Financial strength and cash-generating ability INTRODUCTION. FINANCIAL REVIEW Steady operating performance despite challenging operating environment

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1 J S E L I M I T E D A U D I T E D A B R I D G E D R E S U LT S F O R t h e 1 2 mo n t h s e n ded 3 1 de c ember , c as h di v ide n d de c laratio n a n d a p p oi n tme n t of n e w c h ief fi n a n c ial offi c er

2 COMMENTARY INTRODUCTION The JSE has delivered a steady financial performance in, making significant progress in achieving its long-term strategic objectives and providing a solid foundation for the year ahead. We celebrate a number of important successes as we progress into the second year of our 2017 strategic journey. In particular, we: achieved CPSS-IOSCO compliance for our derivatives clearing house, Safcom, so that our clients now enjoy maximum Basel III relief when they clear exchange traded derivatives through Safcom; implemented the new MillenniumIT trading system and replacement SENS solution for the equity market successfully, on time and within budget; successfully upgraded the commodities and derivatives market technology to handle increased volumes; successfully integrated our Post-Trade Services business; and in conjunction with the National Treasury and market participants, found a way forward on securities transaction tax with which participants are comfortable. FINANCIAL REVIEW Steady operating performance despite challenging operating environment Despite a challenging operating environment, our Group revenue remained steady, increasing by 1.1% to R1.38 billion. In common with most other cash equity exchanges around the world, our equity market trade execution revenues declined by 9.4%. However, this decline was offset by growth in other revenue lines, with notable improvements in both interest rate products and market data. Total operating expenses were slightly down (: R1.03 billion; : R1.04 billion). Although headcount was also slightly down (: 495; : 504), personnel expenses rose by 18% year-on-year to R353.9 million (: R299.2 million) owing to the full-year impact of the increase in headcount. Other expenses declined by 8.8% to R672.3 million (: R737.5 million). Excluding the impact of impairments, other expenses have increased by 6% annually over the past four years, a positive reflection of efforts to keep our (largely) fixed cost base under control. Management remains committed to keeping the business at an optimum size from an operational perspective, and also to make it possible to take advantage of opportunities for new business growth. Improvement in operating earnings Earnings have improved by 6.7% year-on-year to R405.6 million (: R380.1 million) with EBIT margin up one percentage point (: 29%; : 28%). Although net profit after tax has declined by 12% to R302.1 million (: R341.8 million) this is largely the result of unwinding a deferred tax asset associated with the termination of key components of SRP there has been no material change to the Group s underlying effective tax rate. Financial strength and cash-generating ability Our business continues to be strongly cash generative with cash generated from operations totalling R470.4 million (: R664.6 million). The net cash invested in the business (inclusive of financing activities) of R85.3 million (: R161 million) included the purchase of computer hardware for our new MillenniumIT equity trading engine and computer software. Discretionary cash flow remained healthy at 394c per share (: 447c per share) leaving the Company with free cash flow of R98.5 million (: R3.6 million) after payment of dividends to shareholders. At year end our cash and cash equivalents stood at R1.1 billion (: R1.0 billion). We remain ungeared apart from a loan (balance of R23.7 million) utilised to fund the acquisition in of the Managed Account Platform (: R26.8 million). This loan bears interest at the Short Term Fixed Interest rate (STEFI) and is repayable out of future revenues from the venture. Ongoing investment in the business remains crucial looking forward into 2013, our capital expenditure programme for business as usual activities amounts to about R45 million. A series of other strategic and technology investments remain under consideration by executive management and the Board, and we highlight some of these later in this review. The capex spend in 2013 for all these other potential investments is projected at about R200 million. Post year end the Group committed R100 million to a new default fund, ring-fenced from the JSE s operations, and established as part of our CPSS-IOSCO compliance process for on-exchange derivatives. This new fund serves to backstop losses incurred where a clearing member is unable to settle its clearing obligations in any of our derivative markets. In the event of a drawdown (a plausible although low probability scenario), the Group has an obligation to replenish its contribution to a maximum aggregate amount of R100 million in any 12-month period following a clearing member default. The JSE earns interest on its cash committed to the fund. Launch pad for 2013 These results demonstrate the resilience of the JSE s business and attest to the underlying strength of our strategy of continuing to diversify the revenue base. The leadership team is comfortable that the progress made in, the internal efficiencies and can do culture that is now taking root, together with the Group s financial strength, provide a solid launch pad for delivering on our 2013 strategic objectives. Appointment of Chief Financial Officer and changes to Directorate Freda Evans resigned as Chief Financial Officer in September and we thank her for the impact she made during the time she spent with us. We are pleased to welcome Aarti Takoordeen, who joined the JSE on 1 February 2013, as our new Chief Financial Officer. Aarti has been appointed to the JSE Board as an executive director effective 12 March The Board also appointed Dr Mantsika Matooane and Ms Nomavuso Mnxasana as non-executive directors during. Both Dr Matooane and Ms Mnxasana will stand for election at the Company s Annual General Meeting on 25 April JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 1

