SYGNIA LIMITED 2007/025416/06. Audited CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 SEPTEMBER 2015

Transcription

1 SYGNIA LIMITED 2007/025416/06 (Previously Sygnia Investment Holdings No 2 Proprietary Limited) Audited CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FO THE YEA ENDED 30 SEPTEMBE 2015 These financial statements have been prepared under the supervision of the Financial Director, NJ Giles CA(SA). These financial statements have been audited in compliance with the applicable requirements of the Companies Act of South Africa.

2 GENEAL INFOMATION Country of incorporation and domicile South Africa Nature of business and principal activities Sygnia Limited and its subsidiaries ( the Group ) is a specialist financial services group headquartered in South Africa focusing on the provision of investment management and administration solutions to institutional and retail clients predominantly located in South Africa. The main services provided by the Group include multi-manager investment solutions, index-tracking investment solutions, customised/bespoke investment strategy management, transition management, stockbroking and investment administration/platform services. Directors Date of Appointment Date of esignation MF Wierzycka SJB Peile HI Bhorat NJ Giles KT Hopkins SA Zinn IK Moyane 17/09/ /09/ /06/ /06/ /06/ /06/ /09/ /06/ egistered office 7th Floor, The Foundry Cardiff Street Green Point Cape Town 8001 Postal address PO Box Waterfront 8002 Auditor KPMG Inc. egistered Auditor 1 Mediterranean Street Foreshore Cape Town 8001 South Africa Company secretary DI Johnson Company registration number 2007/025416/06 PAGE 1

3 ANNUAL FINANCIAL STATEMENTS FO THE YEA ENDED 30 SEPTEMBE 2015 CONTENTS PAGE - Directors responsibility for financial reporting 03 - Directors report 04 - Audit committee report 09 - Independent auditor s report 10 - Consolidated statement of financial position 11 - Consolidated statement of profit or loss and other comprehensive income 12 - Consolidated statement of changes in equity 13 - Consolidated statement of cash flows 14 - Notes to the consolidated financial statements 15 PAGE 2

4 DIECTOS ESPONSIBILITY FO FINANCIAL EPOTING The directors are responsible for the preparation and fair presentation of the consolidated annual financial statements of Sygnia Limited, comprising the consolidated statement of financial position at 30 September 2015, and 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, in accordance with International Financial eporting Standards and the requirements of the Companies Act of South Africa, and the report of the directors. EPOT BY THE COMPANY SECETAY In terms of S88(2)(e) of the Companies Act 2008, as amended and for the year ended 30 September 2015, I, David Ian Johnson, 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. The directors are also responsible for such internal control as the directors determine is necessary to enable the preparation of 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 Company and its subsidiaries to continue as going concerns and have no reason to believe that the businesses will not be going concerns in the year ahead. Company Secretary Cape Town 25 NOVEMBE 2015 The auditor is responsible for reporting on whether the consolidated financial statements are fairly presented in accordance with the applicable financial reporting framework. APPOVAL OF CONSOLIDATED ANNUAL FINANCIAL STATEMENTS The consolidated annual financial statements of Sygnia Limited, as identified in the first paragraph, were approved by the board of directors on 25 November 2015 and are signed by: DIECTO DIECTO PAGE 3

