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 The Sharenet Daily 
Tuesday, 19 August 2014 - 20:00
Top News
SA Business
Company News
Company Results
World Markets (Spot Prices)
JSE Today
JSE Trading Statistics
Major Moves
Index Summary
Latest Consensus Changes / Results Expected
Recent Dividends / Ex Div
Upcoming AGMs
Stock Exchange News Service (SENS)

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Seed Weekly - The African Bank Debacle

African Bank Investment Limited (Abil) has had immense media coverage as the bank went into decline to the point where the Reserve Bank authorised a bailout and placed the bank under curatorship.

African Bank is not a bank in the traditional sense, which is largely funded by a retail deposit base. Rather this bank had very little by way of retail deposits and was mostly funded by institutional bondholders.

Banks are typically risky businesses given the way that they have their balance sheet structured between equity and debt. While each business will vary in the amount of debt that it can take on, a typical (non bank) business may have a debt to equity ratio of around 0.5, i.e. for every rand of equity the business has, it will have half the amount of interest bearing debt. SABMiller, for instance, has a debt to equity ratio of 0.6.

Banks, almost by definition of the nature of the business, operate at far higher levels of debt to equity. In the last set of account, African Bank recorded that it had equity of R 10.3bn, preference share capital of R 1.1bn and total liabilities of R 55bn.

Essentially African Bank borrowed large tranches of money in the capital markets by issuing various bonds in order to raise capital. As a bank it had very little by way of retail deposits. It then lent this combined capital out into the retail market by way of unsecured shorter duration loans at higher rates of interest.

The business model started to unravel when the bank extended loans that it could not fully recover and when it made multiple loans to the same highly indebted client base. It also became clear that the bank did not adequately provide for non-performing loans. This has the effect of overstating their profitability and the recoverability of their loans.

Despite a recapitalisation exercise earlier in the year, it got to the point where the Reserve Bank had no choice but to place the bank into curatorship. At the same time the Reserve Bank announced a recapitalisation plan of R 10bn sourced from the five major banks plus Capitec and the PIC in capitalising a new “good bank” from a portion of the assets.

The various investors into African Bank will be treated as follows
• The price of the equity in African Bank fell from around R10 per share at the beginning of the year to 31 cents before the share was suspended. Existing shareholders will be able to participate in the recapitalisation of the new “good bank” when it relists, but it is now highly unlikely that equity investors will recover their almost 100% losses.
• Senior debt holders will have their debt transferred to the new bank at 90%. I.e. investors in these debt instruments will take a 10% “haircut” of their capital. There is a degree of uncertainty at this stage as to the recoverability of the balance of the outstanding bonds and accrued interest.
• Subordinated debt holders will remain invested in the “old” bank. It is not clear at this stage what their write down will be, but it is likely to be substantial.

Seed Investments exposure

Given the size of African Bank, especially in the bond market, there were many equity, money market and multi asset unit trust funds that had exposure to the equity and debt of African Bank.

While it was widely reported that Coronation had the largest exposure to African Bank equity, the size of this equity exposure in its various portfolios was relatively small compared to two other equity funds, namely the Momentum Value fund which suffered a 10% write down and the Stanlib Value fund with a 6.1% exposure to African Bank’s equity.

• The Seed Equity Fund had no exposure to African Bank Investments equity.
• The Seed Absolute Return Fund had one direct senior debt instrument, which has subsequently been sold. It also had a very small exposure to the Atlantic Stable Income Fund. The estimated total impact on the Fund to investors was -0.06%.
• The Seed Flexible Fund had a two mandates with asset manager Atlantic – a bond mandate and a cash mandate. The estimated total impact on the fund to investors was -0.09%.
• The Prescient Wealth Multi Strategy FoHF had 15% allocated to 36One. This manager has publicly announced that they were short African Bank shares, which generated a net return of approximately 1.6% for the fund itself and hence an approximate 0.24% gain for investors in the Fund of Hedge Funds.

The African Bank failure is a clear indication that all investments carry risk. In this case even many money market funds, which many investors perceived to carry no risk at all, were impacted. Quite obviously while some managers avoided the risk by not investing, or on a more select basis even shorting the shares, most fixed income managers had a small allocation to African Bank debt.

We continue to assess each investment that we include into the portfolios not only on the basis of the expected return, but more importantly on the basis of the various risks that they carry. Sizing the investment position for both risk and return is a crucial element in risk management and hence portfolio management. While we would always like to avoid all losses of a permanent nature for our clients, we do believe that in this particular circumstance where billions have been written down, losses for our clients are relatively small and commensurate with the additional risk.