3 Operations Issuer Regulation Revenue rose 4.6% to R95.8 million (: R91.6 million). Number of new company listings on the JSE declined to 12 (: 16). Listings activity up in other JSE-listed equity instruments 16 new ETFs, ETNs (: 14 ETFs, ETNs). The total nominal listed bond value by year-end December was R1.6 trillion (: R1.3 trillion), with listings in total by year-end December (: 1 171). Numerous changes were made to the Listings Requirements to ensure they remain appropriate and are enabling for both listed companies and investors. The JSE s business development teams actively seeks new equity, debt and related listings. The Exchange has a listings pipeline across its five markets, but does not predict future listing numbers. Listings in were slow, mainly owing to the economic environment, and there were 18 delistings, mainly owing to corporate actions. In line with the strategic focus on innovative product development, there will be continued development of the Listings Requirements, which will enable new product development in 2013 and beyond. Equity Market Revenue declined by 9.4% to R319.1 million (: R352.2 million). The number of transactions year-on-year was flat at 26.9 million (: 26.5 million). Average number of shares per trade (for all trades) continued to fall (: 2 296; : 2 696). Total value traded increased by approximately 4% (: R3.4 trillion; : R3.3 trillion). The new MillenniumIT trading system and replacement SENS solution were implemented successfully, on time and within budget. The JSE s trade volume performance, although disappointing, is respectable in global terms. Equity Market volumes across exchanges worldwide have been falling. In 2013, finalising the way forward in the Equity Market Business Model and revisiting the costs of conducting business in the Equity Market will be core focus areas. Post-Trade Services At present, Post-Trade Services revenue reflects only the Equity Market risk management fees, which involve the Exchange charging a transaction fee per trade leg for this service, with a value-based element. Although the division s revenues are linked to the number of equity transactions that take place on the cash Equity Market, the increase in clearing and settlement revenues did not track equity trading exactly, because of the different billing structure for equity trading and for risk management. The division also risk manages the clearing of derivative transactions, but the JSE does not bill separately for this risk management. Derivative transactions are billed in a per contract fee, which is accounted for in the Bond and Financial Derivatives division. Revenue rose by 1.4% to R211.9 million (: R209.0 million). Post-Trade Services revenue was flat in, owing to the flat volume of equities trades. CPSS-IOSCO compliance status was achieved by Safcom in December, making it one of the world s first clearing houses to be compliant. The division underwent enormous changes during, prompted by the strategy to combine all Post-Trade Services into one area. The Post-Trade Services division is investigating what services the JSE is able to provide in the over-the-counter clearing space. It is also focusing on various initiatives to strengthen the on-exchange clearing business. The division is also working to clarify the timing of a move to T+3. Back-Office Services Revenue rose by 4.1% to R204.9 million (: R196.8 million). The Exchange will continue to use our back office service, BDA, until at least December 2015, adding enhancements to enable a number of regulating client requirements and T+3 settlement for the Equity Market. Bonds and Financial Derivatives Total divisional revenue rose by 2.1% to R175.7 million (: R172.1 million). Financial Derivatives revenue declined by 3.6% to R112.6 million (: R116.8 million). Value traded is unchanged at R4.3 trillion (: R4.3 trillion). The number of contracts declined by 7.9% to million (: million). Open interest as at 31 December increased by 3.2% to 12.2 million contracts traded (: 11.8 million). Currency derivatives revenue rose by 5.5% to R17.5 million (: R16.6 million). The number of contracts traded increased by 28.8% year-on-year to 18.9 million (: 14.7 million). Open interest as at 31 December also increased by 10% to 1.1 million contracts traded (: 1.0 million). Interest rate market revenue rose by 17.7% to R45.7 million (: R38.8 million). The nominal value of bonds traded rose by 10.0% to R23.0 trillion in (: R20.9 trillion). The number of bond derivatives contracts traded rose by 92.3% from 1.3 million contracts traded in to 2.5 million in. Open interest in bond derivatives rose by 40.5% from in to in. The Financial Derivatives Market changed the pricing mix in the interest rate and currency markets to encourage increased market participation. We also upgraded the derivatives market technology to handle increased trading volumes. The team is continuing to look at developing new products in this market. In order to accommodate a far greater rate of growth in volumes, the equity derivatives trading engine needs to be replaced, so this will be a focus area for the team for The implementation of a new engine is planned for 2014/2015. In the government bond space, we are excited by the fact that the National Treasury has now published requirements for an exchange traded platform for government bonds and we are now considering how the JSE can deliver that for the National Treasury. JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 2

