Sygnia : Audited Consolidated Annual Financial Statements - September 2021

Audited Consolidated

Annual Financial

Statements

for the year ended

30 September 2021

These financial statements have been prepared under the supervision of the Financial Director, MA Sirkot (CA (SA)) and have been audited in compliance with the applicable requirements of the Companies Act of South Africa.

Corporate information

Annual general meeting: 27 January 2022

Share code (ordinary shares): SYG

ISIN: ZAE000208815

Board of Directors

Name	Date of appointment	Date of resignation
MF Wierzycka (Chairperson) #	17/09/2007
DR Hufton (CEO) #	01/09/2018
MA Sirkot (Financial Director) #	16/01/2019
WA Wierzycki #	10/06/2021
G Cavaleros (Lead Independent) *	28/06/2019
HI Bhorat *	11/06/2015
MH Jonas *	01/09/2018
C Appana *	08/09/2020
J Boyd *	29/07/2021
A Crawford-Brunt ^	01/11/2018	29/01/2021
R Sithubi *	26/02/2019	31/12/2020
H Mayers *	01/01/2021	29/07/2021

* Independent Non-executive Director ^ Non-executive Director # Executive Director

Registered office:	Sponsor:
7th Floor, The Foundry	The Standard Bank of South Africa Limited
Cardiff Street	30 Baker Street, Rosebank,
Green Point	Johannesburg, 2196
8001	External auditor:
Postal address:
Mazars
PO Box 51591	Mazars House, Rialto Road
Waterfront	Grand Moorings Precinct
8002	Century City, 7441
Company registration number	South Africa
Transfer secretaries:
2007/025416/06
Company secretary:	Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank,
G MacLachlan	Johannesburg, 2196
Appointed: 01/11/2016

Sygnia Integrated Report 2021

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Contents

1. Directors' responsibility statement
2. Directors' report

1. Audit and Risk Committee report

1. Independent auditor's report

1. Consolidated statement of financial position

1. Consolidated statement of profit or loss and other comprehensive income
2. Consolidated statement of changes in equity
3. Consolidated statement of cash flows
4. Notes to the consolidated financial statements

49 Analysis of shareholding

Directors' responsibility statement

The directors are responsible for the preparation and fair presentation of the consolidated annual financial statements of Sygnia Limited and its subsidiaries ("the Group"). The annual financial statements comprise the Directors' report, Audit and Risk Committee report, report by the company secretary and the financial statements. The financial statements comprise the consolidated statement of financial position at 30 September 2021, the consolidated statements of profit or loss and other comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and the notes to the consolidated financial statements which include a summary of significant accounting policies and other explanatory notes. The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), Financial Reporting Pronouncements as issued by Financial Reporting Standards Council and the requirements of the Companies Act of South Africa.

The directors are also responsible for such internal control as they determine is necessary to enable the preparation of annual financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management. The directors have made an assessment of the ability of the Group to continue as a going concern and have no reason to believe that the businesses will not be a going concern in the year ahead.

The auditor is responsible for reporting on whether the consolidated financial statements are fairly presented in accordance with the applicable financial reporting framework.

Approval of annual financial statements

The consolidated annual financial statements were approved by the board of directors on 6 December 2021.

Chief Executive Officer and Financial Director confirmation

The directors, whose names are stated below, hereby confirm that -

1. the annual financial statements set out on pages 12 to 48, fairly present in all material respects the financial position, financial performance and cash flows of the Group in terms of IFRS;
2. no facts have been omitted or untrue statements made that would make the annual financial statements false or misleading;
3. internal financial controls have been put in place to ensure that material information relating to the Group have been provided to effectively prepare the financial statements of the Group; and
4. the internal financial controls are adequate and effective and can be relied upon in compiling the annual financial statements, having fulfilled our role and function within the combined assurance model pursuant to principle 15 of the King Code. Where we are not satisfied, we have disclosed to the Audit and Risk Committee and the auditors the deficiencies in design and operational effectiveness of the internal financial controls and
   any fraud that involves directors, and have taken the necessary remedial action.

David Hufton	Murad Sirkot
Chief Executive Officer	Financial Director

Report by the company secretary for the year ended 30 September 2021

In terms of S88(2)(e) of the Companies Act 2008, as amended and for the year ended 30 September 2021, I, Glen MacLachlan, in my capacity as company secretary of Sygnia Limited, hereby certify that Sygnia Limited has lodged

all returns required by the Act with the Companies and Intellectual Property Commission and that all such returns are true, correct and up to date.

Glen MacLachlan

Company Secretary

Sygnia Integrated Report 2021

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Directors' report

The directors have pleasure in presenting their report on the activities of the Group for the year ended 30 September 2021.

