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Summarised consolidated annual results and cash dividend declaration for the year ended 31 December 2016
JSE Limited (Incorporated in the Republic of South Africa)
(Registration number: 2005/022939/06)
Share code: JSE ISIN: ZAE000079711
Summarised consolidated annual results and
cash dividend declaration
FOR THE YEAR ENDED 31 DECEMBER 2016
Responsibility for annual results
The preparation of these annual results has been supervised by the chief financial officer, Aarti Takoordeen CA(SA), in terms of section 29(1)(e)
of the Companies Act. This report is extracted from the audited information, but is not itself audited. The directors take full responsibility for the
preparation of this report and warrant that the financial information has been correctly extracted from the underlying audited annual financial
statements.
COMMENTARY
We are pleased to report that the JSE Group earnings after tax grew by 2% to R920 million (2015: R899 million). This was achieved against the
following backdrop:
- South Africa navigated a particularly noisy socio-economic environment;
- Key global markets experienced socio-economic upheavals;
- The JSE listed ABInBev SA/NV (the world's largest brewer), Hammerson plc (one of the UK's leading real estate investment trusts (REITs) and
7 AltX listings, among 18 new listings;
- The JSE moved to T+3 equity settlement with zero failed trades to date (something for which we know of no international precedent);
- We upgraded our equity trading engine and implemented new large order functionality to allow clients to execute large orders with lower
market impact;
- We reduced certain BDA and equity trading fees considerably;
- Liquidity on the local register grew to nearly 80%;
- Real traction has been gained in implementing the electronic trading platform for government bonds;
- Value traded grew in almost all the derivative markets;
- We launched new initiatives to support the development of our black brokers to facilitate the trading of BEE schemes;
- We invested R205 million in capex to enable us to deliver faster, more reliable systems to our clients; and
- New exchange licences have been granted in South Africa.
Operating revenue rose by 10% to R2.3 billion (2015: R2.1 billion). Group earnings before interest and tax (EBIT) decreased by 5% to R975 million
(2015: R1 billion) following the impact of price reductions, forex movement and cost growth. Although EBIT declined, the positive contribution
from higher finance income and a higher contribution from Strate (the Group's equity accounted investee) supported net profit after tax (NPAT)
growth for 2016.
Earnings per share (EPS) and headline earnings per share (HEPS) were at 1 074.8 cents (up 2%) and 1 063.2 cents (up 4%) respectively.
Revenue
Operating revenue grew despite higher year-on-year fee reductions of R34 million (2015: R18 million) in Back-Office Services (BDA) and the
impact of the R30 million (2015: R0 million) elimination of charges for certain report-only trades in 2016. The following contributions to operating
revenue are worth noting:
- The Primary Market recorded a 2% increase in revenue to R164 million (2015: R161 million) as a result of equity listing fees being brought in
line with global peers;
- Equity Market billable value traded grew by 18%, contributing to an 11% increase in cash equities trading revenue to R555 million (2015: R501
million). The revenue reflected is net of the fees eliminated for certain report-only trades (R30 million);
- BDA revenue grew by 2% to R316 million (2015: R311 million) owing to increased number of transactions. The revenue reflected is net of fee
reductions of R34 million;
- The Equity Derivatives Market value traded increased by 4%, resulting in a 2% increase in revenue to R177 million (2015: R173 million);
- Currency Derivatives Market revenue increased by 12% to R38 million (2015: R34 million) owing to the increase in the number of contracts
traded (up 7%);
- Interest Rate Market bond nominal value traded increased by 22%, resulting in a 20% increase in revenue to R60 million (2015: R50 million).
This was on the back of two SARB Monetary Policy Committee repo rate hikes in 2016 and continued expectations that the US Federal
Reserve would hike interest rates;
- Commodity derivatives revenue declined by 4% to R70 million (2015: R73 million) owing to a 2% drop in commodity derivatives contracts.