5 DIECTOS EPOT FO THE YEA ENDED 30 SEPTEMBE 2015 The directors have pleasure in presenting their report on the activities of the Group for the year ended 30 September MAIN BUSINESS AND OPEATIONS State of affairs Sygnia Limited (registration number 2007/025416/06) is a specialist financial services group based in South Africa and listed on the Johannesburg Stock Exchange ( JSE ). The Group focuses on the provision of investment management and administration solutions to institutional and retail clients predominantly located in South Africa. The main services provided by Sygnia include multi-manager investment solutions, index-tracking products, funds of South African hedge funds, customised/bespoke investment strategy management, transition management, stockbroking and investment administration services. Group results Sygnia s revenue is linked to its assets under management and administration, and the company is reliant on both market movements and new business inflows for growth. Despite a challenging year in the global and domestic financial markets, the company delivered a strong set of results for the 12 months to 30 September 2015, supported by growth in assets under management and administration of 21.4% to 137 billion (2014: 113 billion). Sygnia s key focus on lowering the cost of saving and investing for South Africans, and excellent performance across product lines, has resulted in total net inflows of 16.1 billion across all of the main business lines. As a consequence, Sygnia s revenue in the financial year to September 2015 grew by 41.2% to million compared to the prior financial year (2014: million), while total expenses, at million, rose by 27.5% (2014: million). This resulted in an increase in profits after tax of 54.2% to 59.3 million (2014: 38.5 million), and headline and diluted headline earnings per share of 43.4% to cents (2014: cents). The company listed on the main board of the Johannesburg Stock Exchange, in the financial services sector, on 14th October The above results are marginally better than the results communicated in the pre-listing statement published in October 2015 which included two months of forecast results. Name change and conversion to public company During the current financial year, Sygnia Investment Holdings No 2 Proprietary Limited was converted to a public company and renamed Sygnia Limited. Matters material for the shareholders to appreciate the state of affairs of the Group In preparation for the listing of the company on the Johannesburg Stock Exchange, Sygnia Investment Holdings No 2 Proprietary Limited was converted to a public company and renamed Sygnia Limited. Furthermore, the issued share capital of the company was increased from 200 ordinary shares on 30 September 2014 to 60,000,000 ordinary shares on 1 October 2014 by way of a share split. During the financial year Sygnia Limited purchased Sygnia Life Limited from Sygnia Investment Holdings Proprietary Limited. The purchase consideration was settled by the issuing of 40,000,000 ordinary shares in Sygnia Limited to Sygnia Investment Holdings Proprietary Limited and was accounted for as a common control transaction. This increased the ordinary shares in issue of Sygnia Limited to 100,000,000 as at 30 September The details of the transaction are set out in note 8 of the consolidated financial statements. PAGE 4

6 DIECTOS EPOT FO THE YEA ENDED 30 SEPTEMBE 2015 EVENTS SUBSEQUENT TO THE EPOTING DATE GOING CONCEN On 1 October 2015, Sygnia Asset Management repurchased a portion of its shares held by Ulundi Holdings Proprietary Limited for a consideration of 14,293,066. Ulundi Holdings exchanged its remaining shareholding in Sygnia Asset Management Proprietary Limited for shares in Sygnia Limited. This resulted in an additional 8,933,166 ordinary shares being issued. The consolidated annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. The basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. Sygnia Limited listed on the Main Board of the JSE in the financial services sector on 14 October The listing was facilitated by way of a private placement of 28,244,834 additional ordinary shares which were issued on the date of listing, resulting in 137,178,000 ordinary shares being listed on the JSE. On 14 October 2015 Sygnia Limited made an offer to participants of the employee share option scheme to acquire 2,595,242 ordinary shares at a 40% discount to the private placing price. The options shall be exercisable as follows: 20% shall be excercisable on the third anniversary of the option date, 30% on the fourth anniversary of the option date and 50% on the fifth anniversary of the option date. DIVIDENDS Dividends of 41,067,705 were declared during the year ended 30 September 2015 (2014: 12,000,000). Dividends are not accounted for until they have been approved by the Company s board of directors. No dividends have been declared or approved subsequent to the financial year end. The directors are not aware of any other matter or circumstances arising since the end of the financial period, not otherwise dealt with in the consolidated financial statements, which significantly affect the financial position of the Group or the results of their operations. PAGE 5

7 DIECTOS EPOT FO THE YEA ENDED 30 SEPTEMBE 2015 DIECTOS EMOLUMENTS The directors emoluments for services rendered (excluding share transactions) for the year ended 30 September 2015 were as follows: 2015 DIECTOS FEES Executive director BONUS TOTAL MF Wierzycka NJ Giles SJB Peile* Non-executive director KT Hopkins HI Bhorat SA Zinn IK Moyane MEDICAL ETIEMENT DIECTOS BONUS TOTAL AID FUND FEES Executive director MF Wierzycka NJ Giles SJB Peile* Non-executive director HI Bhorat * esigned as director effective 11 June As of 1 January 2014, contributions to retirement fund and medical aid are made by the directors in their personal capacity and not by the Group on their behalf. The executive directors of the Group are employed on the same terms and conditions as other employees and do not have separate service contracts in their capacity as Group directors. The non-executive directors are paid a monthly retaining fee as well as an attendance fee for their participation as board members as well as for their role in the other committees. There were no share based payments, termination benefits or other short term benefits paid to the directors during the year ended 30 September 2015 (2014: nil). PAGE 6

