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Abridged Audited Results for the year ended 30 June 2015 - RMBMID
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 YEAR ENDED 30 JUNE 2015
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 26 June 2012.
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.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015
2015 2014 2013
Restated Restated
Rand Rand Rand
Assets
Listed investments held at fair value
through profit or loss 124 436 944 114 775 431 98 285 868
Trade and other receivables 120 724 983 581 2 779 925
Cash and cash equivalents 278 957 838 833 930 194
Total assets 124 836 625 116 597 845 101 995 987
Liabilities
Net assets attributable to participatory interest
holders 124 569 591 114 977 267 98 253 399
Trade and other payables 267 034 1 620 578 3 742 588
Total liabilities 124 836 625 116 597 845 101 995 987
INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2015
2015 2014
Restated
Rand Rand
Investment income 13 272 339 20 014 390
Dividend income 3 931 121 2 959 841
Interest income on financial instruments designated - 575 033
at fair value through profit or loss
Interest income on bank account 30 276 22 715
Fair value adjustment on financial instruments 9 310 942 16 456 801
designated at fair value through profit or loss
Other operating income
Other income 165 440 110 482
Expenses
Management and administrative expenses (1 010 455) (915 204)
Profit before taxation 12 427 324 19 209 668
Taxation - -
Profit before amounts attributable to
participatory interest hol 12 427 324 19 209 668
Distributions to participatory interest holders (2 835 000) (2 485 800)
Increase in net assets attributable to participatory
(9 592 324) (16 723 868)
interest holders
Total comprehensive income - -
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2015
2015 2014
Rand Rand
Cash flow from operating activities 2 275 124 (2 394 439)
Cash utilised in operations (1 335 702) (1 130 388)
Dividend received 3 931 121 2 959 841
Interest income on bank account 30 276 22 715
Interest income on financial instruments designated at
fair value through profit or loss - 575 033
Net purchases of listed investments held at fair value
through profit or loss (350 571) (32 762)
Cash flow from financing activities (2 835 000) 2 485 800
Distributions to participatory interest holders (2 835 000) (2 485 800
Net decrease in cash and cash equivalents (559 876) (91 361)
Cash and cash equivalents at the beginning of the
year 838 833 930 194
Cash and cash equivalents at the end of the year 278 957 838 833
SUMMARISED ACCOUNTING POLICIES
FOR THE YEAR ENDED 30 JUNE 2015
The preparation of the audited financial results for the year ended 30 June 2015 was supervised by Richard
Pampel CA (SA), 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.
During the financial year ended 30 June 2015, the Manager decided to change the classification of the net
assets attributable to participatory interest holders. Previously this amount was classified as equity of the Funds.
However, given the mandatory nature of the distributions, the Manager believes that classification as a liability
provides users of the financial statements of the Funds with more relevant information. The change in
presentation brings the presentation of the Funds in line with industry practice. The relevant line items in the
annual financial statements have been restated.
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”), the JSE Listing Requirements for Exchange Traded Funds and
the Collective Investment Schemes Control Act No 45 of 2002.
Financial instruments
Measurement
Financial instruments 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. Transaction
costs on financial instruments at fair value through profit or loss are recognised in profit or loss. For financial
instruments which are not at fair value through profit or loss, transaction costs are included in the initial
measurement of the instrument. 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 closing prices 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 comprise cash on hand, demand deposits and other short-term highly liquid
investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of
changes in value. All balances included in cash and cash equivalents have a maturity date of less than three
months from the date of acquisition.
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.
Trade and other payables
Trade and other payables are initially measured at fair value, and are subsequently measured at amortised cost.
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, being the previous day closing index price, using the
proceeds less any transaction costs.
Offset
Financial assets and financial liabilities are offset when the right to set-off is not contingent on a future event and
is legally enforceable for all counterparties in the normal course of business, as well as in the event of default,
insolvency and bankruptcy then the net amount is reported in the statement of financial position when the Fund
has the intention and ability 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
- Where the Fund neither transfers nor retains substantially all the risks and rewards of ownership of the
financial asset, the Fund shall determine whether it has retained control of the financial asset. In this case:
o if the Fund has not retained control, it shall derecognise the financial asset and recognise separately as
assets or liabilities any rights and obligations created or retained in the transfer; or
o if the Fund has retained control it shall continue to recognise the financial asset to the extent of its
continuing involvement in the financial asset.
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.
Impairment
At each reporting date the Fund assesses all financial assets, other than those at fair value through profit or
loss, to determine whether there is objective evidence that a financial asset or group of financial assets has
been impaired. For amounts due to the Fund, significant financial difficulties of the debtor, probability that the
debtor will enter bankruptcy and default of payments are all considered indicators of impairment. Impairment
losses are calculated as the difference between the assets' carrying amount and the present value of estimated
future cash flows discounted at the financial assets' original effective interest rate. Impairment losses are
recognised in profit or loss. Impairment losses are reversed when an increase in the financial asset's
recoverable amount can be related objectively to an event occurring after the impairment was recognised,
subject to the restriction that the carrying amount of the financial asset at the date that the impairment is
reversed shall not exceed what the carrying amount would have been had the impairment not been recognised.
