SYGNIA LIMITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

Transcription

1 SYGNIA LIMITED CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH 2016

2 SYGNIA HIGHLIGHTS FO THE SIX MONTHS ENDED 31 MACH 2016 COMPAATIVES SHOWN AE FO THE PEIODS ENDING 31 MACH 2015 AND 31 MACH 2014 POFIT FO THE SIX MONTHS UP 19.4% ASSETS UNDE MANAGEMENT AND ADMINISTATION UP 20.7% m m b EVENUE FO THE SIX MONTHS UP 19.7% NUMBE OF STAFF UP 10.0% FIST DIVIDEND SINCE LISTING 25c PE SHAE SYGNIA LIMITED egistration Number: 2007/025416/06 01

3 GENEAL INFOMATION Nature of business and principal activities Country of incorporation and domicile Sygnia Limited and its subsidiaries ( the Group ) are a specialist financial services group headquartered 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 the Group include multi-manager investment solutions, index-tracking investment solutions, customised/bespoke investment strategy management, stockbroking, transition management and investment administration/platform services. South Africa Directors MF Wierzycka (CEO) HI Bhorat (Chairman) # NJ Giles (CFO) KT Hopkins * # SA Zinn (Lead Independent) * # IK Moyane * # * Independent # Non - executive egistered office 7th Floor, The Foundry Cardiff Street Green Point Cape Town 8001 Postal address PO Box Waterfront 8002 Auditor KPMG Inc. egistered Auditors 1 Mediterranean Street Foreshore Cape Town 8001 South Africa Company secretary DI Johnson N Muller esigned - 23/03/2016 Appointed - 23/03/2016 Company registration number 2007/025416/06 SYGNIA LIMITED egistration Number: 2007/025416/06 02

4 CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH 2016 CONTENTS COMMENTAY OF THE DIECTOS INDEPENDENT AUDITO S EVIEW EPOT CONDENSED CONSOLIDATED INTEIM STATEMENT OF FINANCIAL POSITION CONDENSED CONSOLIDATED INTEIM STATEMENT OF POFIT O LOSS AND OTHE COMPEHENSIVE INCOME CONDENSED CONSOLIDATED INTEIM STATEMENT OF CHANGES IN EQUITY CONDENSED CONSOLIDATED INTEIM STATEMENT OF CASH FLOWS NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS SYGNIA LIMITED egistration Number: 2007/025416/06 03

5 COMMENTAY OF THE DIECTOS FO THE SIX MONTHS ENDED 31 MACH 2016 HIGHLIGHTS ASSETS UNDE MANAGEMENT AND ADMINISTATION OF 146 BILLION DILUTED HEADLINE EANINGS PE SHAE OF CENTS INTEIM DIVIDEND PE SHAE OF CENTS Shareholders are advised that comparisons of headline earnings per share and diluted headline earnings per share to prior periods are distorted by the number of shares in issue as at 30 September 2015 and 31 March 2015 relative to 31 March The number of shares in issue increased from to (+37.2%) due to Sygnia Limited s ( Sygnia ) listing on the Johannesburg Stock Exchange ( JSE ) in October FINANCIAL ESULTS The past six month period to 31 March 2016 has been particularly challenging for most cyclical businesses, such as asset managers and investment administrators, whose revenues depend on the value of assets under management and administration, and hence are influenced by the vagaries of the investment markets. The extraordinary volatility in the South African markets, as well as the and, has directly reflected on the monthly volatility of earnings. Over the period, the FTSE/JSE All Share Index hit a high of and a low of , eventually returning 5.6% for the period, driven largely by a recovery in commodity prices, the JSE All Bond Composite Index delivered -0.3%, the MSCI World Index 5.1% in US dollar terms and the and depreciated to as low as 16.98/US$, before strengthening to 14.65/US$ on 31 March Despite demanding market conditions, Sygnia grew its assets under management and administration by 20.7% to 146 billion (March 2015: 121 billion) and its revenue by 19.7% relative to the same period to 31 March Net inflows over the 12 month period amounted to 11.4 billion. Our embrace of the label of being a market disruptor has been successful in positioning Sygnia as a consumer champion, while our focus on index-tracking investment strategies is slowly gaining market recognition. Sygnia s profit after tax grew by 19.4% relative to the same period to 31 March 2015 despite a significant increase in operating expenses associated with strategic expansion, the cost of the listing on the JSE and a new acquisition. The dilutionary effect of issuing shares has resulted in diluted headline earnings per share of cents (March 2015: cents). BUSINESS UPDATE Sygnia listed on the JSE on 14 October 2015 with the stated objective of growing in a number of core areas, including multimanagement, index-tracking, funds of hedge funds management, investment administration and the umbrella fund market. The listing itself was intended to help Sygnia enhance its public profile, brand recognition and general awareness in both the institutional and the retail markets in South Africa in order to facilitate growth, as well as to strengthen the balance sheet in pursuit of faster organic growth and systems development strategies. The past six months have involved a strong focus on execution in all the areas identified at the time of the listing. The key highlights of the achievements of each business area are described below. INSTITUTIONAL MAKET Institutional assets under management and administration as at 31 March 2016: billion (March 2015: billion) Net inflows in the 12 months to 31 March 2016: 10.2 billion The flow of assets into our multi-manager and funds of hedge funds products has been particularly pleasing. Some of this has been, unfortunately, offset by negative market movements and net outflows from the investment administration division as a consequence of corporate retrenchments and restructuring in the broader economy which have translated into withdrawals of savings from occupational retirement funds. Despite a challenging start to the year which benefitted asset managers with significant commodity exposure, the Sygnia Signature product range continued to perform well relative to its multi-manager peers: Our flagship risk-profiled multi-manager products, the Sygnia Signature 40, 60 and 70 Funds, ranked 1st in terms of returns over 3 years and 5 years in all their respective risk categories in the Alexander Forbes Multi-Manager Watch TM Survey to 31 March 2016, while the Sygnia Signature 50 Fund ranked 1st over 3 years and 2nd over 5 years. When compared to large single asset managers performances, as published in the Alexander Forbes Global Large Manager Watch TM Survey to March 2016, the Sygnia Signature 70 Fund ranked 1st over 3 years and 2nd over 5 years. The significance of this lies in the fact that multi-manager products can compete directly with single asset managers products for top-level performance and can offer a compelling alternative to the self-selection of single asset managers for retirement funds. The index tracking multi-asset class products have also done well as active asset managers continued to struggle to outperform market indices, with the flagship Sygnia Skeleton 70 Fund delivering grossof-fees returns of 5.51% over 1 year, 14.62% per annum over 3 years and 16.18% per annum over 5 years to 31 March SYGNIA LIMITED egistration Number: 2007/025416/06 04