8 DIECTOS EPOT FO THE YEA ENDED 30 SEPTEMBE 2015 DIECTOS INTEEST IN SYGNIA LIMITED At 30 September 2015, prior to private placing and including the effect of the Ulundi settlement, the directors direct and indirect beneficial interests in the issued share capital of the company were: DEPENDANT DIECT BENEFICIAL INDIECT BENEFICIAL TOTAL PECENTAGE HELD MF Wierzycka # % NJ Giles % SJB Peile* # % HI Bhorat % At 14 October 2015, subsequent to the private placement: DEPENDANT DIECT BENEFICIAL INDIECT BENEFICIAL TOTAL PECENTAGE HELD MF Wierzycka # % NJ Giles % SJB Peile* # % HI Bhorat % At 30 September 2014 excluding the effect of the Sygnia Life acquisition that occurred on 1 October 2014: DEPENDANT DIECT BENEFICIAL INDIECT BENEFICIAL TOTAL PECENTAGE HELD MF Wierzycka % NJ Giles % SJB Peile* % * esigned as director effective 11 June # The above percentages have been calculated in accordance with the Listings equirements which state that direct and indirect beneficial interests include that of any associates. An associate is defined so as to include an individual s immediate family, and thus in this case MF Wierzycka, SJB Peile, and the Zatoka Trust are all associates of each other. PAGE 7

9 DIECTOS EPOT FO THE YEA ENDED 30 SEPTEMBE 2015 SPECIAL ESOLUTIONS At the special and annual general meetings of the Company held on 11 March 2015, 2 July 2015 and 11 September 2015, respectively, the following special resolutions were passed: 11 MACH 2015 Special esolution 1 - Increase authorised share capital. Special esolution 2 - Purchase of Sygnia Life Limited. Special esolution 3 - Formation of committee with specific authority to purchase Sygnia Life Limited. 2 JULY 2015 Special esolution 1 - Conversion from private company to public company. Special esolution 2 - Approval of name change. Special esolution 3 - Memorandum of incorporation. 11 SEPTEMBE 2015 Special esolution 1 - Listing of ordinary shares on the JSE. Special esolution 2 - Issue of shares in terms of the private placement. Special esolution 3 - epurchase of shares. Special esolution 4 - Approval of directors remuneration. Special esolution 5 - Financial assistance for subscription of securities. Special esolution 6 - Financial assistance to related or inter-related companies, directors or prescribed officers of the company. PAGE 8

10 AUDIT COMMITTEE EPOT FO THE YEA ENDED 30 SEPTEMBE 2015 The Audit Committee is a committee of the board of directors, and serves in an advisory capacity to the Board in discharging its duties relating to the safeguarding of assets, the operation of adequate systems, risk management and internal controls, the review of financial information and the preparation of the annual financial statements. This includes satisfying the Board that adequate internal, operating and financial controls are in place. TEMS OF EFEENCE The Audit Committee has adopted formal terms of reference that have been updated and approved by the board of directors, and has executed its duties during the past financial year in compliance with these terms of reference. Considered the independence of the external auditor and has concluded that the external auditor has been independent of the company throughout the year taking into account all other non-audit services performed and circumstances known to the committee. eceived and dealt appropriately with any complaints relating to the accounting practices and internal audit of the company, the content or auditing of its annual financial statements, the internal financial controls of the company, or to any related matter. Made submissions to the Board on any matter concerning the company s accounting policies, financial control, records and reporting. LEGAL EQUIEMENTS COMPOSITION AND MEETING POCESS The current members are Mr Ken Hopkins (Chairman), Prof Shirley Zinn and Mr Kaizer Moyane. The Audit Committee has complied with all applicable legal, regulatory and other responsibilities for the period under review. ANNUAL FINANCIAL STATEMENTS The committee comprises exclusively independent directors, and met twice during the year with senior management, including the chief executive officer, the finance director, the head of risk and certain other executive management. The external and internal auditors attend these meetings and have unrestricted access to the committee and to its chairman. Ad hoc meetings are held as required. Following our review of the annual financial statements for the year ended 30 September 2015, we are of the opinion that, in all material respects, they comply with the relevant provisions of IFS and the Companies Act 71 of 2008 and that they fairly present the financial position at 30 September 2015 of the Group and the results of operations and cash flows for the year then ended. STATUTOY DUTIES In execution of its statutory duties, as required in terms of the Companies Act and the Insurance Laws Amendment Act, during the past financial year the Audit Committee has: Ensured the appointment as external auditor of the company of a registered auditor who, in the opinion of the Audit Committee, was independent of the company. Determined the fees to be paid to the external auditor and such auditor s terms of engagement. Ensured that the appointment of the external auditor complies with the Companies Act and any other legislation relating to the appointment of such auditors. Determined the nature and extent of any non-audit services which the auditor may provide to the company or such services that the auditor may not provide to the company or related company. CHAIMAN OF THE AUDIT COMMITTEE 25 NOVEMBE 2015 PAGE 9

