Sygnia : ETF Abridged Annual Report 2021

Sygnia Itrix Collective Investments Scheme Abridged Annual Report

for the year ended

31 December 2021

Legal notes

Management company:

Sygnia Itrix (RF) (Pty) Ltd Registration No: 2004/035580/07

7th Floor, The Foundry, Cardiff Street, Green Point, 8001

Board of directors:

Name

Date of appointment

Date of resignation

HI Bhorat	01/07/2017	Current
DR Hufton	01/01/2019	Current
MA Sirkot	16/01/2019	Current
G Cavaleros	29/07/2019	Current
G Maclachlan*	01/07/2017	Current
*Company secretary
Investment manager:

Sygnia Asset Management (Pty) Ltd is an authorised Financial Services Provider (FSP 873).

Registered office:

Postal address:

7th Floor, The Foundry Cardiff Street

Green Point 8001

PO Box 51591 Waterfront 8002

External auditor:

Trustee:

Mazars

Mazars House Rialto Road

Standard Bank of South Africa Limited (Reg. No 162/00738/06)

Grand Moorings Precinct Century City Johannesburg 7441

Trustees and Fiduciary Services Telephone: [phone]

The directors take full responsibility for the preparation of the abridged report and that the financial information has been correctly extracted from the underlying annual financial statements.

There were no qualifications made by the auditor in their report on the financial statements of the manager and the portfolios.

Copies of the audited annual financial statements of the manager and of the scheme managed by it, are available on the Sygnia website (www.sygnia.co.za)

Chairperson's report

In my first report as Executive Chairperson of Sygnia Limited it would be remiss of me not to start by thanking Professor Haroon Bhorat for chairing our board of directors for so many years. He has been with us from almost the start of the company and has guided us through many a storm. He remains a highly respected and valued member of the board in his new role as an independent non-executive director.

2021 has been a watershed for me personally, as I stepped down as the chief executive of Sygnia. One of the reasons I did so is that I have always recognised that as companies grow and their operational complexity increases, the skill set required of an effective chief executive is different from that of an entrepreneurial founder. In David Hufton I have found just the right successor. David joined Sygnia over five years ago with a clear view to succeeding me in time, and I am confident that the time has arrived. My family remain the majority shareholders of Sygnia, and in my executive role I will remain intricately involved in setting and managing the strategy of the business.

South Africa has endured turbulent times over the past year and a half. The Covid-19 pandemic has wreaked havoc on emerging markets, with the services sector suffering the most damage due to a shutdown of tourism, frequent lockdowns and rules around social interactions. We cannot underestimate the fact that over fifty percent of our country's people are unemployed. The poverty that surrounds us requires solid growth policies and a collaborative approach to delivering on those policies. Unfortunately, based on the municipal election results in November 2021, this unity seems to be lacking. As much as opposition parties frequently use the rhetoric of "party over country" to criticise President Cyril Ramaphosa, all the political parties have behaved in the same self-interested manner. The drop in support for the ANC has not necessarily translated into support for other parties. Rather, disillusioned voters have opted not to vote. Lack of engagement never leads to positive long-term outcomes.

"Beyond politics, what really keeps me awake at night is South Africa's electricity crisis."

Lack of a reliable electricity supply will impact growth, discourage foreign investors and lead to even more skilled people leaving the country. We cannot afford these factors to undermine the economy, but as it stands, they all do. There are no short-term or easy solutions after years of neglect underpinned by rampant corruption. President Ramaphosa recently secured a partnership deal with other world leaders valued at R131 billion over the next three to five years for highly concessional climate financing that is meant to help transition South Africa away from coal to cleaner forms of energy. However, this transition is likely to take a long time and will face resistance from trade unions. It is also not a solution to Eskom's R402 billion debt woes. South Africans must prepare for many more years of load-shedding and all the negative associations this brings. Generators, inverters and UPSs are here to stay, making ongoing business conditions challenging and costly.

Most foreign investors do not believe a long-term investment case can be made for South Africa right now. Our high bond yields, a function of our government's perceived default risk levels, continue to attract short-term speculative flows that prop up the rand but are not true job-creation investments.