4 COMMENTARY (continued) Commodity Derivatives Market Revenue rose by 5.3% to R55.9 million (: R53.1 million) following an increase in the number of physical deliveries processed and improved activity in the cash-settled commodities. Three million derivatives contracts were traded during, which is a 15.3% increase on the previous record of 2.6 million contracts set in. Trade in rand-settled foreign-referenced instruments under licence from the CME Group continues to increase. The physical delivery process for grain products was enhanced by introducing a platform to the market to trade basis premiums for grain stored in any of the 200 registered delivery points. In December approval was received from the regulators to introduce Zambian grain contracts to be traded in USD. This milestone allows the commodities market to extend its price risk management instruments into Zambia. The division continues to explore a range of new commodity products that can be physically settled to provide the premier platform for price discovery and price risk management. By improving access to the market, the JSE plays a pivotal role in aiding the sustainability of this sector. Market Data Revenue rose by 17.0% to R146.8 million (: R125.5 million) owing to international growth in professional indices users as well as algorithmic players and hedge funds subscribing to JSE data. The overall number of terminals displaying JSE data increased by 6.7% as a result of a continued focus on diversifying the client base outside South Africa (: ; : ). The sales focus on foreign clients across all continents continues. New data products that were launched will be promoted in The implementation of the new MillenniumIT trading system for the Equity Market resulted in all live equities clients having access to a low-latency market data feed from 2 July. Market data clients subscribing to Live FTSE/JSE Africa indices series also benefited from additional added value, receiving live streaming indices as well as real-time total return indices for both the FTSE/JSE Top 40 and the FTSE/JSE Swix40. During 2013, the division will focus on completing the automation of our client interaction. To grow revenue, the team will also continue to focus on previously untapped markets, particularly in a global environment, where investors continue to seek yields from new and specifically emerging markets. INFORMATION TECHNOLOGY The JSE s drive to upgrade and replace its trading systems and backoffice technology over the past decade has been accompanied by trade volume growth and is a factor in the Exchange s global recognition as a strong market operator and regulator. The Exchange continues this drive in a bid to serve clients and maintain growth. With this in view, the JSE upgraded the commodities and derivatives market technology to handle the increased volumes and is planning to replace the Equity Derivatives trading engine completely in The new MillenniumIT trading system was implemented successfully for the equity market, on time and within budget. The system offers worldclass trading technology, which along with its relocation to the JSE, significantly reduces latency and transaction execution times. This also reduces reliance on international links, which enhances the system s operational stability. The JSE will retain BDA until at least December 2015 while evolving the Equity Market Business Model. Should any change to the Equity Market Business Model be decided on (which is by no means certain), that change will require extensive consultation with a wide and large number of stakeholders. The market will also need time to develop any new systems or processes to accommodate any new model. It logically follows that BDA will need to be retained until at least the end of The JSE is intending to offer co-location services in the JSE s existing primary data centre, but will do so only if sufficient client demand exists to cover the cost of providing such services. Technology is vital and we will continue to focus on it as we facilitate interaction with our clients across the value chain and enhance their access to us. Dividend The Board and management remains confident as to the underlying strength of the JSE s operations and its continued strong cash flows. All planned investments and capital requirements for 2013 can be funded from own resources notwithstanding this year s reduction in after-tax profits. Accordingly, the Board has decided to maintain the dividend for the year ended December at 250c per ordinary share. Maintaining the dividend payout implies an improvement in dividend cover to 1.56x (: 2.19x). This cover is within the 2.5x 1.5x range stipulated in our existing dividend policy. However, the payout ratio should not be considered a precedent for future years. From a policy perspective, we also prefer to pay a single dividend in any year. Accordingly, notice is hereby given that the directors have declared an annual gross cash dividend of 250 cents (212.5 cents net of dividend withholding tax) per ordinary share for the financial year. The dividend has been declared from retained earnings and no STC credits are available for use. A dividend withholding tax of 15% will be applicable to all shareholders who are not exempt. The final ordinary dividend is payable to shareholders recorded in the register of members of the Company at the close of business on Friday, 24 May 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. The dividend will be noted at the Annual General Meeting to be held on Thursday, 25 April In compliance with the requirements of Strate, the following salient dates for the payment of the dividend are applicable: To be released on SENS on Tuesday, 12 March 2013 Last date to trade JSE shares cum dividend Friday, 17 May 2013 JSE shares trade ex dividend Monday, 20 May 2013 JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 3

