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13 October 2014

Contents
Contents .................................................................................................................................... 2
Newsflash .................................................................................................................................. 3
Market Comment ........................................................................................................................................................... 3
How about Bonds and SA Listed Property? .................................................................................................................... 4
Other Commentators ...................................................................................................................................................... 4
Economic Update ....................................................................................................................... 6
Weekly Market Analysis ............................................................................................................. 7
STANLIB Money Market Fund ......................................................................................................................................... 8
STANLIB Enhanced Yield Fund ........................................................................................................................................ 8
STANLIB Income Fund ..................................................................................................................................................... 8
STANLIB Flexible Income Fund ........................................................................................................................................ 9
STANLIB Multi-Manager Absolute Income Fund ............................................................................................................ 9

Newsflash
Pessimism on world markets is rising quickly and plenty of bad news is being bandied about in the media, usually a
good sign that the bottom is not far away.
Market Comment
Having said that there was a 60% possibility the market correction was bottoming a week ago, one
acknowledges that the 40% possibility that it had NOT bottomed then is certainly winning, as the JSE All
Share Index continued its correction with gusto on Friday, although today looks better.
This has been a serious clean-out/correction and it is global, with very few shares spared.
The US S&P 500 Index is down around 5.3%, while the MSCI World Index is down a heftier 7.8% in dollar
terms, back at its November 2013 level. The weaker non-US currencies, relative to the dollar, have
aggravated the fall in this index.
The MSCI Emerging Markets Index is down 10% in dollars, while the JSE ALSI in dollar terms is down 13.5%
from the recent high.
At time of writing on Monday morning before the pickup, the All Share Index in rands is -10.4% or 5,426
points below its record high of 52,323, while the previously powerful Industrial Index is -9% and the strong
Financial Index is -9.4%.
As mentioned, very few shares are escaping, with the biggest share Billiton (9.9% of the ALSI) down some
23% from its record high in rand terms, back at 2008 prices, while Anglo American, now only the 6 th biggest
share at 5%, was on Friday down about 20% from its recent high and down a massive 55% from its record
high in 2008, trading now at 2006 prices!
Both Anglo and Billiton are bouncing today as the day progresses.
Even Woolies is down 19%, trading at November 2012 prices, i.e. almost two years ago!
Clearly some of the big rand hedges are hurting, apart from Billiton and Anglos. Richemont is down 22%, back
at 17-months ago levels, while Sasol is down 15% and the mighty SA Breweries is down 15%.
One of the previously great shares that actually went up during the 2008/9 crash, Shoprite, is down a
whopping 36% from its record high in late 2012, trading at the same price as around three years ago - down
19% so far in 2014.
The share is, however, still trading at 19 times earnings of the past 12 months (the PE ratio) and on a dividend
yield of 2.6%, is still below the 3.1% dividend yield of the JSE All Share Index, which by the way is almost its
highest dividend yield in 5 years (the ALSI dividend yield), partly because companies are paying more of their
profits in dividends.
One of the more extraordinary moves today is the 4.4% jump in the share price of Capitec, to yet another
record high, 28% above its low of two months ago during the African Bank issue.
The JSE’s ALSI PE ratio is now around 16 (trading at 16 times earnings of the past 12 months), still higher than
the 14.6 times average of the past 20 years, although arguably still affected on the high side by some of the
big rand hedges, like Naspers and SAB.
If the US stock market correction extends to 7% from the current 5.3%, then the JSE correction could extend
to, say 12.5% or so.
Pessimism on world markets is rising quickly and plenty of bad news is being bandied about in the media
(very little good news). It could reach a peak quite soon, which usually represents an excellent buying
opportunity; exactly when, no-one knows. It could even be there now.
However, if one wishes to up-weight one’s equity allocation, gradually buying into this downturn should
prove rewarding.