11 INDEPENDENT AUDITO S EPOT TO THE SHAEHOLDES OF SYGNIA LIMITED We have audited the consolidated financial statements of Sygnia Limited which comprise the consolidated statement of financial position at 30 September 2015, and the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, and the notes to the financial statements which include a summary of significant accounting policies and other explanatory notes, as set out on pages 11 to 61. Directors esponsibility for the Financial Statements The company s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial eporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Opinion In our opinion, these financial statements present fairly, in all material respects, the consolidated financial position of Sygnia Limited at 30 September 2015, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with International Financial eporting Standards and the requirements of the Companies Act of South Africa. Other matter The financial statements of Sygnia Limited for the year ended 30 September 2014 were audited by another auditor who expressed an unmodified opinion on those financial statements on 12 December Other eports equired by the Companies Act Auditor s esponsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. As part of our audit of the financial statements for the year ended 30 September 2015, we have read the eport of the Directors, the Audit Committee s eport and the eport by the Company Secretary for the purpose of identifying whether there are material inconsistencies between these reports and the audited financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited financial statements. However, we have not audited these reports and accordingly do not express an opinion on these reports. KPMG Inc. egistered Auditor Per GM Pickering Chartered Accountant (SA) egistered Auditor Director 25 November Mediterranean Street Foreshore Cape Town 8001 South Africa PAGE 10

12 CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBE 2015 ASSETS NOTES GOUP 2015 ESTATED GOUP 2014 Intangible assets Deferred tax assets Property and equipment Investments linked to investment contract liabilities Investments Loans receivable Taxation receivable Trade and other receivables Amounts owing by clearing houses Amounts owing by clients Cash and cash equivalents TOTAL ASSETS EQUITY Stated capital etained earnings eserves ( ) ( ) TOTAL EQUITY LIABILITIES Deferred tax liabilities Investment contract liabilities Third-party liabilities arising on consolidation of unit trust funds Taxation payable Trade payable and other accruals Dividend payable Amounts owing to clients Bank overdraft TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES PAGE 11

13 CONSOLIDATED STATEMENT OF POFIT O LOSS AND OTHE COMPEHENSIVE INCOME FO THE YEA ENDED 30 SEPTEMBE 2015 NOTES GOUP 2015 GOUP 2014 evenue Expenses ( ) ( ) Investment contract income Transfer to investment contract liabilities 22.2 ( ) ( ) Interest income Other investment income POFIT FOM OPEATIONS Finance costs ( ) (61 229) POFIT BEFOE TAX Income tax expense 24 ( ) ( ) TOTAL POFIT AND COMPEHENSIVE INCOME FO THE YEA EANINGS PE SHAE (CENTS) Basic and diluted PAGE 12

14 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FO THE YEA ENDED 30 SEPTEMBE 2015 NOTES STATED CAPITAL COMMON CONTOL ESEVE GOUP EQUITY ADJUSTMENT SHAE-BASED PAYMENT ESEVE ETAINED EANINGS TOTAL CAPITAL BALANCE AT 1 OCTOBE ( ) Changes in ownership interests Common control acquisition of subsidiary ( ) Adjusted balance at 1 October ( ) ( ) Total comprehensive income Total profit and comprehensive income for the year Total comprehensive income for the year Transactions with owners Dividends paid ( ) ( ) Total transactions with owners of the Group ( ) ( ) BALANCE AT 30 SEPTEMBE ( ) ( ) Total comprehensive income Total profit and comprehensive income for the year Total comprehensive income for the year Transactions with owners Dividends paid ( ) ( ) Transaction costs on issue of ordinary shares ( ) ( ) Total transactions with owners of the Group ( ) ( ) ( ) BALANCE AT 30 SEPTEMBE ( ) ( ) PAGE 13