6 / COMMENTAY OF THE DIECTOS FO THE SIX MONTHS ENDED 31 MACH 2016 In recognition of its 2015 performance Sygnia has been nominated for two industry awards at the 2016 Imbasa Yegolide Awards, the Manager of Managers of the Year (Multi-Manager) and the Overall Investment / Asset Manager of the Year. Winners will be announced in June ETAIL MAKET etail assets under management as at 31 March 2016: 10.6 billion (March 2015: 8.5 billion) Net inflows in the 12 months to 31 March 2016: 1.2 billion Sygnia s retail business showed pleasing growth with a visible pickup following the publicity associated with the listing and the growing awareness of index-tracking as a plausible manner of managing assets. Most significantly our LISP, launched in 2014, has grown both in terms of assets and client numbers in a testament to Sygnia becoming more known among retail investors. Clients investing through the Sygnia LISP stood at as at 31 March 2016 (March 2015: 2 434, September 2015: 3 435). Assets under administration on the LISP grew to 4.33 billion (March 2015: 1.91 billion, September 2015: 3.00 billion). The performance of Sygnia s index tracking unit trusts has held up well against actively managed peers: - The Sygnia Skeleton Balanced 70 Fund, a passively managed highequity multi-asset class unit trust, ranked 25th out of 115 unit trusts*, most of them actively managed, in the South African Multi-Asset High Equity category since its inception in October 2013 to March The Sygnia SWIX Index Fund, a passively managed equity unit trust, ranked 28th out of 124 unit trusts*, most of them actively managed, in the South African Equity General category since its inception in October 2013 to March The Sygnia Top 40 Index Fund, a passively managed equity unit trust, ranked 6th out of 17 unit trusts*, most of them actively managed, in the South African Equity Large Cap category since its inception in November 2013 to March *Source: MoneyMate The retail division depends on robust infrastructure and hence Sygnia continued to invest in both people and systems in order to meet the rapid expansion of that area of the business. NEW STATEGIC INITIATIVES Sygnia Umbrella etirement Fund Sygnia acquired the Gallet Employee Benefits Group with effect from 1 April 2016 in order to speed up its expansion into the umbrella fund market. Umbrella funds are increasingly becoming the vehicle of choice used by companies to provide retirement benefits for employees in place of stand-alone retirement fund arrangements. This represents a significant growth opportunity for companies that can provide competitive umbrella fund propositions. Apart from benefitting from the above trend, Sygnia also intends to disrupt the existing umbrella fund market, estimated at 400 billion, by offering a more innovative, streamlined and cost-effective proposition. To that effect, the Sygnia Umbrella etirement Fund ( SUF ) was launched on 1 April SUF is revolutionary in that it offers both in-fund preservation and annuitisation with no need for members to leave SUF on retirement or termination of employment. Most relevantly, they can retain their investments in institutionally-priced investment products instead of being forced, by default, into costly unit trusts. SUF also reduces the overall charges associated with an umbrella fund proposition by approximately 70% relative to its peers. There are no consulting and no administration fees. The only applicable fee is the asset management fee associated with investments. This allows participating employers to appoint independent financial advisors. Given the positive publicity SUF has enjoyed since its launch, we expect this to be one of Sygnia s significant drivers of growth going forward. Sygnia oboadvisor Sygnia has spent significant effort on developing the Sygnia oboadvisor, a digital advisory platform launched on 16 May To date this initiative has resulted in significant media and public interest. Going forward, the Sygnia oboadvisor provides an alternative retail distribution channel for Sygnia s low-cost indextracking products, and an advisory underpin to SUF. Based on international experience, this is likely to be of appeal to younger savers in search of simple and cost-effective investment options. Market Awareness Sygnia has appointed an advertising agency to enable it to gain broader public recognition through an advertising campaign to be launched in the second half of We expect that the transition from reliance on P to broader advertising should increase the visibility of Sygnia s low-cost savings and investment product offerings. SYGNIA LIMITED egistration Number: 2007/025416/06 05