If you have any questions at any time on this or any other issue, please do not hesitate to contact us.

Kind regards,

Ian de Lange

021 914 4966

Tue, 19 Aug 2014
Top News
South African stocks were down on Tuesday with mining companies taking the most points off the index after heavy weight BHP Billiton announced plans to spin off businesses worth an estimated $16 billion but baulked at a share buyback.  Full story

The rand gleaned support from expectations that interest rates in South Africa are going to continue higher, keeping the local currency holding steady against a stronger dollar.  Full story
Israel said Palestinian militants fired rockets from Gaza on Tuesday in violation of a truce, attacks that swiftly drew air strikes and the recall of Israeli negotiators from talks in Cairo on a long-term ceasefire.  Full story
U.S. police said early on Tuesday they came under heavy gunfire and arrested 31 people during another night of racially charged protests in Ferguson, Missouri, sparked by the fatal shooting of an unarmed black teenager by a white policeman 10 days ago.  Full story
Tens of thousands of protesters used a crane and bolt cutters to force their way past a barricade of shipping containers in the Pakistani capital Tuesday as they marched on parliament to try press the prime minister to resign.  Full story
Wall Street got a lift from the U.S. housing sector and extended a global stock markets rally on Tuesday as investors shifted focus. . .  Full story
U.S. stocks advanced on Tuesday after solid earnings from Home Depot helped lift retailers' shares and Apple touched $100 for the first time. . .  Full story
European shares extended the previous session's rally on Tuesday, with Germany's DAX index outperforming, driven by what traders saw as an easing. . .  Full story
Britain's top share index climbed to its highest closing level in three weeks on Tuesday, bolstered by housebuilding stocks after robust results from Persimmon.. . .  Full story

Gold moved lower on Tuesday on buoyant global equities and as the dollar strengthened after upbeat U.S. data, while the market continued to. . .  Full story
U.S. stocks opened higher on Tuesday, putting the S&P 500 on track for a second straight day of gains, following solid earnings from. . .  Full story
U.S. stock index futures advanced modestly on Tuesday, putting the S&P 500 on track for a second straight day of gains, after solid. . .  Full story
Global stocks rose and money-market rates fell to new lows on renewed investor appetite for risk on Tuesday, as investors breathed easier over. . .  Full story
SA Business
South Africa's Shoprite warned of a continuing squeeze on the country's consumers after posting its slowest profit growth in 15 years, sending its shares to a five-month low.. . .  Full story
South African bullion producer Harmony Gold said on Tuesday it will temporarily close its Target 3 shaft because it is bleeding money, a move that could affect up to 1,500 jobs.. . .  Full story

The world's biggest mining company, BHP Billiton , announced plans to spin off businesses worth an estimated $16 billion, most of them acquired in. . .  Full story
South Africa's financial regulator said on Tuesday it had given some investment funds the go-ahead to divide up assets they hold. . .  Full story
South Africa sold 2.35 billion rand (221 million US dollars) of its 2032, 2037 and 2044 bonds on Tuesday. Yields. . .  Full story
When a scorching drought struck eastern Australia in 2006, cattle farmers Robyn and Paul Kendal had to slaughter nearly all their livestock and. . .  Full story

The following bids, mergers, acquisitions and disposals were reported by 2000 GMT on Monday:. . .  Full story
World Markets (Spot Prices)
NameTimeRPMove% Move
JSE Overall17:0051363.37-208.82-0.40%
JSE Top 4017:0046195.61-229.16-0.49%
JSE Gold17:001493.622.780.19%
JSE Financial17:0037953.4390.000.24%
JSE Industrial17:0067379.83258.460.39%
JSE Indust 2517:0059585.32249.170.42%
JSE Resource17:0058170.95-1566.44-2.62%
DJ Futures18:5216885.0092.000.55%
DJ Ind19:5816912.7974.050.44%
SP 50019:581980.208.460.43%
FTSE 10017:356779.3138.060.56%
All Ords08:375618.4037.800.68%
NZSE 5007:485114.2143.090.85%
NameTimeRPMove% Move
Gold $19:591296.11-1.94-0.15%
Gold R19:5913819.9561.540.45%
Gold R/kg19:5844422122850.52%
Silver $19:5919.4360-.1730-0.88%
Platinum $19:591436.30-3.20-0.22%
Palladium $19:59877.80-11.70-1.32%
Brent Crude19:58101.58-.02-0.02%
Rand / Dollar19:5910.66190.06130.58%
Rand / Pound19:5517.6708-0.0288-0.16%
Rand / Euro19:5514.18800.02390.17%
Rand / NZD19:598.99060.00020.00%
Rand / AUD19:559.91830.03140.32%
Yen / Dollar19:59102.87200.31400.31%
Euro / Dollar19:590.75090.00240.32%
Dollar / Euro19:591.3317-0.0044-0.33%
Pound / Dollar19:550.60160.00400.67%