And so we will live through two more turbulent years before the national election results are decided. Even then, it is important to recognise that if the ANC loses its fifty percent majority and is forced to form a coalition, coalition governments have never been hugely successful, with compromises rather than solid policies driving the national agenda.

In evaluating South Africa, however, one must also look more broadly at the post-pandemic world. Shifting geopolitical relationships create as much risk and uncertainty as one country's specific risk levels. Countries such as Belarus and Russia have openly challenged the West in response to the sanctions under which they have been placed, whilst China is flexing its muscles over Taiwan's sovereignty. Such aggression

/ Chairperson's report

does not bode well for the export of microchips from China and gas from Russia, as examples. Already, a lack of the former and subtle (albeit denied) moves by Russia to restrict gas supplies to the European Union have resulted in a spike in inflation. Inflation is particularly relevant to South Africa, as any slowdown in quantitative easing measures, such as an increase in interest rates by the United States, will translate into a higher cost of borrowing which is likely to translate into outflows from South African investment markets and a weakening of the rand.

On a positive side, the widespread availability of the Covid-19 vaccine to the South African population has lowered the risks associated with the disease. On a negative side the recent emergence of yet another variant of the virus has demonstrated just how short-lived any gains can be. The travel corridors which finally opened, bringing hope to all those working in the tourism industry, closed overnight. The anti-vaccine movement, which remains very vocal on social media, has led to an entirely unnecessary vaccine hesitancy. This has been exacerbated by difficulties in distribution, particularly to townships and rural areas.

In writing this report I am acutely aware of the fact that it carries many negative messages. However, there is no point in sugar-coating the situation. Only brutal honesty can set us on a path towards a brighter future.

I am very proud that against this background, Sygnia has managed to hold its own. As much as the institutional market is shrinking due to retrenchments and a lack of new job openings, the retail market is growing strongly. Our brand recognition amongst the South African public has never been stronger, nor have the resulting inflows. The management team has once again delivered strong financial results against a difficult economic background and must be congratulated for their dedication and effort. I am sure the company will continue to go from strength to strength under its new leadership.

I would also like to thank all our long-standing clients of Sygnia for their continued and unwavering support and a warm welcome to those who recently joined us on our journey.

Magda Wierzycka Chairperson

Trustee's report

Report of the trustee for the Sygnia Itrix Collective Investment Scheme

We, the Standard Bank of South Africa Limited, in our capacity as Trustee of the Sygnia Itrix Collective Investment Scheme ("the Scheme") have prepared a report in terms of Section 70(1) (f) of the Collective Investment Schemes Control Act, 45 of 2002, as amended ("the Act"), for the financial year ended 31 December 2021

In support of our report we have adopted certain processes and procedures that allow us to form a reasonable conclusion on whether the Manager has administered the Scheme in accordance with the Act and the Scheme Deed.

As Trustees of the Scheme we are also obliged to in terms of Section 70(3) of the Act to satisfy ourselves that every statement of comprehensive income, statement of financial position or other return prepared by the Manager of the Scheme as required by Section 90 of the Act fairly represents the assets and liabilities, as well as the income and distribution of income, of every portfolio of the Scheme.

The Manager is responsible for maintaining the accounting records and preparing the annual financial statements of the Scheme in conformity with International Financial Reporting Standards. This responsibility also includes appointing an external auditor to the Scheme to ensure that the financial statements are properly drawn up so as to fairly represent the financial position of every portfolio of its collective investment scheme are in accordance with International Financial Reporting Standards and in the manner required by the Act.

Our enquiry into the administration of the Scheme by the Manager does not cover a review of the annual financial statements and hence we do not provide an opinion thereon.

Based on our records, internal processes and procedures we report that nothing has come to our attention that causes us to believe that the accompanying financial statements do not fairly represent the assets and liabilities, as well as the income and distribution of income, of every portfolio of the Scheme administered by the Manager.

We confirm that according to the records available to us, no losses were suffered in the portfolios and no investor was prejudiced as a result thereof.

We conclude our report by stating that we reasonably believe that the Manager has administered the Scheme in accordance with:

• I. the limitations imposed on the investment and borrowing powers of the manager by this Act;

• II. and the provisions of this Act and the deed;

Seggie Moodley

Standard Bank of South Africa Limited

17 March 2022