Just one cautionary: we are into the 6 th year of the bull market (possibly the 8 th innings of a 9 innings bull
market, to compare it to a baseball game), so one needs to bear that in mind. One would therefore be more
cautious than if we were only in the 2 nd or 3 rd innings of the bull market.
One or two market-letter writers have pointed out the statistics relating to the 3 rd year of a US Presidential
cycle, which started for President Obama on 1 st October. The 3 rd year has since the 1930’s so far has never
produced a negative stock market total return in the US (including dividends) and in fact has produced
returns way higher than years one, two and four.
Hopefully that statistic continues to play out. Usually most of the returns occur between October and April.
Of course, one cannot rely on this happening (3 rd year doing so well), but it is an interesting factor that does
encourage the bulls among us; and why not?
Credit Suisse’s latest Global Equity Strategy, written by Andrew Garthwaite, notes that US director buying of
their company shares has recently been strong, which is positive and net speculative positions on the S&P
500 Index in the US are close to a three year low, which is also a good sign for equities being close to the
bottom.
Meanwhile ongoing excess liquidity remains good for equities.
How about Bonds and SA Listed Property?
As is fairly customary during a stock market correction, bonds improve as yields decline and prices rise.
Investors sell out of the riskier equities and buy bonds. This time investors are emboldened to buy bonds on
the back of news of weak growth in many regions, along with lower inflation, a typically good combination
for bonds.
Offshore bond yields have fallen quite sharply, with the US 10-year yield down from 2.49% at end September
to 2.28% today, driving prices and values higher. This is the lowest yield/highest price since the “taper
tantrum” in June 2013.
Offshore property shares have turned upwards by 2.5% after their sharp 6.8% correction and are now down
about 4.7%.
Our All Bond Index here in SA is up 1.5% in October (yields down) and is up 7.3% so far in 2014. This is
positive for SA Listed Property, which is still showing a total return in 2014 of around 13.5%.
Other Commentators
US MARKET ANALYST ELAINE GARZARELLI
Recent US Fed (central bank) minutes reassured that policy is data-dependent and there is no immediate
intention to tighten.
Members of the Fed were concerned about the effect that weak global growth and the stronger dollar could
have on slowing the US economy.
Garza’s quants system reading declined to 62.5% from 66% last week, due to the downgrade to neutral of the
ECRI leading indicator. This indicator shows potential changes in the economic cycle.
Corrections of 4 to 7% are normal during bull markets. Garza’s system still indicates a fair value for the S&P
500 Index some 24% higher than current levels.
Her sentiment indicator (bullishness of US investment advisors) declined to 45.5%, but is only neutral, not yet
bullish for the market (contrarian indicator).
She likes the US economy, with only housing restrained due to slow household formation, but expects it to
stabilise over the next year.

BCA RESEARCH
Conventional wisdom has it that a strong dollar undermines US equities and vice versa.
BCA, however, expects a period ahead when both the US dollar and US equities appreciate, albeit with
substantial volatility.
The dollar is still extremely overbought though, so it could have a period of sideways movement or even
some contraction relative to the euro etc.
US equities should outperform global equities over the next 6 months or so.
BCA still expects US equities to outperform US bonds and cash.
Paul Hansen
Director: Retail Investing

Economic Update
Locally, manufacturing production growth decreased by a more moderate1.2% y/y in August after falling by a
revised 8.1% in July. M/m, seasonally adjusted, production grew by 2.2% in August based on an increase in
production of16.2% m/m (+3.3pp) of basic iron and steel and a 16.6% (+1.4pp) rise in the production of motor