15 CONSOLIDATED STATEMENT OF CASH FLOWS FO THE YEA ENDED 30 SEPTEMBE 2015 CASH FLOWS FOM OPEATING ACTIVITIES NOTES GOUP 2015 GOUP 2014 Cash generated by operations Dividends received Interest received Interest paid ( ) (61 229) Taxation paid ( ) ( ) NET CASH INFLOW FOM OPEATING ACTIVITIES CASH FLOWS FOM INVESTING ACTIVITIES Additions to property and equipment ( ) ( ) Additions to intangible assets ( ) ( ) Purchase of investments ( ) ( ) Proceeds on sale of investments Common control acquisition of subsidiary, net of cash acquired Proceeds on disposals of property and equipment NET CASH OUTFLOW FOM INVESTING ACTIVITIES ( ) ( ) CASH FLOWS FOM FINANCING ACTIVITIES Dividends paid ( ) ( ) Transaction costs on issue of ordinary shares ( ) - NET CASH OUTFLOW FOM FINANCING ACTIVITIES ( ) ( ) NET INCEASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of the year CASH AND CASH EQUIVALENTS AT END OF THE YEA PAGE 14

16 FO THE YEA ENDED 30 SEPTEMBE EPOTING ENTITY 3. PIO YEA ECLASSIFICATION Sygnia Limited is a company domiciled in the epublic of South Africa. The consolidated financial statements ( consolidated financial statements ) as at and for the year ended 30 September 2015 comprise the Company and its subsidiaries (together referred to as the Group ). The Group is primarily involved in the provision of investment management related services. The Company has been converted to a public company during the year, and is incorporated and domiciled in South Africa. The address of its registered office is 7th Floor, The Foundry, Cardiff Street, Green Point, Cape Town, Sygnia Limited listed on the JSE on 14 October Statement of compliance These financial statements comprise the consolidated financial statements of the Group and have been prepared in accordance with International Financial eporting Standards ( IFS ) and its interpretations adopted by the International Accounting Standards Board ( IASB ), the SAICA Financial eporting Guides as issued by the Accounting Practices Committee, the Financial eporting Pronouncements as issued by the Financial eporting Standards Council, the JSE Listings equirements and the requirements of the Companies Act of South Africa. 2. BASIS OF PEPAATION The financial statements have been prepared on the basis of accounting policies applicable to a going concern. The basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The Group has previously disclosed investment contract portfolio debtors and accrued interest as part of trade and other receivables. The Group has restated the current year financial statements to reclassify investment contract portfolio debtors and investment contract portfolio accrued interest from trade and other receivables to investments linked to investment contract liabilities as the Group believes this disclosure better reflects the nature of these assets and is in line with industry best practice. The reclassification impacts the comparative amounts previously presented as follows: Investments linked to investment contract liabilities increases by 165,569,864 and Trade and other receivables decreases by 165,569,864. The reclassification impacts the comparative amounts previously presented in statement of cash flows as follows: Increase in net purchase of investments linked to investment contract liabilities increased by 165,569,864 and the Decrease in trade and other receivables increased by 165,569,864. The net effect on the statement of financial position is nil. The Group also elected to reclassify cash flows in relation to investment contracts. In the interim financial statements for the period ended March 2015, Net purchases of investments linked to investment contract liabilities and Policyholder investment contracts were disclosed on the face of the statement of cash flows as Cash flows from investing activities and Cash flows from financing activities respectively. These amounts are now disclosed as cash flows from operating activities and grouped together with all other cash flow items relating to policyholder investment contracts in order to better present the movement in policyholder investment contracts. The reclassification impacts the amounts previously presented on the face of the interim 2015 statement of cash flows as follows: Net purchases of investments linked to investment contract liabilities changes from 3,741,609,191 to nil and Policyholder investment contracts changes from 3,696,890,860 to nil. The net financial effect on the statement of cash flows is nil. 4. INTEIM PEIOD EO The financial statements are presented in South African and, which is the functional currency of the companies within the Group. The financial statements have been prepared on the historical cost basis, except for the measurement of financial instruments. The principal accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements. The Group has amended the presentation of the statement of financial position in the current year to present assets and liabilities in their broad order of liquidity as this presentation provides more reliable and relevant information than separate current and noncurrent classifications. This method of presentation is also in line with industry best practice. The Group did not consolidate two unit trust funds over which it had contol in its interim financial statements for the period ended 31 March These unit trust funds have been consolidated in these financial statements as disclosed in note 20. Had these unit trust funds been consolidated in the interim financial statements, the statement of financial position would have been impacted as follows: investments linked to investment contract liabilities would have increased by 349,688,491 with a corresponding increase in third-party liabilities arising on consolidation of unit trust funds of 349,688,491. The error had no impact on the statement of profit or loss and other comprehensive income, statement of changes in equity or statement of cash flows. PAGE 15