2016 was a tough year for the grains sector, as the drought significantly reduced the available deliverable supply of grains, negatively
impacting trading volumes;
- Post-Trade Services grew by 16% to R413 million (2015: R357 million) following the increase in equity billable value traded; and
- Information Services, which includes Market Data, grew revenue by 22% to R298 million (2015: R245 million) because of new business, new
clients, new products, colocation and the impact of forex gains.
Other income
Year-on year Group revenue growth was negatively impacted by a R14 million forex loss (2015: R83 million forex gain) on foreign denominated assets.
Operating expenditure
The Group's total operating expenses increased by 12% to R1.4 billion (2015: R1.3 billion) following higher technology investment, staff costs and
expenses to support our ecosystem.
Personnel costs increased by 14% (R69 million) to R565 million (2015: R496 million). This is made up as follows:
- Gross remuneration per employee increased by 7% and average headcount increased by 1%. This, together with the impact of the change
in the mix of staff, resulted in a net 11% increase in the payroll bill or an increase of 8 percentage points. Headcount at year-end was
483 (2015: 506).
- The accounting impact for the long-term incentive scheme (LTIS) increased by R13 million to R43 million (2015: R30 million), contributing
3 percentage points to the growth. This amount includes a R4 million accelerated recognition for good leavers.
- Retention payments amounting to R9 million (2015: R0 million), contributed 2 percentage points to growth.
- The discretionary reward pool increased to R88.9 million (representing 9.7% of NPAT) from R85.9 million in 2015 (representing 9.6% of 2015
NPAT). This R3 million increase in the reward pool contributed 1 percentage point to the growth in personnel costs.
- Remuneration capitalised to projects increased by R1 million to R19 million (2015: R18 million) as work on strategic projects continues.
Technology costs increased by 20% or R48 million to R283 million (2015: R235 million) as we maintained our technology investments to ensure
robust product and service delivery to our clients.
General expenses increased by 9% to R463 million (2015: R425 million).
Depreciation was largely flat at R99 million (2015: R100 million).
Robust balance sheet
We generated R976 million (2015: R888 million) and ended the year with a robust balance sheet, including R2 billion (2015: R1.9 billion) in cash,
owing to strong working capital management.
We invested R205 million in capex to enable us to deliver more reliable systems.
The Board believes that the JSE is appropriately capitalised, given the nature of the risks we currently face and given the uncertain nature of
future regulatory capital requirements.
Prospects
Despite the difficult economic environment in which, for the first time, we expect to see local licensed exchange competitors, we are clear about
our 2017 priorities and hence the issues that we need to tackle to achieve our strategy and grow this business sustainably.
The JSE is a largely fixed-cost business. Therefore we will maintain our focus on costs, while making the necessary capital investments in areas
that will enhance the Group's sustainability and diversify revenue.
Our revenues are variable and largely driven by activity on the various markets that we operate. For this reason, the Board makes no projections
regarding the Group's financial performance in 2017.
REGULATION
South African financial sector policy makers and regulators have guided the Financial Sector Regulation Bill, also known as the Twin Peaks
Bill, through the Standing Committee on Finance in Parliament. The Regulations primarily provide for the regulation of the over-the-counter
derivatives market but include the governance, capital requirements and risk requirements for market infrastructures (exchanges, clearing
houses, central counterparties, central depositories and trade repositories). This Bill will impact both how the JSE is regulated and the cost of
operating in a regulated environment. The JSE is ready to meet the new regulatory capital requirements and is exploring opportunities to provide
products and services to give capital relief to its clients.
ACCOLADES
South Africa's overall rating in the World Economic Forum Global Competitiveness Index improved in the 2016-2017 rankings, to 47th from 49th
last year and from 52nd in 2012-2013. The financial sector and corporate governance continue to be highlights for South Africa and we have top
three global rankings in the following categories: strength of auditing and reporting standards; protection of minority shareholders' rights; and
financing through the local equity market. We are number two in financial services meeting business needs and soundness of banks, as well as
number three in the efficacy of corporate boards and the regulation of securities exchanges. These accolades demonstrate how relevant and
competitive our financial sector remains.