Click here for the Sharenet Spot Price page
The JSE Today

Trading Statistics
* Includes all listed instruments on the JSE
Major Moves Up
SharenameSaleMove% MoveVolume
1 ATLATSA  385205.48.%41225
2 CONVERGE  12565.04.%82150
3 EQSTRA  650315.01.%60625
4 PINNACLE  799374.86.%2993623
5 KEATON   275124.56.%39281
6 INTEWASTE  15164.14.%11546
7 DCENTRIX  400153.90.%500872
8 INVPROP  1529553.73.%10259
9 FAMBRANDS  103693693.69.%75281
10 ROCKCASTL  1995703.64.%628877
11 ADAPTIT  715253.62.%195514
12 DIGICOR  20573.54.%35260
13 COMAIR  440153.53.%10146
14 WBHO  137414603.46.%105616
15 FINBOND  300103.45.%6914
16 STEINHOFF  52061563.09.%10503955
17 LEWIS  60301803.08.%269427
18 CAPEVINH  870252.96.%49817
19 ARCMITTAL  39531132.94.%616195
20 TASTE  350102.94.%90578

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Major Moves Down
SharenameSaleMove% MoveVolume
1 PUTPROP  800-100-11.11.%8035
2 DELTA  395-44-10.02.%11550
3 ROCKWELL  362-38-9.50.%1000
4 OANDO  172-18-9.47.%6629
5 EFFICIENT  300-20-6.25.%3000
6 VUNANI  141-9-6.00.%120
7 SHOPRIT  14550-863-5.60.%15079751
8 BILLITON  34756-2003-5.45.%3073192
9 EHSV  590-31-4.99.%18484
10 TRNSHEX  330-13-3.79.%102307
11 WOOLIES  7705-242-3.05.%4208241
12 METAIR  3600-113-3.04.%81802
13 TRUWTHS  6705-204-2.95.%2981391
14 ROLFES  340-10-2.86.%172719
15 PHUMELELA  1899-50-2.57.%106410
16 ELLIES   190-5-2.56.%454765
17 KAP  395-10-2.47.%662083
18 CLICKS  6525-156-2.33.%941162
19 CASHBIL  12600-300-2.33.%4577
20 ADVHLTH  187-4-2.09.%169425

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New Highs
SharenameSaleHighMove% MoveVolume
1 ROCKCASTL  19952100703.64.%628877
2 MTN  24440245723401.41.%3908762
3 MEDCLIN  91819298760.83.%1119908
4 ARROW-A  80080550.63.%1399599
5 SANLAM  64536514330.51.%2757331
6 RESILIENT  69857027350.50.%224971
7 REMGRO  2412024300990.41.%853955
8 ASCENDIS  160016200.147846
9 SUNINT  1177011879-30-0.25.%341666
10 INTUPROP  59846109-35-0.58.%719428
11 ETFPLD  94479560-83-0.87.%4950

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New Lows
SharenameSaleLowMove% MoveVolume
1 ADCOCK  47794616-89-1.83.%1449197
2 PSG-KST  670650-4-0.59.%218676