7 / COMMENTAY OF THE DIECTOS FO THE SIX MONTHS ENDED 31 MACH 2016 TANSFOMATION Sygnia is committed to being a representative South African company. To that effect the company continues to promote the principles embodied in the Financial Sector Code across the business. Broad-based staff ownership has been facilitated through listing the company on the Johannesburg Stock Exchange. Sygnia Asset Management is certified as a Level 2 contributor in terms of the Financial Services Sector Code. Shareholders are advised, however, that the new Draft Amended Financial Services Sector Code gazetted in March 2016 is substantially more demanding on all financial services companies. This means that Sygnia will undertake new initiatives to retain an acceptable level of compliance later in This may include further measures to broaden its ownership base. INTEIM CASH DIVIDEND EXTENAL AUDIT EVIEW The external auditors, KPMG Inc., reviewed the condensed consolidated statement of financial position of Sygnia Limited Group as at 31 March 2016 and the related condensed consolidated statement of comprehensive income, changes in equity and cash flows for the period then ended, and other explanatory notes. The review has been conducted in accordance with the International Standard on eview Engagements Copies of the unmodified report of KPMG Inc. are available for inspection at the registered office of the company. Magda Wierzycka Chief Executive Officer Sygnia is committed to rewarding its shareholders with regular distributions of free cash flow generated. Accounting for projected cash requirements, a gross dividend (no 1) for the interim period ended 31 March 2016 of cents per share has been declared out of income reserves, resulting in a net dividend of cents per share for shareholders subject to Dividends Tax ( DT ). In compliance with the JSE Listings equirements, the following dates are applicable: Last day to trade: Thursday, 9 June 2016 Shares trade ex dividend: Friday, 10 June 2016 ecord date: Friday, 17 June 2016 Payment date: Monday, 20 June 2016 Share certificates may not be dematerialised or re-materialised between, Friday, 10 June 2016 and Friday, 17 June 2016 both dates inclusive. Dividends declared after 31 March 2012 are subject to DT, where applicable. In terms of the DT, the following additional information is disclosed: The local DT rate is 15% The number of ordinary shares in issue at the date of this declaration is Sygnia s tax reference number is 9334/221/16/6 SYGNIA LIMITED egistration Number: 2007/025416/06 06

8 INDEPENDENT AUDITO S EVIEW EPOT ON CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS TO THE SHAEHOLDES OF SYGNIA LIMITED We have reviewed the condensed consolidated interim financial statements of Sygnia Limited contained in the accompanying interim report, which comprise the condensed consolidated interim statement of financial position at 31 March 2016 and the condensed consolidated interim statements of profit or loss and other comprehensive income, changes in equity and cash flows for the period then ended, and selected explanatory notes. DIECTOS ESPONSIBILITY FO THE INTEIM FINANCIAL STATEMENTS The Directors are responsible for the preparation and presentation of these interim financial statements in accordance with International Financial eporting Standard, IAS 34 Interim Financial eporting, the SAICA Financial eporting Guides, as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial eporting Standards Council 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 interim financial information that are free from material misstatement, whether due to fraud or error. CONCLUSION Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed consolidated interim financial statements of Sygnia Limited for the period ended 31 March 2016 are not prepared, in all material respects, in accordance with International Financial eporting Standard, IAS 34 Interim Financial eporting, the SAICA Financial eporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial eporting Standards Council and the requirements of the Companies Act of South Africa. KPMG Inc. Per GM Pickering Chartered Accountant (SA) egistered Auditor 25 May 2016 AUDITO S ESPONSIBILITY Our responsibility is to express a conclusion on these interim financial statements. We conducted our review in accordance with International Standard on eview Engagements (ISE) 2410, eview of Interim Financial Information Performed by the Independent Auditor of the Entity. ISE 2410 requires us to conclude whether anything has come to our attention that causes us to believe that the interim financial information are not prepared in all material respects in accordance with the applicable financial reporting framework. This standard also requires us to comply with relevant ethical requirements. A review of interim financial information in accordance with ISE2410 is a limited assurance engagement. We perform procedures primarily consisting of making inquiries of management and others within the entity, as appropriate, and applying analytical procedures, and evaluate the evidence obtained. The procedures performed in a review are substantially less in scope than and differ in nature from those performed in an audit conducted in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these interim financial statements. SYGNIA LIMITED egistration Number: 2007/025416/06 07