Changes to directorate during the period under review
In 2016, there was the following change to our Board:
- Dr Leila Fourie, director of Post-Trade and Information Services, resigned with effect from 18 July 2016 following her emigration.
In 2016, there were a number of changes to our Executive Committee:
- Dr Alicia Greenwood was appointed with effect from 1 February 2016 as director of Post-Trade Services;
- Leanne Parsons was appointed with effect from 1 July 2016 as director of Information Services;
- Tswantsho Matsena was appointed with effect from 1 July 2016 as director of Trading and Market Services; and
- Donald Khumalo was appointed with effect from 1 November 2016 as director of Human Resources.
Declaration of ordinary dividend
The Board has decided to declare an ordinary dividend for the year ended December 2016 at 560 cents per ordinary share (2015: 520 cents
ordinary; 105 cents special). We aim for growth in the nominal value of the ordinary dividend over time. Accordingly, notice is hereby given that
the directors have declared the following:
Dividend Annual gross amount Withholding tax % Net amount
Ordinary 560 cents 20 448 cents
The dividend has been declared from retained earnings. A dividend withholding tax of 20% will be applicable to all shareholders who are
not exempt. The dividends are payable to shareholders recorded in the register of members of the Company at the close of business on
24 March 2017.
In compliance with the Companies Act, the directors of the JSE confirm that the Company will satisfy the solvency and liquidity test immediately
after completion of the dividend distribution. In compliance with the requirements of Strate, the following salient dates for the payment of the
ordinary dividend are applicable:
Dividend paid in year in respect of financial year ended 31 December 2016 31 December 2015
Ordinary dividend per share 560 cents 520 cents
Special dividend per share – 105 cents
Rand value R487 million R543 million
Declaration date Tues, 28 February 2017 Thur, 25 February 2016
Last date to trade JSE shares cum dividend Mon, 20 March 2017 Fri, 11 March 2016
JSE shares commence trading ex-dividend Wed, 22 March 2017 Mon, 14 March 2016
Record date for purposes of determining the registered holders of JSE shares to
participate in the dividend at close of business on Fri, 24 March 2017 Fri, 18 March 2016
Date of payment of dividend Mon, 27 March 2017 Tue, 22 March 2016
Share certificates may not be dematerialised or rematerialised from Wednesday, 22 March 2017 to Friday, 24 March 2017, both days inclusive.
On 27 March 2017, the dividend will be electronically transferred to the bank accounts of certificated shareholders who use this facility.
In respect of those who do not use this facility, cheques dated 27 March 2017 will be posted on or about that date. The accounts of those
shareholders who have dematerialised their shares (which are held at their central securities depository participant or broker) will be credited on
27 March 2017.
The issued share capital of the Company as at the declaration date was 86 877 600. The tax number of the Company is 9313008840.
Notice of annual general meeting
Notice is hereby given that the twelfth annual general meeting (AGM) of shareholders of the JSE will be held at the JSE on 18 May 2017, at
16:00, to transact the business as stated in the AGM notice forming part of the annual financial statements. The AGM notice includes the
proxy form.
Only persons physically present at the meeting or represented by a valid proxy will be entitled to cast a vote on any matter put to a vote of
shareholders.
Salient dates for 2017 AGM
Record date to determine which shareholders are entitled to receive the notice of AGM 17 March 2017
Last day to trade in order to be eligible to attend and vote at the annual general meeting 9 May 2017
Record date to determine which shareholders are entitled to attend and vote at the AGM 12 May 2017
Forms of proxy for the annual general meeting to be lodged by 16:00* 16 May 2017
*Any proxies not lodged by this time must be handed to the chairperson of the AGM immediately prior to the AGM.