5 Record date for purposes of determining the registered holders of JSE shares to participate in the dividend at close of business on Friday, 24 May 2013 Date of payment of dividend Monday, 27 May 2013 Share certificates may not be dematerialised or rematerialised from Monday, 20 May 2013 to Friday, 24 May 2013, both days inclusive. On Monday, 27 May 2013, 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 May 2013 will be posted on or about that date. The accounts of those shareholders who have dematerialised their shares (which are held at their participant or broker) will be credited on Monday, 27 May The issued share capital of the Company as at the declaration date is The tax number of the Company is initiatives The JSE is committed to building a business that we believe will survive the test of time. We have to build the base by making the right investments in people and technology in order to drive value by achieving efficiencies, revenue diversification and cost savings and positioning the organisation for growth and innovation. Our priorities for 2013 include: significantly progressing the replacement of our derivatives trading engine in 2014, an important step towards us increasing the liquidity in that market; building on the CPSS-IOSCO compliance status in the Post-Trade Services space that was achieved by the JSE-appointed clearing house, Safcom. This will include considering services that the JSE is able to provide in the over-the-counter clearing space; making a decision on the implementation timeline for T+3; finalising the comprehensive technology roadmap for the JSE based on strategic business initiatives; automating our client interaction in our Market Data space so as to improve our interaction with our clients; finalising the way forward in the Equity Market Business Model; revisiting the costs of conducting business in our market; and measurably improving the JSE client service levels to primary and secondary market customers. Prospects Stakeholders of the JSE will appreciate that revenue projections for the Group are not feasible, given the dependence on trading volumes in all the markets. Although we retain tight control of what is essentially a fixed cost base, expenses are expected to increase from 2013 as a result of depreciation charges starting once the Group s major systems have been implemented. There are also a number of possible initiatives in the pipeline that may require capex spend during 2013 such as co-location, T+3 and OTC clearing. As we chart this new strategic path, we will enhance our agility, cost effectiveness, capital efficiency and innovativeness. The JSE team is extremely excited about this journey. Appreciation The year presented the whole JSE team with new demands and 2013 will be no different. This has been a year of hard work and new direction in a challenging external environment and we are very appreciative of the team s effort. We also want to thank all our stakeholders for their frank engagement. We have worked hard to build a more collaborative relationship and we look forward to continuing our work in this regard in Humphrey Borkum Chairman Nicky Newton-King Chief Executive Officer JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 4

6 consolidated statement of comprehensive income for the year ended 31 december Group Exchange Investor Protection Funds* Revenue Other income Personnel expenses ( ) ( ) ( ) ( ) Other expenses ( ) ( ) ( ) ( ) (5 474) (7 780) Profit from operating activities Finance income Finance costs ( ) ( ) (9 018) (9 013) Net finance income Share of profit of equity-accounted investees (net of income tax) Profit before income tax Income tax expense ( ) ( ) ( ) ( ) Profit for the year Other comprehensive income Net change in fair value of available-for-sale financial assets Net change in fair value of available-for-sale financial assets reclassified to profit or loss (11 834) (22 931) (11 834) (22 931) Income tax on other comprehensive income Other comprehensive income/(loss) for the year, net of income tax (21 874) (21 874) Total comprehensive income for the year Earnings per share Basic earnings per share (cents) Diluted earnings per share (cents) * Investor Protection Funds comprise the JSE Guarantee Fund Trust, JSE Derivatives Fidelity Fund Trust and BESA Guarantee Fund Trust (the Trusts ). The JSE maintains these Trusts for investor protection purposes as required under the Securities Services Act 36, of The JSE is required to consolidate the Trusts into the results of the Group in terms of International Financial Reporting Standards (IFRS). However, as these Trusts are legally separate from the JSE, neither the JSE nor its shareholders have any right to the net assets of these Trusts. For enhanced understanding, the Trusts have been shown separately (before intercompany adjustments), although, for compliance with IFRS, the results form part of the Group financial statements. JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 5

