City of Johannesburg Pension Fund

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1 ITY O OHANNESBURG E N S I O N U N D future your egg for S E NN STRENGTH i l A est ia depedece th c grow peace of mid a f i develop stability BURG ENSION UND OH RETIREMENT O I TY security ity of ohaesburg esio ud Member Ivestmet hoice Guide: Makig a Ivestmet hoice that is Right for You & Your Retiremet Savigs

2 Nurturig our ud. rotectig our members.

3 What You Will id I This Ivestmet hoice Guide: age 1. Itroductio 2. Rules are Rules 3. Let's Uderstad Asset lasses 4. The Basics of Ivestig for Members Uder 53 Years Old 5. The Basics of Ivestig for Members Over 53 Years Old Uderstadig the Life Stage ortfolio, the Default ortfolio ( If You Do't Wat to hoose) 6 I YOU WANT TO MAKE YOUR OWN INVESTMENT HOIE: 8 7. Get Advice If You Need it 8 Uderstad Your hoice of Ivestmet ortfolios: 9 8. High Risk ortfolio 9. Medium Risk ortfolio 10. Low Risk ortfolio 11. Moey Market ortfolio 12. What You Need to Do if You Wat to Make a Ivestmet hoice 13. How Ivestmet Switches Work 14. Do You Have More Questios?

4 1. Itroductio The three most importat thigs to look at whe makig sure you save eough to live comfortably after retiremet are: Savig your beefit for retiremet ad ot spedig your moey betwee jobs; Makig sure the amouts you cotribute to your retiremet (cotributios) are eough; ad Makig sure your cotributios ear eough ivestmet returs to beat iflatio whe you are youger. As the ity of ohaesburg esio ud (the ) is a defied cotributio fud, your beefit o retiremet is made up of the cotributios which go towards retiremet savigs as well as the ivestmet returs eared o these cotributios. This meas that you, the member, take o the ivestmet risk. or this reaso, your Trustees (based o advice of the ud s professioal Ivestmet osultats) have put together four ivestmet portfolios, which ca be used to ivest your retiremet savigs. If you do't wat to make a ivestmet choice, your moey will be ivested i a Default ortfolio called the Life Stage ortfolio, which the Trustees have desiged (together with the ud s professioal Ivestmet osultats) to move your moey to suitable ivestmet portfolios, based o your age. What are Ivestmet Returs? Let's say you ow a spaza shop. You go to the market to buy stock ad maage to get 12,5kg bags of mielie meal for oly R30. If you bought 5 bags of mielie meal from the market, you would pay R150. If you sell these bags of mielie meal for R40 each, you would ow have more moey tha you had (R200). The reaso for this is that you would make R10 profit o each bag of mielie meal ad would make a total profit of R50 o 5 bags. You are ivestig your moey i the mielie meal. If you SAZA sell all your bags of mielie meal for R40 each, you would have more moey tha whe you started. O the other had, if you could oly sell your bags of mielie meal for R25 each, you would oly be paid R125 for 5 bags of mielie meal. Because you paid R150 for 5 bags of mielie meal, you would the have made a ivestmet loss. I the same way, your retiremet beefit (your ud redit) ca make a ivestmet profit or a ivestmet loss. This guide helps you to uderstad your ivestmet choices i the. lease read this guide carefully - whe it comes to your retiremet beefits, the ivestmet choices you make today will affect your retiremet savigs ad therefore your quality of life i retiremet. 2. Rules are Rules The Rules of the set out how the ud must be ru ad how ivestmet choice works. Should there be ay differeces betwee this guide ad the 's Rules, the Rules will always apply. If you have a disagreemet with the ud, you have the right to address this with the ud or the ity of ohaesburg i writig ad, if you eed to, you ca approach the esio uds Adjudicator. Also, you have the right to look at the 's Rules / other documets, eg the 's fiacial statemets / actuarial valuatios at the 's registered address: 1st loor Oakhurst, West Wig, 11/13 St Adrews Road, arktow, ohaesburg, p a g e 2 ITY O OHANNESBURG ENSION UND

lease ote that ay iformatio i this commuicatio relatig to ay fiacial product or fiacial advice: Serves merely as a factual commuicatio / display of the fiacial product ad or advice Does ot costitute

situatio or particular eeds Is ot meat as advice as cotemplated i the iacial Advisory ad Itermediary Services Act The ivestmet retur objectives specified i this guide are ot guarateed.