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Index Summary
Index NameRPMove% Move
Top 4046,195.61-229.16-0.49%
Mid Cap65,571.2219.050.03%
Small Cap55,162.93153.750.28%
Resource 2058,170.95-1566.44-2.62%
Industrial 2559,585.32249.170.42%
Financial 1514,640.4536.320.25%
Financial & Ind. 3063,446.77282.280.45%
All Share51,363.37-208.82-0.40%
Oil & Gas 47,121.03287.560.61%
Mining 34,323.18-1138.39-3.21%
Gold Mining1,493.622.780.19%
Platinum Mining47.32.280.60%
GENERAL MINING10,022.36-425.78-4.08%
Oil & Gas Producers 25,336.11154.620.61%
Basic Materials 30,235.25-900.73-2.89%
Chemicals 24,268.92-47.16-0.19%
Forestry & Paper 31,201.25-57.43-0.18%
Industrial Metals 19,382.69114.660.60%
Industrials 47,213.72163.430.35%
General Industrials 152.96.740.49%
Consumer Goods 60,473.18312.500.52%
Automobiles & Parts 8,152.05-255.88-3.04%
Household Goods357.28113.09%
Health Care 87,903.73376.490.43%
Beverages 200.08-.10-0.05%
Index NameRPMove% Move
Food Producers 79,399.75209.290.26%
Personal Goods 1,029.437.990.78%
Consumer Services 12,602.56-45.28-0.36%
General Retailers 64,944.17-1040.47-1.58%
Travel & Leisure 5,923.4728.730.49%
Media 296.872.310.78%
Support Services 2,760.18-18.31-0.66%
Telecommunications 11,614.50165.331.44%
Financials 37,953.4390.000.24%
Banks 66,240.52334.620.51%
Non-life Insurance 55,186.671421.592.64%
Life Insurance 36,067.75100.590.28%
General Financial 3,632.8323.600.65%
Technology 43,614.8715.050.03%
SHARIAH TOP40 4,350.82-63-1.43%
FTSE/JSE SHARIAH ALL4,484.42-52-1.15%
COAL MINING18,856.451590.85%
FTSE JSE Fledgling 6,764.13360.54%
FTSE/JSE Alt X 1,300.71231.81%
CAPPED PROPERTY 471.83-0.46%
RESOURCE 31,712.49-810-2.49%
DIVIDEND PLUS224.2100.07%
FTSE/JSE RAFI 4010,123.64-46-0.45%
Capped Top 4024,496.96-81-0.33%
Capped All Share26,015.30-95-0.36%
JSE TABACO 7,969.2880.10%

Click here for the Sharenet Index Summary page
Latest Consensus Changes**
CodeCompany NameStatusUpdated
Results Expected**
ExpectedCompany NameFin. Date
20/08/2014ARBJune 2014 (Final)
20/08/2014BHPBILLJune 2014 (Final)
20/08/2014BHPBILL5June 2014 (Final)
20/08/2014BLUETELMay 2014 (Final)
20/08/2014GLENCOREJune 2014 (Interim)

Recent Dividends**
Share NameDec-DateLDTPay-DateAmount
CLIENTELE18/08/1412/09/1422/09/14ZAR 0.7800
ADAPTIT18/08/1405/09/1415/09/14ZAR 0.0823
KAP18/08/1426/09/1406/10/14ZAR 0.1200
CITYLDG15/08/1405/09/1415/09/14ZAR 1.8900
STANBANK6.514/08/1429/08/1408/09/14ZAR 0.0325
Ex Div**
Share NameDec-DateLDTPay-DateAmount
FIRSTRANDB-P24/07/1415/08/1425/08/14ZAR 3.4111
SABVEST30/07/1415/08/1425/08/14ZAR 1.0000
SABVEST-N30/07/1415/08/1425/08/14ZAR 1.0000
SIBANYE31/07/1415/08/1425/08/14ZAR 0.5000
BATS30/07/1415/08/1430/09/14GBP 0.4750

Upcoming AGMs**
CodeCompany NameDateStatus
HUGHuge Group Ltd.19/08/2014Confirmed
RACPRECM - Calibre Ltd.20/08/2014Confirmed
RACCRECM - Calibre Ltd.20/08/2014Confirmed
PSVPSV Holdings Ltd.21/08/2014Confirmed
CDZCadiz Holdings Ltd.21/08/2014Confirmed