17 FO THE YEA ENDED 30 SEPTEMBE ACCOUNTING POLICIES The accounting policies applied in the preparation of these consolidated financial statements conform to IFS and are consistent with those accounting policies applied in the preparation of the consolidated financial statements as at and for the year ended 30 September 2014, apart from the following accounting policies which are set out below. The accounting policies for investment contract liabilities, financial instruments and foreign exchange transactions are consistent with policies applied by Sygnia Life Limited in previous periods. An accounting policy has also been included for acquisition of business under common control as this is the first time the entity has entered into such a transaction, refer to note 8. STANDADS AND INTEPETATIONS AFFECTING AMOUNTS EPOTED IN THE CUENT PEIOD (AND/O PIO PEIODS) In the current year, the Group has applied a number of new and revised IFSs issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 October IAS 24: elated Party Disclosures: (Amendments resulting from Annual Improvements Cycle (management entities)) - effective annual periods beginning on or after 1 July The amendments had no financial impact on the Group. IAS 32 Financial Instruments: Presentation: (Amendments resulting from Annual Improvements Cycle (tax effect of equity distributions)) - effective annual periods beginning on or after 1 January The amendments had no financial impact on the Group. IAS 36 Impairment of Assets: (The amendment to IAS 36 clarifies the required disclosures of information about the recoverable amount of impaired assets if that amount is based on fair value less cost of disposal) - effective annual periods beginning on or after 1 January The amendments had no financial impact on the Group. STANDADS, AMENDMENTS AND INTEPETATIONS ISSUED BUT NOT YET EFFECTIVE At the date of authorisation of these financial statements, the following standards and interpretations that impact the Group were in issue but not yet effective: IFS 9 Financial Instruments: (New standard that forms the first part of a three-part project to replace IAS 39 Financial instruments: ecognition and Measurement) effective annual periods beginning on or after 1 January The impact of the standard is still under assessment. IFS 15 evenue from contracts with customers: (The standard emphasises how and when an IFS reporter will recognise revenue as well as requiring such entities to provide users of financial statements with more informative, relevant disclosures) - effective annual periods beginning on or after a 1 January The impact of the standard is still under assessment. IAS 1 Presentation of financial statements: (Amendments provide additional guidance on the application of materiality and aggregation when preparing financial statements) - effective annual periods beginning on or after 1 January The impact of the standard is still under assessment. IAS 16 Property, plant and equipment, and IAS 38 Intangible assets: (Amendment clarifies that a revenue-based method is not considered to be an appropriate method of depreciation and amortisation) - effective annual periods beginning on or after 1 January The amendments will have no impact on the Group s financial statements. IAS 27 Consolidated and separate financial statements: (Amendments allow an entity to apply the equity method in its separate financial statements to account for its investments in subsidiaries, associates and joint ventures) - effective annual periods beginning on or after 1 January The amendments will have no impact on the Group financial statements. BASIS OF CONSOLIDATION In terms of IFS 10 Consolidated Financial Statements, subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group has power over an entity, is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect these returns through its power over the entity. Subsidiaries are fully consolidated from the date on which control is obtained by the Group. They are deconsolidated from the date on which control ceases. The acquisition method of accounting is used to account for the acquisition of subsidiaries and businesses by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of acquisition, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are generally measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of acquisition over the fair value of the Group s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group s share of the net assets of the subsidiary acquired, the difference is recognised directly in profit or loss. PAGE 16

18 FO THE YEA ENDED 30 SEPTEMBE 2015 BASIS OF CONSOLIDATION (CONT.) Changes in ownership interests in subsidiaries are accounted for as group equity adjustments if they occur after control has already been obtained and they do not result in loss of control. Inter-company transactions, balances and unrealised gains or losses on transactions between Group companies are eliminated. Where consolidation of unit trust funds occur by virtue of the Group s investment into the fund, the income and expenditure components are disclosed in the statement of comprehensive income as well as the third-party share thereof. Assets and liabilities of the fund are included in the statement of financial position and the third-party liability is separately disclosed. asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. The useful life, depreciation method and residual value of all assets are reassessed annually. Depreciation is calculated on the straight-line method to write off the cost of each asset to its residual value over its estimated useful life. Assets are depreciated over the following periods: Artwork - installed as part of Over the lease term building Artwork - movable 25 years Owner occupied property 50 years BUSINESS COMBINATIONS UNDE COMMON CONTOL Computer equipment 3 years For business combinations involving entities or businesses under common control the Group, as acquirer, accounts for the common control transactions using book value accounting in the consolidated financial statements. The book value of the entity transferred is used. The Group has also elected to restate the comparatives figures it has previously presented in its consolidated financial statements to present the combining entities as if they have historically always been one consolidated entity. The Group recognises the difference between the consideration transferred and the share capital of the acquiree as an adjustment to equity. The adjustment is reflected as a separate common control reserve account in equity, the common control reserve. Office equipment 5 years Furniture and fittings 6 years Leasehold improvements Over the lease term Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in profit or loss. POPETY AND EQUIPMENT Property and equipment is stated at historical cost less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset s carrying amount or recognised as a separate PAGE 17