Appreciation
This has been a challenging year, but the threats and opportunities we encountered in 2016 have renewed our focus and energised our business.
We believe this focus and energy will be critical to establishing our long-term sustainability.
We would like to thank all our stakeholders for their interaction with us and with the JSE team. We look forward to continuing our work in this
regard.
Approval of financial statements
The consolidated and separate annual financial statements of the JSE Limited, as identified in the first paragraph, were approved by the Board of
directors on 28 February 2017 and signed by:
N Nyembezi-Heita
Chairman
N Newton-King
Chief Executive Officer
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 8584
Consolidated statement of comprehensive income
For the year ended 31 December 2016
Group
2016 2015
Notes R'000 R'000
Revenue 8 2 338 796 2 133 548
Other income 46 402 145 887
Personnel expenses 9 (564 996) (495 759)
Other expenses 10 (845 144) (760 920)
Profit from operating activities 975 058 1 022 756
Finance income 3 249 286 2 133 136
Finance costs (3 035 497) (1 967 342)
Net finance income 213 789 165 794
Share of profit of equity-accounted investee (net of income tax) 59 066 46 568
Profit before income tax 1 247 913 1 235 118
Income tax expense 11 (328 211) (335 640)
Profit for the year 919 702 899 478
Other comprehensive income
Items that are or may be reclassified to profit or loss
Net change in fair value of available-for-sale financial assets (22 331) 24 191
Net change in fair value of available-for-sale financial assets reclassified to profit or loss (16 328) (20 644)
Other comprehensive income for the year, net of income tax (38 659) 3 547
Total comprehensive income for the year 881 043 903 025
Earnings per share
Basic earnings per share (cents) 12.1 1 074.8 1 051.0
Diluted earnings per share (cents) 12.2 1 062.1 1 040.3
Other earnings
Headline earnings per share (cents) 12.3 1 063.2 1 026.3
Diluted headline earnings per share (cents) 12.4 1 050.7 1 015.8
Consolidated statement of financial position
As at 31 December 2016
Group
2016 2015
Notes R'000 R'000
ASSETS
Non-current assets 1 244 388 1 115 895
Property and equipment 173 047 165 073
Intangible assets 13 452 039 358 700
Investment in equity-accounted investee 223 151 187 030
Other investments 293 470 312 564
Loan to the JSE Empowerment Fund Trust 25 098 25 271
Deferred taxation 77 583 67 257
Current assets 44 713 700 37 462 906
Trade and other receivables 555 091 466 930
Income tax receivable 1 064 594
JSE Clear Derivatives Default Fund collateral deposit 500 000 500 000
Margin deposits 41 538 835 34 447 066
Collateral deposits 23 926 140 687
Cash and cash equivalents 2 094 784 1 907 629
Total assets 45 958 088 38 578 801
EQUITY AND LIABILITIES
Total equity 3 269 531 2 956 152
Stated capital 26 693 66 507
Reserves 475 700 478 360
Retained earnings 2 767 138 2 411 285
Non-current liabilities 137 391 126 464
Employee benefits 8 796 10 845
Due to Safex members 1 347 1 347
Deferred taxation 17 771 13 620
Operating lease liability 97 287 87 435
Deferred income 12 190 13 217
Current liabilities 42 551 166 35 496 185
Trade and other payables 434 442 339 561
Income tax payable – 32 713
Employee benefits 153 963 136 158
JSE Clear Derivatives Default Fund collateral contribution 400 000 400 000
Margin deposits 41 538 835 34 447 066
Collateral deposits 23 926 140 687
Total equity and liabilities 45 958 088 38 578 801
Consolidated statement of changes in equity
For the year ended 31 December 2016
Share-based
Stated payment Total Retained Total
capital NDR reserve reserves earnings equity
Group R'000 R'000 R'000 R'000 R'000 R'000
Balance at 1 January 2015 71 889 405 551 43 937 449 488 1 952 617 2 473 994
Profit for the year – – – – 899 478 899 478
Other comprehensive income – 3 547 – 3 547 – 3 547
Total comprehensive income for the year – 3 547 – 3 547 899 478 903 025
