as follows:
Six months ended Six months ended
30 June 2014 30 June 2013
Rm Rm
Allocation 1 (granted in May 2010) 0.8 3.3
Allocation 2 (granted in May 2011) 1.4 2.8
Allocation 3 (granted in June 2012) 2.7 3.6
Allocation 4 (granted in May 2013) 4.0 0.7
Allocation 5 (granted in May 2014) 0.7 –
9.6 10.4
17 Contingent liabilities and commitments
17.1 Contingent liabilities
There were no material changes to the contingent liabilities as disclosed in the annual financial statements for
31 December 2013.
17.2 Commitments
Except for the change below, there were no changes to the commitments as disclosed in the annual financial statements
for 31 December 2013. During the period under review, the Group entered into commitments to the value of R1.5bn with
three local commercial banks in order to fulfil the liquidity risk management obligations of JSE Clear (Proprietary) Limited
as a qualified central counterparty, in compliance with CPSS-IOSCO. The commitments are renewable on an annual basis
and charges incurred are passed on to the clearing members.
18 Fair value estimation
The following table analyses recurring fair value measurements for financial assets and financial liabilities. These fair value
measurements are categorised into different levels in the fair value hierarchy based on the inputs to valuation techniques used.
The different levels are defined as follows:
– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2: inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly
or indirectly.
– Level 3: inputs for the asset or liability that are unobservable.
Total
Level 1 Level 2 Level 3 balance
30 June 2014 R'000 R'000 R'000 R'000
Available-for-sale financial assets 274 660 – – 274 660
Total
Level 1 Level 2 Level 3 balance
31 December 2013 R'000 R'000 R'000 R'000
Available-for-sale financial assets 248 786 – – 248 786
Sandton
Thursday, 14 August 2014
One Exchange Square, 2 Gwen Lane, Sandown, South Africa
Private Bag X991174, Sandton 2146, South Africa
Tel: +27 11 520 7000 Fax: +27 11 520 8585
Sponsor
Rand Merchant Bank
(a division of FirstRand Limited)
Date: 14/08/2014 05:05:00 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.
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