Highlights

• Assets under management and administration of R296.4 billion as at 30 September 2021 (2020: R251.8 billion), up 17.7%.
• Revenue of R737.2 million (2020: R661.0 million), up 11.5%.
• Profit after tax of R240.9 million (2020: R206.1 million), up 16.9%.
• Headline earnings per share of 170.7 cents (2020: 146.4 cents), up 16.6%, and diluted headline earnings per share of 166.1 cents (2020: 143.7 cents), up 15.6%.
• Total dividend per share of 135.0 cents (2020: 110.0 cents).

Financial performance

Despite another challenging and economically turbulent environment for cyclical businesses such as Sygnia, assets under management and administration increased by 17.7% to R296.4 billion as at 30 September 2021 (2020: R251.8 billion). During the same period the FTSE/JSE All Share Index returned 23.2%, the JSE All Bond Composite Index 12.5% and the MSCI World Index, in SA Rands, 16.2%. The growth has also taken place in an environment where the institutional savings market is shrinking by virtue of almost negligible economic growth, corporate closures and retrenchments in South Africa.

The Sygnia-managed range of funds continue to rank in the top quartile of performance surveys across most risk profiles over the medium- to long-term. This performance is a mixture of low- cost strategies and a strong focus on macroeconomic trends, which drive active asset allocation decisions. Our superior long- term performance has been a strong factor behind our growing presence in the retail market.

In addition, the Group has launched several new funds in line with customers' demands, which has contributed to the growth in its revenue.

Sygnia's focus on low-cost investment and savings products and service provision has meant that, in contrast to our competitors, we have experienced little pressure on management fees.

Our past initiatives, such as the launch of the Sygnia Umbrella Retirement Funds ("SURF") in 2016 and the acquisition of the db X-tracker passive management business from Deutsche Bank in 2017 (renamed to Sygnia Itrix), are also starting to contribute materially to the Group's results, both financially and in terms of market recognition and profile. SURF is now the sixth largest umbrella fund offering in South Africa, while Sygnia Itrix is

the second largest provider of ETFs listed on the JSE and the largest South African provider of international ETFs.

Total revenue for the year rose 11.5% to R737.2 million (2020: R661.0 million), while total expenses, at R411.9 million, increased by 7.9% (2020: R381.9 million). The increase in expenses was primarily driven by higher staff costs associated with increased business activity. The decrease in interest income and finance costs to R19.6 million (2020: R26.3 million) and R12.4 million (2020: R16.4 million) respectively, primarily relates to the decrease in interest rates. The decrease in other investment income to R4.2 million (2020: R8.5 million) is mainly due to fluctuations of the rand.

Profit after tax increased by 16.9% to R240.9 million (2020: R206.1 million) in spite of difficult market conditions.

The Group continues to invest in technology to ensure that Sygnia continues to offer leading fintech solutions and exceptional service to clients. Its offshore expansion is not expected to contribute materially to the results for the foreseeable future but is regarded as an exciting opportunity to diversify its revenues. To that end, Sygnia has launched

a number of Ireland-registered funds post year-end. These funds will be distributed to South African clients with existing offshore investments, as well as through international platform providers.

Corporate services

Sygnia offers the following services:

• Asset management services in the form of passive and multi-managed investments.
• A broad spectrum of investment funds, such as unitised life funds, unit trusts, exchange traded funds, and management of segregated portfolios.
• A full range of savings products, including retirement annuities, tax-free savings accounts, investment policies, living annuities, and preservation funds.
• Institutional investment administration services.
• Employee benefits services, including the Sygnia Umbrella Retirement Fund.
• Execution-onlystockbroking, and securities lending and foreign exchange transacting services.

Although we may conclude strategic acquisitions where these are regarded as being value-accretive and consistent or complementary to our core strategy we continue to focus on organically growing assets under management supported by strong investment performance at low cost, a commitment to ongoing innovation and the relentless pursuit of superior customer service.

Passive investing is on the rise in South Africa, and Sygnia is well positioned to take advantage of a growing scepticism among investors about the more expensive alternative of active management, especially in a low-return environment. Thematic investing is also gaining in popularity, and our niche funds continue to enjoy good flows.

Market conditions

While 2020 has seen a remarkable recovery in markets from the Covid-induced recession, it has also brought with it the shadow of rising inflation for the first time since the global financial crisis. This fear of rising prices has also led to the realisation that central banks around the globe will need to normalise monetary policy and end the great liquidity experiment, which has greatly benefitted markets like South Africa. The rand has strengthened close to 10% over the past year, but as a nation we still have a large fiscal imbalance to contend with. Positive terms of trade, notably from high commodity prices, also provided tailwinds for the local currency, but supply chain bottlenecks and the energy crisis will soon turn these to headwinds, and the fiscus will have to be very disciplined to avoid a debt trap. Within our managed portfolios, we are still positioned for a

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