7 consolidated statement of financial position AS AT 31 december Group Exchange Investor Protection Funds Assets Non-current assets Property and equipment Intangible assets Investments in equity-accounted investees Investments in subsidiaries Other investments Derivative financial instruments Loan to the JSE Empowerment Fund Trust Deferred taxation Current assets Trade and other receivables Income tax receivable Due from group entities Margin deposits Collateral deposits Cash and cash equivalents Total assets Equity and liabilities Total equity Share capital Share premium Capital contribution Reserves Retained earnings Non-current liabilities Finance leases Borrowings Employee benefits Deferred taxation Operating lease liability Deferred income Due to SAFEX members Current liabilities Trade and other payables Employee benefits Operating lease liability Due to group entities Margin deposits Collateral deposits Total equity and liabilities JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 6

8 consolidated statement of changes IN EQUITY for the year ended 31 december Non- Total distri- JSE LTIS exchange Investor Share Share butable BBBEE 2010 Retained and sub- Protection Total capital premium reserve reserve reserve earnings sidiaries Funds equity Group Balance at 1 January Total comprehensive income for the year Profit for the year Other comprehensive income Net change in fair value of available-for-sale financial assets Net change in fair value of available-for-sale financial assets reclassified to profit or loss (22 931) (22 931) Total other comprehensive loss (21 874) (21 874) Total comprehensive income for the year Transactions with owners recognised directly in equity Contributions by and distributions to owners Share options lapsed reclassified to retained earnings (2 433) Share options granted Dividends paid to owners ( ) ( ) ( ) Distribution from the BESA Guarantee Fund Trust (2 947) Distribution from the JSE Guarantee Fund Trust (51 000) Treasury shares (43) (28 946) (28 989) (28 989) Treasury shares share issue costs (79) (79) (79) Sale of treasury shares Ordinary shares issued Equity-settled share-based payment Total contributions by and distributions to owners 139 (1 016) ( ) ( ) (53 947) ( ) Total transactions with owners 139 (1 016) ( ) ( ) (53 947) ( ) Balance at 31 December Total comprehensive income for the year Profit for the year Other comprehensive income Net change in fair value of available-for-sale financial assets Net change in fair value of available-for-sale financial assets reclassified to profit or loss (11 834) (11 834) Total other comprehensive profit Total comprehensive income for the year Transactions with owners recognised directly in equity Contributions by and distributions to owners Transfer of BBBEE reserve to retained earnings ( ) Dividends paid to owners ( ) ( ) ( ) Distribution from the BESA Guarantee Fund Trust (2 866) Treasury shares (37) (28 808) (28 845) (28 845) Treasury shares share issue costs (70) (70) (70) Sale of treasury shares Equity-settled share-based payment Total contributions by and distributions to owners (34) (26 784) ( ) (48 912) ( ) (2 866) ( ) Total transactions with owners (34) (26 784) ( ) (48 912) ( ) (2 866) ( ) Balance at 31 December 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 R2,9m (: R2,9m), before intercompany adjustments, was transferred to the JSE Limited for the defrayment of market regulatory expenditure. 2 This represents the monies distributed by the JSE Guarantee Fund Trust for the specific purpose of funding the establishment of the JSE s data centre. JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 7

9 JSE LTIS Share Share BBBEE 2010 Retained Total capital premium reserve reserve earnings exchange Exchange Balance at 1 January Total comprehensive income for the year Profit for the year Total comprehensive income for the year Transactions with owners recognised directly in equity Contributions by and distributions to owners Share options lapsed transferred to retained earnings (2 433) Share options granted Dividends paid to owners ( ) ( ) Treasury shares (43) (28 946) (28 989) Treasury shares share issue costs (79) (79) Sale of treasury shares Ordinary shares issued Equity-settled share-based payment Total contributions by and distributions to owners 139 (1 016) ( ) ( ) Total transactions with owners 139 (1 016) ( ) ( ) Balance at 31 December Total comprehensive income for the year Profit for the year Total comprehensive income for the year Transactions with owners recognised directly in equity Contributions by and distributions to owners Transfer of BBBEE reserve to retained earnings ( ) Dividends paid to owners ( ) ( ) Treasury shares (37) (28 808) (28 845) Treasury shares share issue costs (70) (70) Sale of treasury shares Equity-settled share-based payment Total contributions by and distributions to owners (34) (26 784) ( ) (51 778) ( ) Total transactions with owners (34) (26 784) ( ) (51 778) ( ) Balance at 31 December JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 8