Participatory interests
The Fund issues one class of participatory interest which is redeemable at the holder's option. Such
participatory interests are classified as financial liabilities. Participatory interests can be put back to the Fund at
any dealing date for cash equal to a proportionate share of the Fund's net asset value attributable to the
participatory interest holders. The participatory interests are carried at the redemption amount that is payable at
the reporting date if the holder exercises the right to put the participatory interests back to the Fund. The
participatory interests are issued and redeemed at the holder's option at prices based on the Fund's net asset
value per participatory interest at the time of issue or redemption. The Fund's net asset value per participatory
interest is calculated by dividing the net assets attributable to the holders of each class of participatory interest
by the total number of outstanding participatory interests for each respective class, in accordance with the
provisions of the Fund's Trust Deed. Net assets attributable to participatory interest holder evidences a residual
interest in the assets of an entity after deducting all of its liabilities. The value of the net assets attributable to
participatory interest holders will vary with the changes in the underlying value of the investments net of
receivables and payables. The total movement in the statement of comprehensive income is transferred to the
net assets attributable to participatory interest holders. 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
participatory interest holders in cash. Distributions payable on redeemable participatory interest are recognised
in the statements of comprehensive income as distributions to participatory interest holders.
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.
Other income
Other income comprises income from securities lending activities.
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 component 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 participatory interest holders.
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.
New standards and interpretations adopted in the current financial period
The following standard was adopted by the Fund in the current financial period:
- IFRS 10 Consolidated Financial Statements (Amendments) provide an exemption to the consolidation
requirements for entities that meet the definition of an investment entity in terms of IFRS 10. If the
exemption is applied, the amendments allow the investment entities to account for investments in
subsidiaries at fair value through profit or loss. The amendments are applicable to the Fund as the Fund
meets the definition of an investment entity. However, at this point the Fund does not have investments
in entities which it controls, therefore the IFRS 10 amendments do not have an effect on the current
financial statements but it could have an effect on future financial statements.
- IAS 32 Financial Instruments Presentation (Amendments) The amendments to IAS 32 Financial
Instruments Presentation clarify the existing requirements relating to the offsetting of financial assets
and financial liabilities. It specifically clarifies that the right to set-off must not be contingent on a future
event and must also be legally enforceable for all counterparties in the normal course of business, as
well as in the event of default, insolvency and bankruptcy. The Fund's interpretation of the offsetting
requirements has always been in line with this and the adoption of the amended standard did not have
any impact on the Fund's annual financial statements.
- IAS 36 Impairment of Assets (Amendments) Amendments to IAS 36 Impairments of Assets remove the
unintended consequences of IFRS 13 Fair Value Measurement on the disclosure required under IAS
36. The amendments reduce the circumstances in which the recoverable amount of the assets or cash-
generating units (CGU) is required to be disclosed. The amendments clarify the disclosures required
and introduces an explicit requirement to disclose the discount rate used in determining the impairment
or impairment reversals when the recoverable amount is determined using a present value technique.
The amendments do not impact the amounts reported in the Fund's annual financial statements.
- IAS 39 Financial Instruments Recognition and Measurement (Amendments) The amendments to IAS 39
Financial Instruments Recognition and Measurement applies to where the novation of derivatives to
central counterparties would result in the discontinuance of hedge accounting. The amendments to this
standard provide relief for the discontinuing of hedge accounting when the novation of a derivative
designated as a hedge instrument meets certain criteria. The amendments have no impact to the Fund
as the Fund has not novated any derivatives used as hedging instruments during the current year or
prior periods.
- Annual Improvements 2010 - 2012 and 2011 - 2013 Cycle As part of its Annual Improvements Project,
the IASB made amendments to a number of accounting standards. The annual improvements for the
2010-2012 and 2011-2013 cycle issued in December 2013 were adopted in the current financial year.
These amendments did not have a significant impact on the Fund’s results nor have they resulted in the
restatement of prior year numbers.
- IAS 24 Related Party (Amendments) The standard is amended to include, as a related party, an entity
that provides key management personnel services to the reporting entity or to the parent of the
reporting entity. These amendments did not have a significant impact on the Fund’s results nor have
they resulted in the restatement of prior year numbers.
- IFRS 13 Fair Value Measurement (Amendments) The amendment clarifies that the portfolio exception
in IFRS 13, which allows an entity to measure the fair value of a group of financial assets and financial
liabilities on a net basis, applies to all contracts (including non-financial contracts) within the scope of
IAS 39 or IFRS 9. These amendments did not have a significant impact on the Fund’s results nor have
they resulted in the restatement of prior year numbers.
SUMMARISED NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
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 2015 30 June 2014
Type Level 1 Level 2 Level 3 Level 1 Level 2 Level 3
Listed investments
held at fair value
through profit or loss 124 436 944 - - 114 775 431 - -
Trade and other receivables, cash and cash equivalents and trade and other payables
No hierarchy disclosure is made for financial assets and liabilities measured at amortised cost where their
carrying value approximates fair value.