vehicles, parts and accessories. However, six of the ten manufacturing sub-divisions tracked by Stats SA indicated
contractions in production in August, the most notable declines being food and beverages (-5.3% m/m, -1.3pp);
wood, paper, publishing and printing (-5.5%, -0.5pp) and petroleum, chemical, rubber and plastics (-0.8%, -0.2pp).
Looking ahead, the moderation in manufacturing production growth in August is welcome, although there is still risk
that the sub-sectors continue to contract both y/y and m/m for the remainder of the year which would mean that
manufacturing activity will have to register a large growth of at least 8.0% m/m in September for this sector to
contribute positively to Q3 GDP. Given the still relatively modest trends in the PMI business activity indicator in
September (index level of 53.0), this is probably an unlikely ending and the key productive sectors of mining and
manufacturing are likely to contribute negatively to Q3 GDP growth.
Offshore, the IMF revised down South Africa’s growth forecast for 2014 to 1.4% from 1.7% in April 2014. This is
exactly in-line with our own forecast. The Reserve Bank’s forecast is for South Africa’s GDP to grow by 1.5%, while the
National Treasury has a forecast of 1.8%. For 2015, the IMF revised South Africa’s growth outlook down to 2.3% from
2.7% in April 2014. This is slightly below our own forecast of 2.4%, and the Reserve Bank’s forecast of 2.8%. The IMF
have revised down most country’s growth estimates for 2014 and 2015, especially the Euro-area, Japan, Russia, Brazil,
and the Middle East. In contrast the growth outlook for India, Canada, Mexico, and the United States have been
revised up somewhat. The IMF is still fairly optimistic about the growth outlook for Sub-Saharan Africa despite the
spread of Ebola.
Kevin Lings is currently at the IMF Annual General Meetings in Washington and an additional update on the outcomes
of the IMF and IIF annual meetings in Washington will be the main theme next week.
In the emerging markets, in a recent communication by the Reserve Bank of Zimbabwe an announcement was made
that the country was importing US$ 45 million worth of coins. The main purpose of the operation is to smooth
transactions in the country as it faces shortages of coins in some areas. According to the document some consumers
were given sweets and vouchers instead of change because of the shortage. What aggravated that matter was that
the Bank of Botswana announced that it was phasing out its current coins for new coins which resulted in businesses
no longer accepting Pula coins. The previous attempt of importing coins failed as the freight costs of the exercise was
more than the value of the coins. In that US$45 million dollars, US$ 25 million will be Rand denominated coins and the
outstanding US$20 million will be special coins to be pegged to the US Dollar coins but will be minted in South Africa.
The Reserve Bank re-iterated that this is not a way to re-introduce the Zim Dollar. The impact on inflation is expected
to be minimal and short-lived as the value of the coins is less than 1% of GDP and the country is facing deflationary
pressures from a slowing economy. Delivery of the first batch of coins is expected in November.
Headline inflation in Kenya eased to 6.6% for the month of September and is the first time the inflation rate
dropped in 5 months. This is down from the 8.36% registered in the previous month and is the lowest inflation has
been since April 2014 with most food categories registering a price decrease on a monthly basis. The sharp reversal in
the inflation rate is as a result of the base effects from the increase in the taxes introduced in September 2013
wearing off. The upward trend in the inflation rate is expected to continue though. This gives the Central Bank of
Kenya some breathing space in terms of keeping monetary policy stable at current levels and we expect rates to be
kept on hold for the rest of the year.
Please follow our regular economic updates on twitter @lingskevin
Kevin Lings, Laura Jones & Kganya Kgare
(STANLIB Economics Team)