10 consolidated statement of cash FLOWS for the year ended 31 december Group Exchange Investor Protection Funds Cash flows from operating activities Cash generated by/(used in) operations (5 068) (8 866) Interest received Interest paid ( ) ( ) (9 075) (8 997) Dividends received Taxation paid ( ) ( ) ( ) ( ) Net cash generated by operating activities Cash flows from investing activities Proceeds on sale of other investments Acquisition of other investments (36 161) (33 100) (36 161) (33 100) Dividends from equity-accounted investees Proceeds from disposal of property and equipment Leasehold improvements (188) (47 406) (188) (47 406) Acquisition of intangible assets (74 363) ( ) (74 363) ( ) Acquisition of property and equipment (24 143) (62 083) (24 143) (62 083) Net cash (used in)/from investing activities (85 808) ( ) (81 966) ( ) (3 852) Cash flows from financing activities Distribution from/(by) Investor Protection Funds (2 866) (53 947) Proceeds from issue of new shares Proceeds from sale of treasury shares Loan raised Loan repaid (3 055) Acquisition of treasury shares (28 915) (29 068) (28 915) (29 068) Dividends paid ( ) ( ) ( ) ( ) Net cash used in financing activities ( ) ( ) ( ) ( ) (2 866) (53 947) Net increase/(decrease) in cash and cash equivalents (29 000) (1 210) (1 864) Cash and cash equivalents at 1 January Effect of exchange rate fluctuations on cash held (10 771) (8 879) (10 771) (8 879) Cash and cash equivalents at 31 December JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 9

11 Information about reportable segments # Equity and Interest 2 SELECTED NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 december Basis of preparation and accounting policies # JSE Limited (the JSE, the Company or the Exchange ) is a company domiciled in South Africa. The consolidated financial statements of the Company as at and for the year ended 31 December comprise the Company and its subsidiaries and controlled special purpose vehicles (collectively referred to as the Group and individually as Group entities ) and the Group s interest in associates. The JSE Limited s abridged consolidated annual financial statements for the year ended 31 December have been prepared in terms of the recognition and measurement requirements of International Financial Reporting Standards ( IFRSs ) and the SAICA financial reporting guides as issued by the Accounting Practices Committee and the financial reporting pronouncements as issued by the Financial Reporting Standards Council, the JSE listing requirements, the requirements of the Companies Act, 2008 and the presentation and disclosure requirements of IAS 34. The JSE Limited s principal accounting policies applied by the Group in its consolidated abridged annual financial statements for the year ended 31 December are the same as those applied by the Group in its consolidated annual financial statements as at and for the year ended 31 December. The consolidated financial statements and the separate financial statements were authorised for issue by the Board of Directors on 12 March Special purpose entities # The JSE Guarantee Fund Trust, JSE Derivatives Fidelity Fund Trust and BESA Guarantee Fund Trust are special purpose entities (SPE s) set up for investor protection. The Group does not have any direct or indirect shareholding in these entities, however, based on the evaluation of the substance of the relationship with the Group and the SPE s risks and rewards, the Group controls the financial and operating policies of these entities and the results are thus consolidated. SPEs controlled by the Group were established under terms that impose strict limitations on the decision-making powers of the SPEs management and that result in the Group receiving the majority of the benefits related to the SPEs operations and net assets, being exposed to the majority of risks incident to the SPE s activities, and retaining the majority of the residual or ownership risks related to the SPEs or their assets. Operating segments # The Group has 5 reportable segments, as stated below. Management has determined the operating segments based on the monthly reports reviewed by the Executive Committee (Exco). Exco reviews the revenue streams as set out below. 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. Equity 1 currency Commodity rate Market division derivatives derivatives market data Other 3 Total For the year ended 31 December External revenues For the year ended 31 December External revenues Comprises equities trading fees, post-trade services, membership fees, issuer regulation and back-office services (BDA). 2 Includes R15.1 million (: R13.2 million) of issuer regulation listing fees relating to the bond market. 3 Comprises Funds management and Strate ad valorem fees. Revenue # Group Exchange Revenue comprises: Equities trading fees Post-trade services Back-office services (BDA) Issuer regulation Membership fees Financial derivatives fees Currency derivatives fees Commodity derivatives fees Interest rate market fees Market Data Funds management Total revenue before Strate ad valorem fees Strate ad valorem fees Total revenue JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 10