LTIS Allocation 2 – shares vested 8 457 – (8 457) (8 457) – –
LTIS Allocation 3 – shares vested 12 177 – (12 177) (12 177) – –
Distribution from the BESA Guarantee Fund Trust(1) – (3 591) – (3 591) 3 591 –
Dividends paid to owners – – – – (416 516) (416 516)
Equity-settled share-based payment – – 21 665 21 665 – 21 665
Transfer of profit from investor protection funds – 27 885 – 27 885 (27 885) –
Treasury shares (25 802) – – – – (25 802)
Treasury shares – share issue costs (214) – – – – (214)
Total contributions by and distributions to owners
of the Company recognised directly in equity (5 382) 24 294 1 031 25 325 (440 810) (420 867)
Balance at 31 December 2015 66 507 433 392 44 968 478 360 2 411 285 2 956 152
Profit for the year – – – – 919 702 919 702
Other comprehensive income – (38 659) – (38 659) – (38 659)
Total comprehensive income for the year – (38 659) – (38 659) 919 702 881 043
LTIS Allocation 3 – shares vested 10 288 – (10 288) (10 288) – –
LTIS Allocation 4 – shares vested 15 636 – (15 636) (15 636) – –
Distribution from the BESA Guarantee Fund Trust(1) – (4 422) – (4 422) 4 422 –
Dividends paid to owners – – – – (542 658) (542 658)
Equity-settled share-based payment – – 40 732 40 732 – 40 732
Transfer of profit from investor protection funds – 25 613 – 25 613 (25 613) –
Treasury shares (65 281) – – – – (65 281)
Treasury shares – share issue costs (457) – – – – (457)
Total contributions by and distributions to owners
of the Company recognised directly in equity (39 814) 21 191 14 808 35 999 (563 849) (567 664)
Balance at 31 December 2016 26 693 415 924 59 776 475 700 2 767 138 3 269 531
(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, R4.4 million (December 2015: R3.6 million) before intercompany adjustments was transferred to JSE Limited to
defray market regulatory expenditure.
Consolidated statement of cash flows
For the year ended 31 December 2016
Group
2016 2015
R'000 R'000
Cash flows from operating activities
Cash generated by operations 1 136 998 1 058 178
Interest received 3 151 306 2 081 875
Interest paid (2 948 179) (1 919 176)
Dividends received 3 546 6 455
Taxation paid (367 569) (339 029)
Net cash generated by operating activities 976 102 888 303
Cash flows from investing activities
Proceeds on sale of other investments 77 408 74 090
Acquisition of other investments (80 648) (69 712)
Dividends from equity-accounted investee 22 945 18 823
Proceeds from disposal of property and equipment 310 759
Leasehold improvements (5 076) (893)
Acquisition of intangible assets (145 600) (123 594)
Acquisition of property and equipment (49 890) (54 875)
Net cash used in investing activities (180 551) (155 402)
Cash flows from financing activities
Proceeds from sale of treasury shares – 13 969
Loan repaid – (13 977)
Acquisition of treasury shares (65 738) (39 986)
Dividends paid (542 658) (416 516)
Net cash used in financing activities (608 396) (456 510)
Net increase in cash and cash equivalents 187 155 276 391
Cash and cash equivalents at 1 January 1 907 629 1 631 238
Cash and cash equivalents at 31 December 2016 2 094 784 1 907 629
Selected notes to the consolidated financial statements
For the year ended 31 December 2016
1. Reporting entity
JSE Limited (the "JSE" or the "Company") is a company domiciled in South Africa. The registration number is 2005/022939/06. The JSE is
licensed as an exchange in terms of the Financial Markets Act, No. 19 of 2012. The JSE has the following main lines of business: Capital
Markets, Trading and Market Services, Information Services and Post-Trade Services. The address of the Company's registered office is One
Exchange Square, 2 Gwen Lane, Sandown. The consolidated financial statements of the Company as at and for the year ended 31 December
2016 comprise the Company and its subsidiaries and controlled structured entities (collectively referred to as the "Group" and individually
as "Group entities") and reflect the Group's interest in associates.