9 CONDENSED CONSOLIDATED INTEIM STATEMENT OF FINANCIAL POSITION AT 31 MACH 2016 ESTATED NOTES EVIEWED 31 MACH 2016 AUDITED 30 SEPTEMBE 2015 EVIEWED 31 MACH 2015 ASSETS 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 income eserves ( ) ( ) ( ) TOTAL EQUITY LIABILITIES Deferred tax liabilities Investment contract liabilities Third-party liabilities arising on consolidation of unit trust funds Taxation payable Trade and other payables Dividend payable Amounts owing to clients Bank overdraft TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES SYGNIA LIMITED egistration Number: 2007/025416/06 08

10 CONDENSED CONSOLIDATED INTEIM STATEMENT OF POFIT O LOSS AND OTHE COMPEHENSIVE INCOME FO THE SIX MONTHS ENDED 31 MACH 2016 NOTES EVIEWED SIX MONTHS ENDED 31 MACH 2016 AUDITED FO THE YEA ENDED 30 SEPTEMBE 2015 EVIEWED SIX MONTHS ENDED 31 MACH 2015 evenue Expenses ( ) ( ) ( ) Investment contract income Transfer to investment contract liabilities ( ) ( ) ( ) Interest income Other investment income Fair value adjustment to third-party liabilities ( ) - - POFIT FOM OPEATIONS Finance costs ( ) ( ) ( ) POFIT BEFOE TAX Income tax expense ( ) ( ) ( ) TOTAL POFIT AND COMPEHENSIVE INCOME FO THE PEIOD EANINGS PE SHAE (CENTS) 9 - Basic Diluted HEADLINE EANINGS PE SHAE (CENTS) - Basic Diluted SYGNIA LIMITED egistration Number: 2007/025416/06 09

11 CONDENSED CONSOLIDATED INTEIM STATEMENT OF CHANGES IN EQUITY FO THE PEIOD ENDED 31 MACH 2016 STATED CAPITAL COMMON CONTOL ESEVE GOUP EQUITY ADJUSTMENT SHAE-BASED PAYMENT ESEVE ETAINED INCOME TOTAL EQUITY BALANCE AT 1 OCTOBE AUDITED ( ) ( ) Total comprehensive income Total profit and comprehensive income for the period Total comprehensive income for the period Transactions with owners Dividends paid ( ) ( ) Total transactions with owners ( ) ( ) BALANCE AT 31 MACH EVIEWED ( ) ( ) Total comprehensive income Total profit and comprehensive income for the period Total comprehensive income for the period Transactions with owners Dividends paid ( ) ( ) Transaction costs on issue of ordinary shares ( ) ( ) Total transactions with owners ( ) ( ) ( ) BALANCE AT 30 SEPTEMBE AUDITED ( ) ( ) Total comprehensive income Total profit and comprehensive income for the period Total comprehensive income for the period Transactions with owners Share issue Share option expense Transaction costs on issue of ordinary shares ( ) ( ) Total transactions with owners BALANCE AT 31 MACH EVIEWED ( ) ( ) SYGNIA LIMITED egistration Number: 2007/025416/06 10