Weekly Market Analysis
Currencies/ Indices/ Commodities
Friday’s Close
10/10/14
Weekly Move
(%)
YTD
(%)
Indices
*MSCI World – US Dollar 1626.68 -2.90 -2.07
*MSCI World – Rand 18074.21 -4.74 5.11
*MSCI Emerging Market – US Dollar 989.87 -0.74 -1.28
*MSCI Emerging Market – Rand 10998.54 -2.62 5.96
All Share Index – US Dollar 4237.81 -1.23 -5.18
All Share Index – Rand 47092.25 -3.13 1.81
All Bond Index 467.55 1.52 7.07
Listed Property J253 1583.80 0.25 13.49
Currencies
US Dollar/Rand 11.11 -1.92 7.37
Euro/Rand 14.04 -1.11 -2.69
Sterling/Rand 17.86 -1.29 2.94
Euro/US Dollar 1.26 0.90 -8.11
Commodities
Oil Brent Crude Spot Price ($/bl) 89.91 -2.04 -18.85
Gold Price $/oz 1223.61 2.73 1.50
Platinum Price S/oz 1262.50 3.06 -7.98
Source: I-Net Bridge
* MSCI - Morgan Stanley Capital International

Rates
These rates are expressed in nominal and effective terms and should be used for indication purposes ONLY.
STANLIB Money Market Fund
Nominal:
Effective:
5.99% per annum
6.16% per annum
STANLIB is required to quote an effective rate which is based upon a seven-day rolling average yield for Money
Market Portfolios. The above quoted yield is calculated using an annualised seven-day rolling average as at 12 October
2014. This seven- day rolling average yield may marginally differ from the actual daily distribution and should not be
used for interest calculation purposes. We however, are most happy to supply you with the daily distribution rate on
request, one day in arrears. The price of each participatory interest (unit) is aimed at a constant value. The total return
to the investor is primarily made up of interest received but, may also include any gain or loss made on any particular
instrument. In most cases this will merely have the effect of increasing or decreasing the daily yield, but in an extreme
case it can have the effect of reducing the capital value of the portfolio.
STANLIB Enhanced Yield Fund
Effective Yield: 6.39%
STANLIB is required to quote a current yield for Income Portfolios. This is an effective yield. The above quoted yield
will vary from day to day and is a current yield as at 10 October 2014. The net (after fees) yield on the portfolio will be
published daily in the major newspapers together with the “all-in” NAV price (includes the accrual for dividends and
interest). This yield is a snapshot yield that reflects the weighted average running yield of all the underlying holdings
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Effective Yield: 7.18%
Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of
participatory interests may go down as well as up and past performance is not necessarily a guide to the future. A
schedule of fees and charges and maximum commissions is available on request from the company/scheme. CIS can
engage in borrowing and scrip lending. Commission and incentives may be paid and if so, would be included in the
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STANLIB Extra Income Fund
Effective Yield: 6.69%
Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of
participatory interests may go down as well as up and past performance is not necessarily a guide to the future. A
schedule of fees and charges and maximum commissions is available on request from the company/scheme. CIS can
engage in borrowing and scrip lending. Commission and incentives may be paid and if so, would be included in the
overall costs.
Fluctuations or movements in exchange rates may cause the value of underlying international investments to go up or
down.” The above quoted yield will vary from day to day and is a current yield as at 10 October 2014.
STANLIB Flexible Income Fund
Effective Yield: 7.01%
Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of
participatory interests may go down as well as up and past performance is not necessarily a guide to the future. A
schedule of fees and charges and maximum commissions is available on request from the company/scheme. CIS can
engage in borrowing and scrip lending. Commission and incentives may be paid and if so, would be included in the
overall costs.” The above quoted yield will vary from day to day and is a current yield as at 10 October 2014.
STANLIB Multi-Manager Absolute Income Fund
Effective Yield: 5.80%
Collective Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of
participatory interests may go down as well as up and past performance is not necessarily a guide to the future. A
schedule of fees and charges and maximum commissions is available on request from the company/scheme. CIS can
engage in borrowing and scrip lending. Commission and incentives may be paid and if so, would be included in the
overall costs.” The above quoted yield will vary from day to day and is a current yield as at 10 October 2014.

Glossary of terminology
Bonds
A bond is an interest-bearing debt instrument, traditionally issued by governments as part of
their budget funding sources, and now also issued by local authorities (municipalities),
parastatals (Eskom) and companies. Bonds issued by the central government are often
called “gilts”. Bond issuers pay interest (called the “coupon”) to the bondholder every 6
months. The price/value of a bond has an inverse relationship to the prevailing interest rate,
so if the interest rate goes up, the value goes down, and vice versa. Bonds/gilts generally
have a lower risk than shares because the holder of a gilt has the security of knowing that
the gilt will be repaid in full by government or semi-government authorities at a specific
time in the future. An investment in this type of asset should be viewed with a 3 to 6 year
horizon.
Cash
Collective
Investments
Compound Interest
Dividend Yields
Dividends
Earnings per share
An investment in cash usually refers to a savings or fixed-deposit account with a bank, or to
a money market investment. Cash is generally regarded as the safest investment. Whilst it is
theoretically possible to make a capital loss investing in cash, it is highly unlikely. An
investment in this type of asset should be viewed with a 1 to 3 year horizon.
Collective investments are investments in which investors‟ funds are pooled and managed
by professional managers. Investing in shares has traditionally yielded unrivalled returns,
offering investors the opportunity to build real wealth. Yet, the large amounts of money
required to purchase these shares is often out of reach of smaller investors. The pooling of
investors’ funds makes collective investments the ideal option, providing cost effective
access to the world’s stock markets. This is why investing in collective investments has
become so popular the world over and is considered a sound financial move by most
investors.
Compound interest refers to the interest earned on interest that was earned earlier and
credited to the capital amount. For example, if you deposit R1 000 in a bank account at 10%
and interest is calculated annually; your balance will be R1 100 at the end of the first year
and R1 210 at the end of the second year. That extra R10, which was earned on the interest
from the first year, is the result of compound interest ("interest on interest"). Interest can
also be compounded on a monthly, quarterly, half-yearly or other basis.
The dividend yield is a financial ratio that shows how much a company pays out in dividends
each year relative to its share price. The higher the yield, the more money you will get back
on your investment.
When you buy equities offered by a company, you are effectively buying a portion of the
company. Dividends are an investor’s share of a company’s profits, given to him or her as a
part-owner of the company.
Earnings per share is a measure of how much money the company has available for
distribution to shareholders. A company’s earnings per share is a good indication of its
profitability and is generally considered to be the most important variable in determining a
company’s share price.