2. Basis of preparation
Statement of compliance
The summary consolidated financial statements are prepared in accordance with the requirements of the JSE Listings Requirements, and the
the Companies Act applicable to summary financial statements. The Listings Requirements require such reports to be prepared in accordance
with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting. The accounting
policies applied in the preparation of the consolidated financial statements, from which the summary consolidated financial statements were
derived, are consistent with those applied in the preparation of the previous period's consolidated annual financial statements.
3. Changes in accounting policies
All accounting policies applied by the Group in these summarised consolidated financial statements are in terms of IFRS and are the same
as those applied by the Group in its consolidated financial statements as at and for the year ended 31 December 2016.
4. Comparative figures
Unless otherwise indicated, comparative figures refer to the 12 months ended December 2015.
5. Use of estimates and judgements
The preparation of financial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in
which the estimates are revised and in any future periods affected.
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 2016.
7. Operating segments
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group's other components. Costs in the JSE are
managed holistically across the Exchange and variances against budget are closely monitored. Information technology and other corporate
overheads are not generally allocated to a particular segment.
Group
2016 2015
R'000 R'000
8. Operating segments and revenue
Revenue comprises:
Capital Markets
Equity market fees 555 439 501 190
Equity derivatives fees 177 335 173 434
Currency derivatives fees 37 573 34 009
Interest rate market fees 60 318 50 240
Commodity derivatives fees 69 725 73 069
Primary market fees 164 368 160 644
Post-Trade Services
Clearing and settlement fees 412 741 356 677
Back-office services (BDA) 315 981 310 717
Funds under management 94 940 86 415
Information services
Indices net of FTSE 42 150 35 882
Colocation fees 19 938 16 621
Other market data fees 235 956 192 434
Trading and market services
Trading services 23 401 19 944
Total revenue excluding Strate ad valorem fees 2 209 865 2 011 276
Strate ad valorem fees – cash equities 128 931 122 272
2 338 796 2 133 548
9. Personnel expenses
Remuneration paid 522 233 465 464
Gross amount paid 541 576 483 091
Less: Capitalised to intangible assets (19 343) (17 627)
Long-term incentive schemes 42 763 30 295
564 996 495 759
10. Other expenses
Other expenses 562 486 526 340
Technology costs 282 658 234 580
845 144 760 920
11. Income tax expense
The Group's consolidated effective tax rate for the year ended 31 December 2016 was 26% (2015: 27%).
The investor protection funds are exempt from income tax in terms of S(10)(i)(d)(iii) of the Income Tax Act, No 58 of 1962.
Group
2016 2015
R'000 R'000
12. Earnings and headline earnings per share
12.1 Basic earnings per share
Profit for the year attributable to ordinary shareholders 919 702 899 478
Weighted average number of ordinary shares:
Issued ordinary shares at 1 January 86 877 600 86 877 600
Effect of own shares held (JSE LTIS 2010) (1 305 370) (1 297 984)
Weighted average number of ordinary shares at 31 December 85 572 230 85 579 616
Basic earnings per share (cents) 1 074.8 1 051.0
12.2 Diluted earnings per share
Profit for the year attributable to ordinary shareholders 919 702 899 478
Weighted average number of ordinary shares (diluted):
Weighted average number of ordinary shares at 31 December (basic) 85 572 230 85 579 616
Effect of LTIS Share Scheme 1 016 489 885 896
Weighted average number of ordinary shares (diluted) 86 588 719 86 465 512
Diluted earnings per share (cents) 1 062.1 1 040.3
The average market value of the Company's shares for purposes of calculating the dilutive effect
of share options was based on quoted market prices for the year.