12 CONDENSED CONSOLIDATED INTEIM STATEMENT OF CASH FLOWS FO THE SIX MONTHS ENDED 31 MACH 2016 EVIEWED SIX MONTHS ENDED 31 MACH 2016 AUDITED YEA ENDED 30 SEPTEMBE 2015 ESTATED EVIEWED SIX MONTHS ENDED 31 MACH 2015 CASH FLOWS FOM OPEATING ACTIVITIES Profit before tax Non-cash movements and adjustments to profit before tax * ( ) ( ) Changes in working capital Cash utilised by policyholder activities ( ) ( ) ( ) Dividends received Interest received Interest paid ( ) ( ) ( ) Taxation paid ( ) ( ) ( ) NET CASH INFLOW FOM OPEATING ACTIVITIES CASH FLOWS FOM INVESTING ACTIVITIES Additions to property and equipment ( ) ( ) ( ) Additions to intangible assets ( ) ( ) ( ) Net purchases of investments ( ) ( ) ( ) Proceeds on disposals of equipment NET CASH OUTFLOW FOM INVESTING ACTIVITIES ( ) ( ) ( ) CASH FLOWS FOM FINANCING ACTIVITIES Dividends paid - ( ) ( ) Issue of ordinary shares Transaction costs on issue of ordinary shares ( ) ( ) - NET CASH INFLOW / (OUTFLOW) FOM FINANCING ACTIVITIES ( ) ( ) NET INCEASE IN CASH AND CASH EQUIVALENTS Cash and cash equivalents at beginning of the period CASH AND CASH EQUIVALENTS AT END OF THE PEIOD Cash and cash equivalents at the end of the period included the following cash held on behalf of policyholders and customers Note to the statement of cash flows: Cash held in overnight settlement accounts on behalf of policyholders of Sygnia Life and customers of Sygnia Securities is included on the face of the balance sheet under Cash and cash equivalents with a corresponding payable to clients. This results in the movement in these cash amounts being disclosed in the statement of cash flows. Changes in these amounts are shown under the Changes in working capital, under the Cash Flows from Operating Activities section on the statement of cash flows. These cash amounts fluctuate on a daily basis and can result in significant fluctuations if comparing Changes in working capital between reporting periods. * Non-cash movements and adjustments to profit before tax include depreciation, amortisation, fair value adjustments to investments and share based payment expense. SYGNIA LIMITED egistration Number: 2007/025416/06 11

13 NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH EPOTING ENTITY Sygnia Limited is a company domiciled in the epublic of South Africa. The condensed consolidated interim financial statements ( interim financial statements ) as at, and for the six months, ended 31 March 2016 comprise the company, its subsidiaries and consolidated unit trust funds (together referred to as the Group ). The Group is primarily involved in the provision of investment management and administration related services. Sygnia Limited listed on the Johannesburg Stock Exchange ( JSE ) on 14 October BASIS OF PEPAATION The interim financial statements are prepared in accordance with International Financial eporting Standard (IFS), IAS 34 Interim Financial eporting, the SAICA Financial eporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial eporting Standards Council, the requirements of the Companies Act 71 of 2008 of South Africa and the JSE Listings equirements. The interim 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 interim financial statements are presented in South African ands, which is the functional currency of the Group. The interim financial statements have been prepared on the historical cost basis, except for the measurement of certain financial instruments which are measured at fair value. The principal accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial statements. The condensed consolidated interim financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 30 September to investments linked to investment contract liabilities in the financial statements for the year ended 30 September 2015, 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 interim comparative amounts previously presented as follows: Investments linked to investment contract liabilities increases by and Trade and other receivables decreases by The net effect on the statement of financial position is nil. The Group also elected to reclassify cash flows in relation to investment contracts for the period ended 31 March Previously Net purchases of investment 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. The amount is 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. These amounts are included in cash utilised by policyholder activities on the face of the statement of cash flows. The reclassification impacts the comparative amounts previously presented in the interim statement of cash flows for the period ended 31 March 2015 as follows: Net purchases of investment linked to investment contract liabilities increases by to nil and Policyholder investment contracts decreases by to nil. The net financial effect on the statement of cash flows is nil. 4. INTEIM PIO PEIOD EO The Group did not consolidate two unit trust funds over which it had control in its interim financial statements for the period ended 31 March These unit trust funds were consolidated in the financial statements for the year ended 30 September 2015 and have been consolidated in these interim financial statements. The inclusions of these unit trust funds in the comparative figures as at 31 March 2015 and in these interim financial statements are as follows: investments linked to investment contract liabilities in the statement of financial position has increased by with a corresponding increase in third-party liabilities arising on consolidation of unit trust funds of 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. These condensed consolidated interim financial statements have been prepared under the supervision of the Financial Director, NJ Giles CA(SA). 3. PIO INTEIM PEIOD ECLASSIFICATION The Group previously disclosed investment contract portfolio debtors and accrued interest as part of trade and other receivables in the interim financial statements for the period ended 31 March The Group reclassified investment contract portfolio debtors and investment contract portfolio accrued interest from trade and other receivables SYGNIA LIMITED egistration Number: 2007/025416/06 12