12 SELECTED NOTES TO THE FINANCIAL STATEMENTS (continued) for the year ended 31 december EARNINGS PER SHARE Basic earnings per share # The calculation of basic earnings per share at 31 December of (: 400.8) cents per share was based on profit for the year attributable to ordinary shareholders of R302.1 million (: R341.8 million) and a weighted average number of ordinary shares of (: ) calculated as follows: Group Exchange Profit for the year attributable to ordinary shareholders Weighted average number of ordinary shares: Issued ordinary shares at 1 January Shares issued during the period Effect of own shares held (JSE LTIS 2010) ( ) ( ) ( ) ( ) Weighted average number of ordinary shares at 31 December Basic earnings per share (cents) Diluted earnings per share # The calculation of diluted earnings per share at 31 December of (: 396.1) cents per share was based on the profit for the year attributable to ordinary shareholders of R302.1 million (: R341.8 million) and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of (: ) calculated as follows: Group Exchange Profit for the year attributable to ordinary shareholders Weighted average number of ordinary shares (diluted): Weighted average number of ordinary shares at 31 December (basic) Effect of share options in issue Weighted average number of ordinary shares (diluted) Diluted earnings per share (cents) 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 year. Headline earnings per share # The calculation of headline earnings per share at 31 December of (: 562.4) cents per share was based on headline earnings attributable to ordinary shareholders of R406.4 million (: R479.6 million) and a weighted average number of ordinary shares of (: ) during the year. Group Exchange Reconciliation of headline earnings: Profit for the year attributable to ordinary shareholders Adjustments are made to the following: Profit on disposal of property and equipment (69) (60) (69) (60) Gross amount (96) (83) (96) (83) Taxation effect Impairment of monies due from Group entities Impairment of intangible assets Gross amount Taxation effect (62 536) (62 536) Impairment of investment in BESA Limited Net realised gain on disposal of available-for-sale financial assets 1 (11 834) (22 932) Headline earnings Headline earnings per share (cents) No taxation effect JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 11

13 Diluted headline earnings per share # The calculation of diluted headline earnings per share at 31 December of (: 555.9) cents per share was based on headline earnings for the year of R406.4 million (: R479.6 million) and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of (: ). Group Exchange Software under development # Diluted headline earnings per share (cents) The impairment loss of R75 million (: R223.3 million) relates mainly to the carrying value of the Market Services Solution ( MSS ) and associated components of SRP. The trigger event which led to the decision to impair was a technical analysis that indicated the need to rewrite MSS, one of the five components of SRP. Value in use for MSS was deemed to be Rnil. We are currently investigating the tax treatment of software development costs which may impact the taxation charge going forward. Audit opinion KPMG Inc, the Group s independent auditors, has audited the consolidated annual financial statements of JSE Limited from which the abridged consolidated results contained in this report have been derived, and has expressed an unmodified audit opinion on the consolidated annual financial statements. The abridged consolidated financial results comprise the statements of financial position at 31 December and the statements of comprehensive income, changes in equity and cash flows for the year then ended and selected explanatory notes. The selected explanatory notes have been marked with a #. Their audit report is available for inspection at the Company s registered office. One Exchange Square, 2 Gwen Lane, Sandown, South Africa Private Bag X991174, Sandton 2146, South Africa Tel Fax Sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited) 12 March 2013 JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 12

14 notes: JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 13

15 Bastion Graphics JSE LIMITED AUDITED ABRIDGED RESULTS FOR THE 12 MONTHS ENDED 31 DECEMBER, CASH DIVIDEND DECLARATION 14

16 JSE Limited (Registration number 2005/022939/06) Incorporated in the Republic of South Africa ISIN code: ZAE Share code: JSE One Exchange Square, 2 Gwen Lane, Sandown, South Africa Private Bag X991174, Sandton 2146, South Africa Tel Fax