12.3 Headline earnings per share
Reconciliation of headline earnings:
Profit for the year attributable to ordinary shareholders 919 702 899 478
Adjustments are made to the following: 4 934 (536)
– Gross amount
Profit or loss on disposal of property and equipment (92) (745)
The SA SME Fund Limited – write-down of investment 5 000 –
– Taxation effect 26 209
Net realised gain on disposal of available-for-sale financial assets (no taxation effect) (14 820) (20 644)
Headline earnings 909 816 878 298
Headline earnings per share (cents) 1 063.2 1 026.3
12.4 Diluted headline earnings per share
Diluted headline earnings per share (cents) 1 050.7 1 015.8
13. Intangible assets
Included in the intangible assets of R452 million (2015: R359 million), are newly developed intangible assets of R171 million (2015:
R137 million), mainly in respect of bond ETP, Umnotho and integrated trading and clearing.
14. Share-based payments
i. Vesting of Allocation 3 Tranche 2 shares during the period under review
The third award ("Allocation 3") under LTIS 2010 was granted in June 2012 with the following vesting profile:
Tranche 2: 50% of the total award, vesting in June 2016 (during the period under review)
114 350 Personal performance shares vested for those participants still in the employ of the JSE on 1 June 2016.
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 80% of these Tranche 2 shares should vest for those participants still in the
employ of the JSE on 1 June 2016. The remainder of the Tranche 2 corporate performance shares (being 9 770 shares) were forfeited
by participants.
As at 31 December 2016, details of Tranche 2 were as follows:
Personal Corporate
performance performance Total
Tranche 2 – fully vested shares shares shares
Original number of Tranche 2 shares awarded in June 2012 131 800 51 500 183 300
Forfeited by leavers to date (17 450) (2 650) (20 100)
Tranche 2 shares forfeited for missing performance targets – (9 770) (9 770)
Accelerated for good leavers (7 300) (5 360) (12 660)
Tranche 2 shares vested on 1 June 2016 (107 050) (33 720) (140 770)
Tranche 2 shares outstanding – – –
ii. Vesting of Allocation 4 Tranche 1 shares during the period under review
The fourth award ("Allocation 4") under LTIS 2010 was granted in May 2013 with the following vesting profile:
Tranche 1: 50% of the total award, vesting was completed during the current period
Tranche 2: 50% of the total award, vesting on 1 June 2017
150 450 Personal performance shares vested for those participants still in the employ of the JSE on 1 June 2016.
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 86.54% of these Tranche 1 shares should vest for those participants still
in the employ of the JSE on 1 June 2016. The remainder of the Tranche 1 corporate performance shares (being 8 211 shares) were
forfeited by participants.
As at 31 December 2016, details of Tranche 1 were as follows:
Personal Corporate
performance performance Total
Tranche 1 – fully vested shares shares shares
Original number of Tranche 1 shares awarded in June 2012 164 250 64 300 228 550
Forfeited by leavers to date (13 800) (3 250) (17 050)
Tranche 1 shares forfeited for missing performance targets – (8 211) (8 211)
Accelerated for good leavers (3 250) (3 246) (6 496)
Tranche 1 shares vested on 1 June 2016 (147 200) (49 593) (196 793)
Tranche 1 shares outstanding – – –
iii. Grant of Allocation 7 under LTIS 2010 during the period under review
At the annual general meeting held on 26 May 2016, 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 342 090 shares ("Allocation 7") to selected employees for the 2016 year. These individual allocations were
accepted by all scheme participants on 4 March 2016. As at this date, the grant date as defined in IFRS 2 had not been determined
as the detailed terms of the vesting conditions were in the process of being finalised. These were finalised and communicated to all
affected parties on 21 October 2016, which was established as the grant date as defined in IFRS 2. The initial award under Allocation
7 comprised a total of 342 090 JSE ordinary shares and these shares were acquired in the open market by 10 March 2016, at a volume-
weighted average price (including all execution costs) of R158.25 per ordinary share. An additional purchase of 9 684 shares was
executed in respect of the Human Resources Director who joined the Company on 25 November 2016, at a volume-weighted average
price (including all execution costs) of R161.01 per ordinary share. All Allocation 7 shares are held in trust and are restricted until all
vesting conditions are fulfilled, whereupon the shares vest.