Equity
Financial Markets
Fixed Interest Funds
Gross Domestic
Product (GDP)
Growth Funds
Industrial Funds
Investment Portfolio
JSE Securities
Exchange
Price to earnings
ratio
Property
Resources and Basic
Industries Funds
A share represents an institution/individual’s ownership in a listed company and is the
vehicle through which they are able to “share” in the profits made by that company. As the
company grows, and the expectation of improved profits increases, the market price of the
share will increase and this translates into a capital gain for the shareholder. Similarly,
negative sentiment about the company will result in the share price falling. Shares/equities
are usually considered to have the potential for the highest return of all the investment
classes, but with a higher level of risk i.e. share investments have the most volatile returns
over the short term. An investment in this type of asset should be viewed with a 7 to 10 year
horizon.
Financial markets are the institutional arrangements and conventions that exist for the issue
and trading of financial instruments.
Fixed interest funds invest in bonds, fixed-interest and money market instruments. Interest
income is a feature of these funds and, in general, capital should remain stable.
The Gross Domestic Product measures the total volume of goods and services produced in
the economy. Therefore, the percentage change in the GDP from year to year reflects the
country's annual economic growth rate.
Growth funds seek maximum capital appreciation by investing in rapidly growing companies
across all sectors of the JSE. Growth companies are those whose profits are in a strong
upward trend, or are expected to grow strongly, and which normally trade at a higher-thanaverage
price/earnings ratio.
Industrial funds invest in selected industrial companies listed on the JSE, but excluding all
companies listed in the resources and financial economic groups.
An investment portfolio is a collection of securities owned by an individual or institution
(such as a collective investment scheme). A funds‛ portfolio may include a combination of
financial instruments such as bonds, equities, money market securities, etc. The theory is
that the investments should be spread over a range of options in order to diversify and
spread risk.
The primary role of the JSE Securities Exchange is to provide a market where securities can
be freely traded under regulated procedures.
Price to earnings ratio or p: e ratio is calculated by dividing the price per share by the
earnings per share. This ratio provides a better indication of the value of a share, than the
market price alone. For example, all things being equal, a R10 share with a P/E of 75 is much
more “expensive” than a R100 share with a P/E of 20.
Property has some attributes of shares and some attributes of bonds. Property yields are
normally stable and predictable because they comprise many contractual leases. These
leases generate rental income that is passed through to investors. Property share prices
however fluctuate with supply and demand and are counter cyclical to the interest rate
cycle. Property is an excellent inflation hedge as rentals escalate with inflation, ensuring
distribution growth, and property values escalate with inflation ensuring net asset value
growth. This ensures real returns over the long term.
These funds seek capital appreciation by investing in the shares of companies whose main
business operations involve the exploration, mining, distribution and processing of metals,
minerals, energy, chemicals, forestry and other natural resources, or where at least 50
percent of their earnings are derived from such business activities, and excludes service
providers to these companies.

Smaller Companies
Funds
Value Funds
Growth Funds
Smaller Companies Funds seek maximum capital appreciation by investing in both
established smaller companies and emerging companies. At least 75 percent of the fund
must be invested in small- to mid-cap shares which fall outside of the top 40 JSE-listed
companies by market capitalisation.
These funds aim to deliver medium- to long-term capital appreciation by investing in value
shares with low price/earnings ratios and shares which trade at a discount to their net asset
value.
Growth funds seek maximum capital appreciation by investing in rapidly growing companies
across all sectors of the JSE. Growth companies are those whose profits are in a strong
upward trend, or are expected to grow strongly, and which normally trade at a higher-thanaverage
price/earnings ratio.
Sources: Unit Trust and Collective Investments (September 2007), The Financial Sector Charter Council, Personal Finance (30 November 2002),
Introduction to Financial Markets, Personal Finance, Quarter 4 2007, Investopedia (www.investopedia.com) and The South African Financial
Planning Handbook 2004.

Disclaimer
The price of each unit of a domestic money market portfolio is aimed at a constant value. The total return to the investor is primarily made up of
interest received but, may also include any gain or loss made on any particular instrument. In most cases this will merely have the effect of
increasing or decreasing the daily yield, but in an extreme case it can have the effect of reducing the capital value of the portfolio. Collective
Investment Schemes in Securities (CIS) are generally medium to long term investments. The value of participatory interests may go down as well as
up and past performance is not necessarily a guide to the future. An investment in the participations of a CIS in securities is not the same as a
deposit with a banking institution. CIS are traded at ruling prices and can engage in borrowing and scrip lending. A schedule of fees and charges and
maximum commissions is available on request from STANLIB Collective Investments Ltd (the Manager). Commission and incentives may be paid and
if so, would be included in the overall costs. A fund of funds is a portfolio that invests in portfolios of collective investment schemes, which levy
their own charges, which could result in a higher fee structure for these portfolios. Forward pricing is used. Fluctuations or movements in exchange
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of the portfolio incurred as charges, levies and fees. A higher TER ratio does not necessarily imply a poor return, nor does a low TER imply a good
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