FEBRUARY 2020

KZN MODERATE FUND

031 322 9002Vusi.Ngcobo@durban.gov.zaSmartXchange Building | 5 Walnut Road | Durban | 4000

FRONT OFFICE CONTACT DETAILS

The KZN Moderate Fund is a 50% / 50% combination of the KZN Managed Fund and KZN Defensive Fund. It is a fund with moderate risk that aims to deliver realgrowth but with less volatility.

The portfolio is well diversified and invests across all local and foreign asset classes and makes use of good quality balanced asset managers and specialist assetmanagers within certain asset classes.

Over the longer term returns are expected to be less volatile but at the same time lower than for a typical balanced fund, because of the 50% exposure to the KZNDefensive Fund.

Due to its moderate allocation to growth assets, the fund has a moderate chance of capital loss in the short term, but is expected to achieve real growth of capital overthe long-term, albeit lower than that of a typical balanced fund. As a result, the fund is best suited to members who have medium term (3-5 years) investment horizon.

The portfolio complies with the prudential investment guidelines set out in Regulation 28 of the Pensions Funds Act.

February saw the worst daily fall in the All Share Index since 2008, amidstconcerns that the Covid-19 virus will not be contained. Economists wereforecasting a V-shaped recovery as the China infection rate continues todrop. However, the rapid increase in cases in the rest of world, particularlyin Italy, Iran, South Korea and Japan, has spooked markets. Gold reacheda seven-year high as concern over the economic impact of the coronavirusboosted demand for haven assets. The most pressing question is aboutgrowth and to what extent global businesses will be forced to shut down, ashappened in China, to quarantine the virus.

The World Health Organization has stated on more than one occasion thatit is too early to declare Covid-19 a pandemic, although it has the potentialto become one and this is the time to prepare. A global recession is definedby the IMF as growth lower than 2.5%, not zero; growth was 3.0% last yearand was forecast at 3.4% this year, but given Covid-19’s impact, globalgrowth is likely to be back to 3.0% – or lower.

Load shedding continued in February, driving manufacturing output to itslowest level since 2014, and South Africa’s three-year average GDP is at itslowest level in 30 years. President Ramaphosa’s State of the NationAddress offered no promise of structural reforms to take place in theimmediate future. However, the 2020 Budget focussed on doing the rightthings, it is promoting growth, through a slow reduction in debt, addressingthe elevated wage bill directly, and only moderately increasing tax, as wellas rebalancing expenditure towards capital from consumption.

Fiscal policy is currently being used as a tool in the US, UK, Japan andChina, as monetary policy is tapped out, but the eurozone lacks the fiscalstructures required to follow. President Macron has said that the eurozonerisks not investing in its own future and is demanding a bigger budget, butGermany disagrees. Meanwhile, the EU remains in a liquidity trap, with onlySweden taking interest rates positive. The FTSE/JSE SWIX Indexdecreased 9.0%, with Industrials losing 6.5% and Financials 8.2% in thered. The JSE All Bond Index traded flat, while the rand depreciated by 5.1%relative to the US dollar.

MONTHLY COMMENTARY

ACTUAL ASSET ALLOCATION

DISCLAIMER

The information and commentary contained in this document is of a general nature and is not intended to address the circumstances of a particular individual or entity. It does not in any way constitute a solicitation,recommendation, guidance or proposal, nor does it constitute financial, investment, tax, legal or other advice. Whilst reasonable care was taken in ensuring that the information is accurate, Sygnia Asset Management doesnot warrant its accuracy, correctness or completeness and accepts no liability in respect of any damages and/or loss suffered as a result of reliance on the information in this document. No one should act upon theinformation contained in this document without having obtained appropriate and professional financial, investment, legal, tax and such other relevant advice as may be required in each instance. Sygnia Asset Managementis a licensed financial services provider (FSP 873): 7th Floor, the Foundry, Cardiff Street, Green Point, 8001 Tel: (021) 446 4940/Fax: (021) 446 4950

STATISTIC FUND BENCHMARK

FUND SUMMARY AS AT 29 FEBRUARY 2020

% Positive Months 58.3% 63.3%

% Negative Months 41.7% 36.7%

Worst Month -3.6% -3.9%

Best Month 3.9% 3.9%

Average Return 0.4% 0.5%

Median Return 0.7% 0.5%

Maximum Drawdown -6.0% -5.3%

PERIOD FUND BENCHMARK

PERFORMANCE ANALYSIS TO 29 FEBRUARY 2020

1 Month -3.6% -3.9%

3 Months -1.7% -1.6%

6 Months 0.2% -0.6%

Year to Date -2.8% -2.7%

1 Year 2.6% 3.7%

3 Years 5.0% 6.1%

5 Years 5.3% 5.7%

Since Inception 5.3% 5.9%

Inception Date: 29 May 2015. Returns prior to inception are backtested.

FEES

Total Expense Ratio (TER) 0.59%

Transaction Costs (TC): 0.10%

Total Investment Charge (TIC): 0.69%

PERFORMANCE FUND BENCHMARK

CALENDAR YEAR RETURNS

2015 7.9% 8.0%

2016 6.1% 6.0%

2017 11.3% 12.9%

2018 -1.1% -0.4%

2019 9.6% 10.4%

MANAGER ALLOCATION 29 FEBRUARY 2020

MANAGER PERCENTAGE

Coronation Absolute Bond - SA Bonds 12.4%

Investec Global Balanced Fund 12.2%

Coronation - Global Balanced 12.0%

Prudential - Global Balanced 12.0%

Coronation – SA Cash 8.6%

Prudential (Int Bond) 6.5%

Coronation – SA Bonds 5.9%

BlackRock – International Equity 5.4%

MAZI Capital SA Equity (Swix) Fund 4.6%

Stanlib Bond Fund 3.7%

Mergence Equity (Swix) Fund 3.5%

Argon SA Equity Fund 2.6%

SAN INST POS RET3 B1 2.3%

Prudential Core Capped Swix Equity Fund 2.3%

STANLIB Property Income Fund Class B3 2.3%

KZN Satrix SWIX Portfolio 2.1%

Old Mutual – SA Private Equity 1.3%

ATA Fund 3 0.3%

BENCHMARK COMPOSITION

The fund benchmark is a composite benchmark consisting of: 33% SWIX, 27.5% ALBI, 6% SAPY, 12.5% STeFI, 12.5% MSCI World Index, 7.5% Barclays GlobalBond Index, 1% Global Cash

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV YEARDEC

HISTORICAL PERFORMANCE

YEAR

-1.1% 0.9% 3.5% 0.9% 1.9% -1.5% 0.9% 1.5% -1.0% -1.5% 0.5% 0.8% 6.1%2016

1.6% -0.2% 1.6% 1.8% 0.4% -1.3% 3.0% 0.8% 1.3% 3.1% -0.1% -1.0% 11.3%2017

0.0% -0.9% -1.3% 3.0% -1.5% 1.6% 0.4% 2.7% -2.1% -2.2% -1.9% 1.3% -1.1%2018

1.6% 2.3% 1.2% 2.4% -2.1% 1.7% -0.8% 0.2% 1.1% 1.4% -0.6% 1.1% 9.6%2019

0.8% -3.6% -2.8%2020

CUMULATIVE INVESTMENT PERFORMANCE