Included in the total number of shares granted of 351 774, a total of 177 214 corporate performance shares have been granted to
members of the JSE's Excecutive Committee. No personal performance shares were allocated under Allocation 7.
Information on Allocation 7 is as follows:
Corporate
performance
shares
Share price at grant date (rands per share) 158.25
Total number of shares granted 342 090
Dividend yield 3%
Grant date 21 October 2016
Vesting profile:
50% of the shares awarded vest on 1 March 2019 (Tranche 1) 171 045
50% of the shares awarded vest on 1 March 2020 (Tranche 2) 171 045
Share price at grant date (rands per share) 161.01
Total number of shares granted 9 684
Dividend yield 3%
Grant date 25 November 2016
Vesting profile:
50% of the shares awarded vest on 1 March 2019 (Tranche 1) 4 842
50% of the shares awarded vest on 1 March 2020 (Tranche 2) 4 842
The profit or loss charge for the period, calculated using the Black-Scholes valuation methodology, in respect of allocations granted
under LTIS 2010 is as follows:
2016 2015
Allocation #2 (granted in May 2011) – R0.7m
Allocation #3 (granted in June 2012) R1.1m R5.3m
Allocation #4 (granted in May 2013) R8.3m R6.6m
Allocation #5 (granted in May 2014) R8.7m R5.5m
Allocation #6 (granted in June 2015) R9.5m R3.1m
Allocation #7 (granted in October 2016) R3.2m –
R30.8 R21.2m
15. Fair value estimation
Financial instruments measured in the statement of financial position at fair value require disclosure. The following is the fair value
measurement hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
- Inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly (that is, as prices) or
indirectly (that is, derived from prices) (level 2).
- Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The following table presents the Group's assets and liabilities that are measured at fair value.
Level 1 Level 2 Level 3 Total balance
R'000 R'000 R'000 R'000
2016
Assets
Other investments
– Equity securities (available-for-sale) 135 108 140 116 – 275 224
– Debt investments (available-for-sale) 18 245 – – 18 245
Total assets 153 353 140 116 – 293 469
2015
Assets
Other investments
– Equity securities (available-for-sale) 154 775 129 098 – 283 873
– Debt investments (available-for-sale) 28 690 – – 28 690
Total assets 183 465 129 098 – 312 563
The carrying values approximates the fair value.
16. Audit opinion
KPMG Inc, the Group's independent auditor, has audited the consolidated annual financial statements of the JSE Limited from which
the summarised consolidated results contained in this report have been derived, and has expressed an unmodified audit opinion on the
consolidated annual financial statements. The summarised consolidated financial results comprise the statements of financial position at
31 December 2016 and the statements of comprehensive income, changes in equity and cash flows for the year then ended and selected
explanatory notes. A copy of the auditor's report is available for inspection at the JSE's registered office.
The auditor's report does not necessarily report on all of the information contained in these summarised annual results and cash dividend
declaration. Shareholders are therefore advised to obtain a copy of the auditor's report together with the accompanying financial
information from the JSE's registered office.
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 8584
Sponsor: Rand Merchant Bank (A division of FirstRand Bank Limited)
28 February 2017
www.jse.co.za
Date: 28/02/2017 05:31:00 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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