Sygnia : Collective Investments Scheme Abridged Annual Report - September 2022

Sygnia Collective

Investments Scheme

Abridged Annual Report

for the year ended

30 September 2022

These financial statements have been prepared under the supervision of the Financial Director, MA Sirkot (CA (SA)).

Legal notes

Management company:

Sygnia Collective Investments RF (Pty) Ltd Registration No: 2009/003063/07

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

Board of Directors

Name	Date of appointment
HI Bhorat*	15/05/2012
G Cavaleros*	29/07/2019
DR Hufton	01/01/2019
MA Sirkot	16/01/2019

* Independent Non-executive Director # Executive Director

Investment manager:

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

Registered office:	Postal address:
7th Floor, The Foundry	PO Box 51591
Cardiff Street	Waterfront
Green Point	8002
8001

External auditor:	Trustee
Mazars	Standard Bank of South Africa Limited
Mazars House	(Reg. No 162/00738/06)
Rialto Road	Trustees and Fiduciary Services
Grand Moorings Precinct	Telephone: [phone]
Century City
Johannesburg
7441

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)

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Chairpersons Report

I don't think I am exaggerating when I say that no one expected Russia to attack Ukraine so soon after the global emergence from the Covid-19 pandemic. No one anticipated the immense implications for global economies, nor the cost to the people of Ukraine. Rocketing oil and gas prices, massive food price increases and supply chain disruptions all contributed to double-digit inflation numbers.

The speed with which peace turned to "war" left most governments struggling to sustain growth and to pacify an increasingly panicked population. The IMF lowered its expectation for global growth in 2022 from 4.4% to 3.2%, and from 3.8% to 2.7% in 2023. Against this background, countries such as China used the distraction to consolidate and centralise political power.

South Africa has not been immune. Inflation has exceeded 7%, growth has been revised downwards, the rand has fallen in value and transport and food costs have risen, with most of our citizens feeling poorer. The strain of an unreliable electricity supply has added to national economic woes. The country also faces grey-listing by the Paris-based Financial Action Task Force, a global institution that oversees compliance with anti- money laundering and counter-terrorism financing measures. Despite many steps being taken by government, it is probably a case of too little too late, with grey-listing almost inevitable. This will make it more difficult for South African companies, banks and individuals to transact internationally.

Unfortunately, economic turbulence normally translates into more constrained fiscal policies and a negative impact on

investment markets. Interest rates have risen dramatically in response to higher inflation, while markets have fallen at a record-breaking pace. There is almost nowhere to hide, with the technology and healthcare sectors suffering the most. Many investors simply opted for the perceived protection of the US dollar, leading to the depreciation of almost all other currencies.

Unsurprisingly, most foreign investors do not believe a long- term investment case can be made for South Africa and other emerging markets. The same applies to China, where political risks have increased substantially.

It is not a stretch to say that the shift in geopolitical relationships reflects a swing back to the "Cold War" era: relationships are strained and increasingly polarised, and no short-term improvements are likely. This has longer-term implications for inflation, market volatility and supply chain disruptions than the Russia/Ukraine war in isolation.

On a more positive note, borders have opened up and travel has resumed, and South Africa has been a beneficiary of renewed tourism. Higher global commodity prices supported higher revenue collection, a pleasant surprise, although most of the

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/Chairperson' report

windfall tax receipts are expected to fall away over the next two years. The strategy outlined in the 2022 Medium-Term Budget Policy Statement (MTBPS) focused on reducing fiscal risks, narrowing the budget deficit and stabilising debt and proposed measures to improve economic growth and provide funding for infrastructure and service delivery programmes. Real GDP growth recovered to 4.9% in 2021, following a contraction

of 6.3% in 2020. Unfortunately, projected economic growth has been revised downwards since the Budget speech, from 2.1% to 1.9%. Growth continues to be impeded by the slow implementation of promised economic reforms, as well as events such as the July 2021 riots and the April 2022 floods in KwaZulu-Natal. The MTBPS promised much-needed debt relief for Eskom, necessary to shore up the finances of the company drowning in debt. The budget also allocated additional funding for health, education, safety and security.

In writing this report I am acutely aware that it delivers more negative than positive messages. Unfortunately, we are living in unprecedented times - at least for many who grew up in a period of relative stability and prosperity.

In light of the above, it is important to recognise that Sygnia's business, like that of other asset managers, is cyclical. Its revenues are very dependent on the level of the markets

• increasingly so when its assets under management and administration have risen to almost R300 billion. In many ways, the market itself is Sygnia's largest client. After reaching record highs at the end of 2021, the fall in value across all asset classes has led to increasingly challenging trading conditions, but Sygnia has held its own. While the institutional market continues to shrink as a result of retrenchments and a lack of new job creation, inflows due to contributions seem to have reached equilibrium with the level of outflows caused by retrenchments, withdrawals and retirement. Retirement funds have been cutting costs, with services such as additional administration being discontinued despite the risks this creates. The retail division continued to attract assets, as did Sygnia's low-cost umbrella fund proposition. Passive funds are also becoming more of a fixture in the South African investment landscape. And our brand recognition, despite a bare minimum spent on marketing, has never been stronger.

We are under no illusion that the next financial year will be a lot tougher, with more volatility in our financial results. We are prepared for that, as Sygnia is a resilient, well-funded business that is ready to face headwinds as and when they arise.

In the meantime, the management team must be congratulated for their dedication and effort in delivering sound financial results in 2021/22. The business has never been stronger in terms of skills, expertise and experience across its leadership team, when steady hands and cool heads have been essential.

I would also like to express my gratitude to Sygnia's board of directors for their guidance and assistance in setting out the strategy of the business.

Magda Wierzycka

Chairperson

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Trustee's Report

Report of the trustee for the Sygnia Collective Investments Scheme

We, the Standard Bank of South Africa Limited, in our capacity as Trustee of the Sygnia Collective Investments 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 30 September 2022.

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:

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

1. and the provisions of this Act and the deed;

Seggie Moodley

Standard Bank of South Africa Limited

12 December 2022

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