Net assets attributable to participatory interest holders
2015 2014
Rand Rand
Balance at the beginning of the year 114 977 267 98 253 399
Increase in net assets attributable to participatory interest holders 9 592 324 16 723 868
Balance at the end of the year 124 569 591 114 977 267
Management and administration expenses
The Manager is entitled to a management fee for the management of the Scheme, as determined by the
Manager from time to time, based on the market value of the investments of the Fund. A management 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.
2015 2014
Rand Rand
2.59 cents per participatory interest (2014: 2.57 cents per
participatory interest)
Declared 26 Sep 2014 and paid 01 Oct 2014
466 200 462 600
(2014: Declared 27 Sep 2013 and paid 07 Oct 2013)
4.36 cents per participatory interest (2014: 3.58 cents per
participatory interest)
Declared 24 Dec 2014 and paid 30 Dec 2014
784 800 644 400
(2013: Declared 03 Jan 2014 and paid 13 Jan 2014)
4.27 cents per participatory interest (2014: 4.45 cents per
participatory interest)
Declared 30 Mar 2015 and paid 01 Apr 2015
768 600 801 000
(2014: Declared 28 Mar 2014 and paid 08 Apr 2014)
4.53 cents per participatory interest (2014: 3.21 cents per
participatory interest)
Declared 26 Jun 2015 and paid 30 Jun 2015
815 400 577 800
(2014: Declared 27 Jun 2014 and paid 07 Jul 2014)
Total distributions 2 835 000 2 485 800
Taxation
Any taxable income realised during the year, has been distributed to the participatory interest holders of the
Fund participatory interests. As a result, both income and capital gains are taxed in the hands of the
participatory interest holders.
Risk management
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 securities.
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 quarterly basis.
Daily pricing of the Fund is publicly available.
Management monitors compliance in terms of the CISCA requirements and reports are submitted to the
Financial Services Board (“FSB”) on a quarterly basis. Daily pricing of the Fund is publicly available.
The Manager’s Audit Committee oversees management’s compliance with the Fund’s risk management
framework in relation to the risks faced by the Fund.
The 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
participatory interest holders, 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;
- Tracking 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.
Credit risk is considered to be low. The bank balance is held at Standard Chartered, which is rated AAA by
Standard & Poor.
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 participatory interest holders;
- 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 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.
The maximum exposure to credit risk at the reporting date was as follows:
2015 2014
Rand Rand
Trade and other receivables 120 724 983 581
Cash and cash equivalents 278 957 838 833
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.
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.
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 participatory interests will remain listed on the JSE. Any termination of
a listing would be subject to the JSE listing requirements. Despite the presence of market makers, the liquidity
of the Fund participatory interests cannot be guaranteed.
The participatory interests may trade at a discount or premium to their NAV.
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 participatory interest 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 participatory interests may be suspended for
a period of time. Operational risk arises in rebalancing the underlying portfolio of securities in the Fund to the
underlying securities constituting the Index, thereby impacting the value of the Fund's securities and in the
determination of the distributions around distribution dates in order to minimise tracking error. The Manager
purely executes and administers trades. Daily participatory interest reconciliations are prepared. Weekly
reconciliations are prepared between the Fund administrators and the custodian. The Manager reviews all the
reconciliations performed with necessary follow ups. A reconciliation is prepared and reviewed monthly by the
Manager and is considered the most appropriate control for internal risk management. Assets are held in
custody at The Standard Chartered Bank Trades are all in listed equity instruments.
Liquidity risk
Liquidity risk is the risk that the Fund will not be able to meet its financial obligations towards participatory
interest holders when they fall due. The approach to managing liquidity risk is to ensure that the Fund would be
able to pay suitable distributions to participatory interest holders 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 participatory interests are listed instruments; that are bought and sold on the JSE Limited through a JSE
member. The participatory interest holders may exchange participatory interests for the underlying assets
which the participatory interests represent. The participatory interest holders may sell their participatory interests
on the JSE. 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 participatory interest holder will be able to buy or sell
the Fund participatory interests from market makers.
Market risk
Market risk exists where significant changes in security 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 participatory interest holders 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 participatory interest
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 participatory interests.
At any point in time, the market value of a Fund participatory interest 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
participatory interest of the Fund. Actual market values may be affected by supply and demand and other
market factors, but the ability of a participatory interest holder to switch out of the Fund participatory interest by
redeeming them in specie for one or more baskets of constituent securities, subject to a minimum of 1 million
Fund participatory interests being delivered, should operate to substantially avoid or minimise any differential
which may otherwise arise between the relevant basket and/or Index level and the value at which the Fund
participatory interests 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
13 November 2015
Sponsor
Bridge Capital Advisors Proprietary Limited
Trustee
Standard Chartered Bank Johannesburg Branch
Managers
RMB CIS Manco Proprietary Limited
Auditors
PricewaterhouseCoopers Incorporated
Date: 13/11/2015 09:00:00 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
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