14 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH ACCOUNTING POLICIES The accounting policies applied in the preparation of these condensed consolidated interim 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 The following new or revised IFSs and interpretations that are applicable to the Group have effective dates applicable to future financial years and have not been early adopted: IFS 9 Financial Instruments (effective 1 January 2018) 7. SEGMENT INFOMATION The Group has identified Sygnia s Executive Committee as the Chief Operating Decision Maker (CODM). The responsibility of the executive committee is to assess performance and to make resource allocation decisions across the Group. The Group provides investment management and administration services to institutional and retail clients predominantly located in South Africa. No disaggregated information is provided to the CODM on the separate operations of the Group, and the CODM assesses operating performance and makes resource decisions about the Group based on the combined results of these operations. The Group has therefore concluded that the combined operations of the Group constitute one operating segment. IFS 15 evenue from Contracts with Customers (effective 1 January 2018) IFS 16 - Leases (effective 1 January 2019) IAS 1 - Disclosure intiative amendments (effective 1 January 2016) The impact of the application of these revised standards and interpretations in future financial reporting periods on the Group s reported results, financial position and cash flows is still being assessed. Share-based payments The Group grants share options to certain employees under an equitysettled share-based compensation scheme. Equity-settled share-based payments are measured at fair value at the grant date. The fair value determined at the grant date of the equitysettled share-based payments is expensed, with a corresponding increase in equity, on a straight-line basis over the vesting period based on management s estimate of the shares that will vest and adjusted for the effect of non market-based vesting conditions. These share-based payments are not subsequently revalued. 6. USE OF ESTIMATES AND JUDGEMENTS In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 30 September 2015, except for estimates relating to the share based payments during the current reporting period. The valuation of the share based payment expense is a key area of judgement where inputs based on observable market data are used to estimate the fair value of the share based payment. Please refer to note 10 for more information. SYGNIA LIMITED egistration Number: 2007/025416/06 13

15 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH STATED CAPITAL NUMBE OF SHAES STATED CAPITAL Authorised 500,000,000 Ordinary shares of no par value (September 2015: 500,000,000 Ordinary shares of no par value) ISSUED As at 1 October Share split Issue of ordinary shares As at 31 March eviewed Transaction costs on issue of ordinary shares - ( ) As at 30 September Audited Issue of ordinary shares - 1 October 2015 * Issue of ordinary shares - 14 October 2015 * Transaction costs on issue of ordinary shares - ( ) AS AT 31 MACH EVIEWED The unissued shares at 31 March 2016 are under the control of the directors until the next annual general meeting. The directors are authorised to buy back shares under general approval subject to certain limitations and the JSE listing requirements. * The issue of ordinary shares on 1 October 2015 and 14 October 2015 relate to the Ulundi Settlement and Private Placement respectively. Please refer to Sygnia Limited s Pre-Listing statement issued on 1 October 2015 for more information. SYGNIA LIMITED egistration Number: 2007/025416/06 14

16 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH EANINGS AND HEADLINE EANINGS PE SHAE EVIEWED SIX MONTHS ENDED 31 MACH 2016 AUDITED YEA ENDED 30 SEPTEMBE 2015 EVIEWED SIX MONTHS ENDED 31 MACH 2015 Profit attributable to ordinary shareholders Non-headline items (net of tax) - Loss on disposal of furniture and equipment Impairment of intangible assets HEADLINE EANINGS Number of shares issued Weighted average number of shares (basic) Weighted average number of shares (diluted) EANINGS PE SHAE CENTS CENTS CENTS Earnings per share (basic) Earnings per share (diluted) Headline earnings per share (basic) Headline earnings per share (diluted) Net asset value per share (cents) Tangible net asset value per share (cents) SHAE BASED PAYMENT During the period Sygnia made an offer to participants of the employee share option scheme to acquire ordinary shares in Sygnia Limited. 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. Options exercised by participants once the minimum date has passed will be settled by the issue of shares in Sygnia Limited. If a participant ceases to be employed by the Group, all options of the participant are forfeited. For the six months ended 31 March 2016, the Group has recognised as a share-based payment expense in the statement of profit or loss and other comprehensive income (30 September 2015: nil; 31 March 2015: nil). Allocation date 1 October February 2016 Number of shares Vesting period 1 October 2015 to 30 September February 2016 to 31 January 2021 Strike price Value of option The value of the option represents the fair value on grant date in accordance with IFS The option was valued using a Finite Difference Scheme under Geometric Brownian motion option pricing model with the following inputs. Weighted average expected volatility (%) 26.57% 37.47% Weighted average option life (years) Weighted average dividend yield (%) 7.01% 5.34% Weighted average risk-free interest rate (%) 7.83% 8.39% Weighted average vesting period (years) SYGNIA LIMITED egistration Number: 2007/025416/06 15