5 lease ote that ay iformatio i this commuicatio relatig to ay fiacial product or fiacial advice: Serves merely as a factual commuicatio / display of the fiacial product ad or advice Does ot costitute a express or implied recommedatio, guidace or proposal that ay particular trasactio i respect of such fiacial product ad / or advice is appropriate to your particular ivestmet objectives, fiacial situatio or particular eeds Is ot meat as advice as cotemplated i the iacial Advisory ad Itermediary Services Act The ivestmet retur objectives specified i this guide are ot guarateed. The actual returs achieved will deped iter alia o capital markets ad ivestmet maager skill. Members should cosult their ow registered fiacial advisors to ascertai what optios are appropriate before makig their choice or effectig ay chages. The Board of Trustees ad the ricipal Officer have made every reasoable effort to esure that the iformatio cotaied herei is true ad correct. The Board of Trustees ad the ricipal Officer will ot accept liability due to ay loss, damage, costs ad / or expeses which may be sustaied or icurred directly or idirectly as a result of ay error or omissio cotaied herei. Use of this iformatio is ot a recommedatio costitutig fiacial advice. 3. Let's Uderstad Asset lasses Your retiremet savigs are ivested ito differet ivestmets, kow as asset classes. The differet types of ivestmets or asset classes are explaied below. What are Shares? Why Ivest i Shares? Whe you ow a share, you ow part of a compay. Shares are also called equities. Ivestig i shares is like takig a log drive. You might break dow alog the way or have a burst tyre, but evetually you will get to the ed of your jourey. I the same way, you must expect shares to go up ad dow i value over a short space of time. History has show that ivestig i shares over a log period of time has give returs which are higher tha the other asset classes. That is why the mai portio of youger members' retiremet savigs should go ito this asset class. What are Bods? Bods are a way for govermet, semi-govermet, parastatals ad large compaies to raise moey. Whe your moey is used to buy a bod, this bod pays back iterest regularly. You will also be paid back the amout you first let to the govermet / parastatal, etc, at a future date. Bods move up ad dow with the rise ad fall of iterest rates, but their value usually goes up ad dow less tha shares. p a g e 3 ITY O OHANNESBURG ENSION UND

What is roperty? roperty is ivestmet i lad ad buildigs. roperty ivestmets may give higher returs tha bods or cash ivestmets over the log term, but usually give lower returs tha shares.

Oe usually ivests i cash for less tha oe year. ash is geerally cosidered the 'safest' ivestmet because the value of your ivestmet will ot go dow.

The Basics of Ivestig for Members Uder 53 Years Old Your Ivestmets Must Ear More Tha Iflatio It is becomig more ad more expesive to live every year. The reaso for this is iflatio.

6 What is roperty? roperty is ivestmet i lad ad buildigs. roperty ivestmets may give higher returs tha bods or cash ivestmets over the log term, but usually give lower returs tha shares. roperty values go up ad dow i value more ofte tha bods ad cash. But shares are the asset class that goes up ad dow the most. What is ash? ash is like puttig moey i the bak or i a fixed deposit. Oe usually ivests i cash for less tha oe year. ash is geerally cosidered the 'safest' ivestmet because the value of your ivestmet will ot go dow. However, cash is ot a good logterm ivestmet because ivestmet returs ca be eate away by iflatio. This meas that cash ivestmets are ot a good idea for youger members with may years util retiremet. 4. The Basics of Ivestig for Members Uder 53 Years Old Your Ivestmets Must Ear More Tha Iflatio It is becomig more ad more expesive to live every year. The reaso for this is iflatio. It will cost a lot more to buy food, petrol, clothes etc whe you retire tha it costs today, because of iflatio. The ivestmet returs that your retiremet moey ears must be higher tha iflatio, so that the value of your moey is ot eate away over time. Also, you must make sure that your retiremet savigs (your ud redit) have eough time to grow whe you are youger, by keepig your moey ivested for 30 years or loger. (The beefit summary will give you a ice remider of how your ud redit is made up.) It meas as well that whe you are youger, it is best to ivest most of your ud redit i shares. Ivestig i shares over a log period of time is the best way to ear ivestmet returs which are higher tha iflatio. or example, you might pay R8.50 for a loaf of white, govermet bread today. I 20 years time, that same bread is goig to cost you R39.62 if iflatio has bee over 8% per year. It will be almost like eatig gold, uless you ca afford that bread durig retiremet. RANDS RANDS RANDS the effect of iflatio over time p a g e 4 ITY O OHANNESBURG ENSION UND