19 FO THE YEA ENDED 30 SEPTEMBE 2015 INTANGIBLE ASSETS Internally-generated intangible assets research and development expenditure Expenditure on research activities is recognised as an expense in the period in which it is incurred. An internally-generated intangible asset arising from the development phase of an internal project is recognised if, and only if, all of the following have been demonstrated: the technical feasibility of completing the intangible asset so that it will be available for use or sale; the intention to complete the intangible asset and use or sell it; the ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; the ability to measure reliably the expenditure attributable to the intangible asset during its development; and it is probable that the expected future economic benefits that are attributable to the asset will flow to the Group. The amount initially recognised for internally-generated intangible assets is the sum of the expenditure incurred from the date when the intangible asset first meets the recognition criteria listed above. When the costs incurred no longer meet the recognition criteria, capitalisation of expenses cease and no internally-generated intangible asset is recognise. The development expenditure is charged to profit or loss in the period in which it is incurred. Expenditure on an intangible asset that was initially charged to profit or loss is not recognised as a part of the cost of an intangible asset at a later date. Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred. Subsequent to initial recognition, internally-generated intangible assets are reported at cost less accumulated amortisation and accumulated impairment losses. Intangible assets are derecognised on disposal or when no future economic benefits are expected from its use. The gain or loss arising from derecognition is recognised in profit or loss. Intangible assets acquired separately Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated amortisations and accumulated impairment losses. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any change in estimate being accounted for on a prospective basis. Assets are amortised over the following periods: Purchased software 2 years TAXATION Income taxation expense represents the sum of the taxation currently payable and deferred taxation. Current taxation Current taxation is the expected taxation payable on the taxable income for the year, using taxation rates enacted or substantively enacted at the reporting date, and any adjustment to taxation payable in respect of previous years. Deferred taxation Deferred taxation is recognised in relation to temporary differences arising between the tax bases of assets and liabilities and their carrying values for financial accounting purposes. However, deferred taxation is not accounted for if it arises from initial recognition of goodwill; the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred taxation is charged or credited to profit or loss, except where it relates to items recognised directly to equity, in which case the deferred tax is also recognised directly in equity. Intangible assets have a finite useful life. Amortisation is calculated on the straight-line method to write off the cost of each asset over its estimated useful life. The useful life, amortisation method and residual value of all assets are reassessed annually. Assets are amortised over the following periods: Internally generated computer software 2 years PAGE 18