17 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH SHAE BASED PAYMENT (CONT.) DETAILS OF NUMBE OF SHAE OPTIONS DUING THE PEIOD EVIEWED 31 MACH 2016 AUDITED 30 SEPTEMBE 2015 EVIEWED 31 MACH 2015 At beginning of period Allocated during the period Forfeited during the period ( ) - - Exercised during the period AT END OF PEIOD As part of the listing process, Sygnia issued ordinary shares to 59 staff members at no cost. This resulted in the Group recognising an expense of in relation to this. 11. CAPITAL COMMITMENTS EVIEWED 31 MACH 2016 AUDITED 30 SEPTEMBE 2015 EVIEWED 31 MACH 2015 Operating lease commitments - Up to 1 year to 5 years More than 5 years The operating lease commitments represent the total future minimum lease payments under non-cancellable operating leases. 12. FINANCIAL ISK MANAGEMENT The Group s activities expose it to a variety of financial risks: market risk (including price risk, foreign currency risk, cash flow risk and fair value interest rate risks), credit risk and liquidity risk. The condensed consolidated interim financial statements do not include all risk management information and disclosure required in the annual financial statements and should be read in conjunction with the Group s financial statements for the year ended 30 September The Group s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements for the year ended 30 September Capital risk management The capital risk management philosophy is to maximise the return on shareholders capital within an appropriate risk framework. Some of the Group s subsidiaries are regulated businesses with capital requirements that are set out by legislation. The adequacy percentage of capital is monitored by management on a regular basis and the position reported to the Financial Services Board. The various subsidiaries met the capital and liquidity requirements at 31 March SYGNIA LIMITED egistration Number: 2007/025416/06 16

18 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH FINANCIAL ISK MANAGEMENT (CONT.) Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligation or incur a change in its creditworthiness, resulting in a financial loss to the Group. The Group has no significant concentration of credit risk. The Group has policies in place to ensure that it deals with clients with an appropriate credit history. Cash resources and longer term investments are limited to high credit quality financial institutions. The Group has policies in place to limit the credit exposure to any one financial institution. The Group has a history of very few bad debts. The liability to policyholders and third-party liabilities arising on consolidation of unit trust funds are linked to the value of the assets held. Credit risk is therefore assumed by the policyholder and third-party. There were no impairments to financial assets during the reporting period. Liquidity risk Liquidity risk is the risk that cash may not be available to pay obligations when due at a reasonable cost. Prudent liquidity risk management implies maintaining sufficient cash and the availability of funding through an adequate amount of committed credit facilities. The group manages its liquidity requirements by monitoring forecasted cash flows. The liquidity risk associated with the Group being contractually obligated to repay policyholders and third-party liabilities arising on consolidation of unit trust funds on demand is managed through the investment composition of assets included in the policyholder portfolios and unit trust funds and by contract with the policyholders. Such contracts mitigate the liquidity risk faced by the Group and passes this on to policyholders and unit holders in the ordinary course of business and in the event that substantial withdrawals require large scale disinvestment of the assets in these portfolios. Cash flow and interest rate risk The Group s income and cash flows are based mainly on contractual asset management and administration fees. The Group does not have any variable-rate borrowings. The Group s policy is to monitor cash requirement and invest surplus cash at variable-rates where appropriate. SYGNIA LIMITED egistration Number: 2007/025416/06 17

19 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH FINANCIAL ISK MANAGEMENT (CONT.) Market risk, interest rate risk and currency risk Market risk is the potential impact on earnings of unfavourable changes in foreign exchange rates, interest rates, prices, market volatilities and liquidity. A large portion of the group s income is derived from fees levied on the market value of the investments that it manages and administers. As the fees are dependent on the daily market value of the investments, any market movements affect the group accordingly. Market risk is mitigated through the diversification of investment mandates such that revenue is not overly exposed to any single sector of the investment market. Investment management capacity is monitored to ensure that the performance of a specific investment is not unduly compromised through excessive scale. The main market risk faced by the Group is the effect of volatility in equity markets on its capital investments in collective investment schemes and listed equities and changes in interest rates on its bank accounts. The investment price risk analysis reflects the sensitivity of the Group s underlying constituents with that of its Index underlying constituents on market capitalisation at the reporting date. The analysis is based on the assumption that the JSE/FTSE All Share Index was increased and decreased by 5% with all other variables held constant. 31 MACH SEPTEMBE MACH % increase index Profit after taxation and equity % decrease index Profit after taxation and equity ( ) ( ) ( ) The Group is exposed to interest rate risk through its loans receivable, fixed deposits and current accounts with various local banking institutions. The impact of a 100 basis point move in local interest rates at reporting date would have increased / decreased profits or loss after taxation and equity as follows: 31 MACH SEPTEMBE MACH basis point increase in interest rates Profit after taxation and equity basis point decrease in interest rates Profit after taxation and equity ( ) ( ) ( ) SYGNIA LIMITED egistration Number: 2007/025416/06 18