Stock Exchange News Service
19/08/201417:35FIRSTRAND BANK LIMITED - Amendment To The Credit Ratings of FirstRand Bank Limit...
19/08/201417:20TSOGO SUN HOLDINGS LIMITED - Tsogo Sun announces the granting of regulatory appr...
19/08/201417:01TSOGO SUN HOLDINGS LIMITED - Fulfilment of conditions precedent regarding the sp...
19/08/201417:00PEREGRINE HOLDINGS LIMITED - Dealings in securities by an associate of a directo...
19/08/201416:57FIRSTRAND BANK LIMITED - FRC79,FRC99-Partial Capital Redemption
19/08/201416:40UBUBELE HOLDINGS LIMITED - Notice in terms of section 129(4) (b) of the Companie...
19/08/201416:05AFRICAN RAINBOW MINERALS LIMITED - Trading statement in respect of the year ende...
19/08/201416:00ROYAL BAFOKENG PLATINUM LIMITED - Dealing in securities by an executive director
19/08/201415:50INVESTEC BANK LIMITED - Dividend Announcement - SHPIHG
19/08/201415:30TOWER PROPERTY FUND LIMITED - Dealing in securities by a director of Tower
19/08/201415:00DEUTSCHE BANK AG - Distribution Announcement - DBNPNV
19/08/201415:00DEUTSCHE BANK AG - Distribution Announcement - DBNPNU
19/08/201414:30OLD MUTUAL PLC - Public Opening Position Disclosure/Dealing Disclosure by a Pers...
19/08/201414:00SACOIL HOLDINGS LIMITED - Assignment of 20% participating interest in Oil Prospe...
19/08/201413:59HUGE GROUP LIMITED - Amended results of Annual General Meeting
19/08/201413:00AFRIMAT LIMITED - Directors dealings
19/08/201412:38INVICTA HOLDINGS LIMITED - Results of annual general meeting
19/08/201412:35TIGER BRANDS LIMITED - Dealing in Securities
19/08/201412:30ABSA BANK LIMITED - ACL204-Interest Rate Reset
19/08/201412:30ALLIED ELECTRONICS CORPORATION LTD - Dealing in Securities
19/08/201412:25FIRSTRAND BANK LIMITED - FRS119-New Instrument Listing
19/08/201411:45NEW GOLD ISSUER LIMITED - NGPLT-Partial De-listing of NewGold Platinum Debenture...
19/08/201411:45BANK WINDHOEK LIMITED - Interest Rate Reset Announcement
19/08/201411:35REDEFINE PROPERTIES LIMITED - Results of general meeting
19/08/201411:32HUGE GROUP LIMITED - Results of Annual General Meeting
19/08/201411:30SYNTHESIS FUNDING LIMITED - Synthesis Funding Limited - New Financial Instrument...
19/08/201411:19CAPITEC BANK HOLDINGS LIMITED - Dealing in securities by an associate of a direc...
19/08/201411:18TRUSTCO GROUP HOLDINGS LIMITED - Truscto establishes an ADR programme
19/08/201411:07NEW GOLD ISSUER LIMITED - GLD-Partial De-Listing of NewGold Debentures
19/08/201411:03MARSHALL MONTEAGLE PLC - Dealing in securities
19/08/201410:45HARMONY GOLD MINING COMPANY LIMITED - Harmony refocuses assets for long term sus...
19/08/201410:40FAMOUS BRANDS LIMITED - Cautionary announcemenet
19/08/201410:00THE THEKWINI WAREHOUSING CONDUIT (RF) LTD - New Financial Instrument Listing - T...
19/08/201410:00TOTAL CLIENT SERVICES LIMITED - Notification in terms of section 122(3) of the C...
19/08/201409:55FOX STREET 2 (RF) LTD - Partial redemption - FS2A2
19/08/201409:55FOX STREET 2 (RF) LTD - Scheduled Redemption - FS2A1
19/08/201409:50GROUP FIVE LIMITED - Dealing in securities by a director of a major subsidiary
19/08/201409:11BHP BILLITON PLC - Results Presentation Year Ended 30 June 2014
19/08/201409:09BHP BILLITON PLC - Unlocking Shareholder Value Presentation
19/08/201409:06RANDGOLD & EXPLORATION COMPANY LTD - Summarised consolidated unaudited interim f...
19/08/201409:04BHP BILLITON PLC - BHP Billiton Results for the Year Ended 30 June 2014
19/08/201409:00SHOPRITE HOLDINGS LIMITED - Results for the 12 months to June 2014
19/08/201409:00CAPITEC BANK HOLDINGS LIMITED - General repurchase of an additional 3% non-redee...
19/08/201408:59BHP BILLITON PLC - Senior Executive Changes
19/08/201408:57BHP BILLITON PLC - Creation of New Global Metals and Mining Company
19/08/201408:31ESKOM HOLDINGS SOC LIMITED - Tap Issue - ES42
19/08/201408:30ESKOM HOLDINGS SOC LIMITED - Tap Issue - EL31
19/08/201407:59GOLD FIELDS LIMITED - Gold Fields sells its 51% stake in Perus Chucapaca project...
19/08/201407:06SA SECURITISATION PROGR (RF) LTD - New financial instrument listing
19/08/201407:05HUGE GROUP LIMITED - Voluntary announcement on the acquisition of intellectual p...
19/08/201407:05TRUSTCO GROUP HOLDINGS LIMITED - Resignation of independent non executive direct...

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