20 FO THE YEA ENDED 30 SEPTEMBE 2015 Deferred taxation (cont.) Financial assets held for trading Deferred tax assets relating to the carrying forward of unused tax losses are recognised to the extent that it is probable that future taxable profit will be available against which the unused tax losses can be utilised. The carrying amount of deferred tax assets is reviewed at each reporting date and is reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on a net basis. FINANCIAL INSTUMENTS ecognition and de-recognition of financial instruments Financial instruments are recognised when the Group becomes a party to the contractual provisions of the particular instrument. The Group de-recognises a financial asset when: The contractual rights to the cash flows arising from the financial assets have expired or been forfeited by the Group; or It transfers the financial asset including substantially all the risks and rewards of ownership of the asset; or It transfers the financial asset, neither retaining nor transferring substantially all the risks and rewards of ownership of the asset, but no longer retains control of the asset. A financial liability is derecognised when the liability is extinguished, that is, when the obligation specified in the contract is discharged, cancelled or has expired. A financial asset is classified in this category if acquired principally for the purpose of selling or buying back in the short term. Financial assets held for trading include investments. Measurement is initially at fair value with transaction costs recognised in profit or loss. Subsequently their fair values are remeasured and all gains and losses, realised and unrealised, are recognised in profit or loss in the period in which they arise, without any deduction for transaction costs it may incur on their disposal. Dividend income on financial assets held for trading is recognised in profit or loss as dividend income. Financial assets designated at fair value though profit or loss Financial assets designated at fair value through profit or loss are initially recognised at fair value and transaction costs are expensed in the profit or loss. After initial recognition, the Group measures financial assets designated at fair value through profit or loss at fair values without any deduction for transaction costs it may incur on their disposal. All investments linked to investment contract liabilities issued by the Group are designated by the Group on initial recognition as at fair value through profit or loss. Listed investments are recognised in the statement of financial position at fair value, using closing prices on share and bond exchanges. Investments in Collective Investments Schemes are recognised at fair value using the quoted exit price provided by the fund manager. Unlisted investments are valued by the directors taking into account prevailing interest rates, market conditions and underlying investments. Derivatives are designated by the Group on initial recognition as at fair value through profit or loss. All purchases and sales of financial assets that require delivery within the time frame established by regulation or market convention ( regular way purchases and sales) are recognised at trade date, which is the date that the Group commits to purchase or sell the asset. Otherwise such transactions are treated as derivatives until settlement occurs. Loans receivable are recognised (at fair value plus attributable transaction costs) when cash is advanced to borrowers. Trade and other receivables are recognised when the Group becomes party to the contractual provisions of the particular instrument. Classification and measurement Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income earned on loans and receivables is recognised by applying the effective interest rate. Amounts owing by clearing houses and clients are classified as loans and receivables and are settled within five days after the transaction occurred in terms of the clearing house rules of the JSE. Financial assets are classified as at fair value through profit or loss where the financial asset is either held for trading or it is designated as at fair value through profit or loss. PAGE 19

21 FO THE YEA ENDED 30 SEPTEMBE 2015 Cash and cash equivalents Cash and cash equivalents comprise cash on hand, deposits held at call with banks, and other money market assets with less than ninety days to maturity from the date of acquisition. For the purposes of the cash flow statement, cash and cash equivalents comprise balances due from and owing to and owing to banks. After initial recognition, the Group measures cash at amortised cost using the effective interest method. paid on the financial liability. Financial liabilities issued by the Group are designated by the Group on initial recognition as at fair value through profit or loss. This designation eliminates a measurement inconsistency that would otherwise arise if these financial liabilities were not measured at fair value since the assets held to back the investment financial liabilities are also measured at fair value. Financial liabilities designated at fair value through profit or loss - investment contract liabilities Financial liabilities and equity instruments Classification as debt or equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. Financial liabilities Financial liabilities at fair value through profit or loss Financial liabilities are measured at fair value through profit or loss where the financial liability is held for trading or it is designated as at fair value through profit or loss. A financial liability other than a financial liability held for trading may be designated as at fair value through profit or loss upon initial recognition if: such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the Group s documented risk management or investment strategy, and information about the grouping is provided internally on that basis. Financial liabilities at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest In terms of the definition of insurance contracts in IFS 4, the contracts issued by a subsidiary of Sygnia Limited, Sygnia Life Limited, do not qualify as insurance contracts. These contracts are accounted for in terms of IAS 32 and IAS 39 on financial instruments. Amounts received under investment contracts are recorded as deposits and credited directly to investment contract liabilities. Amounts paid under investment contracts are recorded as deductions from investment contract liabilities. The Group issues investment contracts that transfer financial risk to the holders of the instruments. Investment contracts are recognised as financial liabilities in the statement of financial position when the Group becomes party to their contractual provisions. Contributions received from or withdrawals made by policyholders are recognised in investment contract liabilities. All investment contracts issued by the Group are designated by the Group on initial recognition as at fair value through profit or loss. This designation eliminates or significantly reduces a measurement inconsistency that would otherwise arise if these financial liabilities were not measured at fair value since the assets held to back the investment contract liabilities are also measured at fair value. Changes in the fair value of investment contracts are included in profit or loss as part of the transfer to investment contract liabilities in the period in which they arise. Disclosure in the statement of profit or loss and other comprehensive income has been made to reflect all income, including realised and unrealised profit, relating to policyholders into one line item called investment contract income and all the expenses relating to policyholders into one line item called transfer to investment contract liabilities. Disclosure in the statement of financial position has been made to reflect all the policyholder assets in one line item called investments linked to investment contracts. No hedge accounting is applied. PAGE 20