20 NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH FINANCIAL ISK MANAGEMENT (CONT.) Statement of financial position (Corporate vs. Third party) A subsidiary of the Group, Sygnia Life Limited is a linked insurance company and issues linked policies to policyholders (where the value of policy benefit is directly linked to the fair value of the supporting assets), and as such does not expose the business to the market risk of fair value adjustments on the financial asset as this risk is assumed by the policyholder. Sygnia Securities Proprietary Limited (subsidiary) provides stockbroking services to clients which results in significant working capital fluctuations due to the timing of the close of the JSE in terms of client settlements. The unsettled exchange traded transactions are represented by money owed to clients and held with the JSE Trustees. Similarly cash held in settlement accounts on behalf of clients related to the abovementioned subsidiaries are considered as third party balances. In order to evaluate the consolidated financial position, the Group segregates the statement of financial position and the statement of profit or loss and other comprehensive income between corporate (own balances) and third party (client-related balances). Third party balances represent the investment contract liabilities and related linked client assets of Sygnia Life Limited, the related portfolio debtors and creditors accounts, deferred taxation, unsettled trades and related bank accounts as well as third party liabilities and assets arising on consolidation of unit trust funds. Client balances in Sygnia Securities Proprietary Limited due to unsettled trades and cash held in settlement accounts on behalf of clients are included in third party balances. EVIEWED - AS AT 31 MACH 2016 AUDITED - AS AT 30 SEPTEMBE 2015 ESTATED EVIEWED - AS AT 31 MACH 2015 TOTAL COPOATE BALANCES THID PATY BALANCES TOTAL COPOATE BALANCES THID PATY BALANCES TOTAL COPOATE BALANCES THID PATY BALANCES ASSETS 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 Equity attributable to owners of the parent TOTAL EQUITY LIABILITIES Deferred tax liabilities Investment contract liabilities Third-party liabilities arising on consolidation of unit trust funds Taxation payable Trade and other payables Dividend payable Amounts owing to clients Bank overdraft TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES SYGNIA LIMITED egistration Number: 2007/025416/06 19

21 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH FINANCIAL ISK MANAGEMENT (CONT.) Statement of comprehensive income (Corporate vs Third party) In order to evaluate the consolidated comprehensive income of the Group, the Group segregates the statement of comprehensive income between Corporate transactions and Third party transactions. Where consolidation of unit trust funds occurs by virtue of the Group s investment into the fund, the income and expenditure components are disclosed in the statement of profit or loss and other comprehensive income as well as the third-party share thereof. These amounts are included in Third party transactions. EVIEWED - AS AT 31 MACH 2016 AUDITED - AS AT 30 SEPTEMBE 2015 ESTATED EVIEWED - AS AT 31 MACH 2015 TOTAL COPOATE THID PATY TOTAL COPOATE THID PATY TOTAL COPOATE THID PATY evenue Expenses ( ) ( ) ( ) ( ) ( ) - ( ) ( ) - Investment contract income Transfer to investment contract liabilities ( ) - ( ) ( ) - ( ) ( ) - ( ) Interest income Other investment income Fair value adjustment to third-party liabilities ( ) - ( ) POFIT FOM OPEATIONS Finance costs ( ) ( ) - ( ) ( ) - ( ) ( ) - POFIT BEFOE TAXATION Income tax expense ( ) ( ) - ( ) ( ) - ( ) ( ) - TOTAL POFIT AND COMPEHENSIVE INCOME FO THE PEIOD SYGNIA LIMITED egistration Number: 2007/025416/06 20

22 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH FAI VALUE The fair values of all financial instruments approximate the carrying values reflected in the statement of financial position. Fair value measurements recognised in the statement of financial position The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value, grouped into Levels 1 to 3 based on the degree to which the fair value is observable. Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs). There have been no transfers between level 1, 2 or 3 during the period under review. The table below analyses financial assets and liabilities, which are carried at fair value, in the statement of financial position. There were no significant changes in the valuation method and assumptions applied since 30 September EVIEWED FINANCIAL ASSETS AT FAI VALUE THOUGH POFIT O LOSS AS AT 31 MACH 2016 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Investments linked to investment contracts Investments (Corporate) EVIEWED FINANCIAL LIABILITIES AT FAI VALUE THOUGH POFIT O LOSS AS AT 31 MACH 2016 Investment contract liabilities SYGNIA LIMITED egistration Number: 2007/025416/06 21

23 / NOTES TO THE CONDENSED CONSOLIDATED INTEIM FINANCIAL STATEMENTS FO THE SIX MONTHS ENDED 31 MACH FAI VALUE (CONT.) AUDITED FINANCIAL ASSETS AT FAI VALUE THOUGH POFIT O LOSS AS AT 30 SEPTEMBE 2015 LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Investments linked to investment contracts Investments (Corporate) AUDITED FINANCIAL LIABILITIES AT FAI VALUE THOUGH POFIT O LOSS AS AT 30 SEPTEMBE 2015 Investment contract liabilities EVIEWED FINANCIAL ASSETS AT FAI VALUE THOUGH POFIT O LOSS AS AT 31 MACH 2015 Investments linked to investment contracts Investments (Corporate) EVIEWED FINANCIAL LIABILITIES AT FAI VALUE THOUGH POFIT O LOSS AS AT 31 MACH 2015 Investment contract liabilities SYGNIA LIMITED egistration Number: 2007/025416/06 22