7 Have a Log Term la (Ivestmet Strategy) The youger you are ad the further you are from retiremet, the more you eed to thik about earig ivestmet returs that are higher tha iflatio. That is why it is so importat to put together a ivestmet pla (called your ow, persoal ivestmet strategy). As a rule, whe lookig at a log term pla for your ivestmets, your ivestmet returs should aim to be at least 4% p.a. higher tha iflatio, for you to build up solid retiremet beefits. If you choose a lower risk ivestmet portfolio which ivests a low amout i shares while you are still youg, you have a great risk that your retiremet savigs wo't ear eough ivestmet returs to beat iflatio over the may years you are savig towards your retiremet (30-40 years or more). If you do't wat to set your ow ivestmet pla (or ivestmet strategy), do't paic! The Trustees (based o advice from professio Ivestmet osultats) have put together a ivestmet strategy that will suit the eeds of most members called the Life Stage (Default ortfolio). If this Life Stage ortfolio suits your eeds or if you wat to ivest i this Default ortfolio, you do't have to make a ivestmet choice. More about this Life Stage ortfolio ca be foud uder item 6 of this guide. Extra Iformatio o Risks of Beig Too oservative Whe You are Youger The table below looks to illustrate the risks of beig too coservative too soo give a member s umber of years util retiremet: Risk of Not Meetig ost Retiremet Icome Expectatios < 3 Years 3-8 Years > 8 Years util Retiremet util Retiremet util Retiremet Low Risk ortfolio Low Medium High Medium Risk ortfolio Medium Low Medium High Risk ortfolio High Medium Low p a g e 5 ITY O OHANNESBURG ENSION UND

5. The Basics of Ivestig for Members Over 53 Years Old rotect Your Ivestmets as You Get loser to Retiremet Age Oe of the biggest dagers as you get older ad closer to retiremet is that the ivestmet

You oly face problems if you eed to use your ud redit to buy a auity at retiremet age, ad the share markets have dropped shortly before you retire.

or this reaso, you should thik about havig a smaller part of your retiremet beefit ivested i shares, as you get older.

You may live aother 20-30 years after you retire, ad your pesio must last util you (ad maybe your spouse) die.

8 5. The Basics of Ivestig for Members Over 53 Years Old rotect Your Ivestmets as You Get loser to Retiremet Age Oe of the biggest dagers as you get older ad closer to retiremet is that the ivestmet markets drop. This may ed up with you losig a big part of your ud redit. Do't forget, you do't actually lose ay moey while your ud redit has time to grow, eve if the markets go dow. You oly face problems if you eed to use your ud redit to buy a auity at retiremet age, ad the share markets have dropped shortly before you retire. (Remember, a auity is a pesio that you buy from a isurace compay to pay you icome each moth, after retiremet). or this reaso, you should thik about havig a smaller part of your retiremet beefit ivested i shares, as you get older. Make Sure You Buy a Auity That Will Give You Icome Whe You are i Retiremet Aother big risk you face, whe you go o retiremet, is the type of pesio (auity) you choose to buy from a isurace compay. You may live aother years after you retire, ad your pesio must last util you (ad maybe your spouse) die. That is why it is importat to speak to a fiacial advisor who uderstads the bigger picture of your fiaces as well as your eeds, before you buy a auity o retiremet. 6. Uderstadig the Life Stage ortfolio, the Default ortfolio (If You Do't Wat to hoose) I the, everyoe ca choose where they would like their moey ivested. You have four ivestmet fuds (called portfolios) that you ca choose from. The Trustees uderstad that some people wo't feel happy to make this choice. That is why, if you do't had i your ivestmet optio form, your ud redit will automatically be put ito the Life Stage ortfolio (also called the Default ortfolio as this will be the default or automatic optio whe members do't make a choice). What is the Life Stage ortfolio ad How Does it Work? Eve if you do't wat to make a ivestmet choice, it is very importat that you uderstad how this Life Stage ortfolio works, so that you uderstad how your ud redit will be ivested. The ame Life Stage actually explais it all. or every stage of a member's life, the amout of the ud redit ivested i shares chages. p a g e 6 ITY O OHANNESBURG ENSION UND

Have a look at this table: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 20% 40% 80% 60% 60% 60% 40% 80% 20% 100% 50% 50% 100% Up to 53 54 55 56 57 58 59 60 High Risk ortfolio Medium Risk ortfolio

lease do't worry about the ames of these portfolios the High Risk ortfolio is oly called that because it has a high ivestmet i shares.

9 Have a look at this table: 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 100% 20% 40% 80% 60% 60% 60% 40% 80% 20% 100% 50% 50% 100% Up to High Risk ortfolio Medium Risk ortfolio Low Risk ortfolio This shows that, as a member becomes older, their beefit is moved from the High Risk ortfolio (which has a high amout i shares), to the Low Risk ortfolio, with low amouts i shares lease do't worry about the ames of these portfolios the High Risk ortfolio is oly called that because it has a high ivestmet i shares. Remember, whe you are youger, it is actually dagerous ot to be ivested i shares, as your beefit will be eate up by iflatio Let's look at a example of how the Life Stage ortfolio works: oh is 52 years old ad his retiremet beefit is i the Life Stage ortfolio. Because he is 52, his ud redit is ivested i the High Risk ortfolio. This meas that 85% of his ud redit is ivested i shares. oh turs 53 years old, o 31 May. All of his ud redit will the gradually be moved to the Medium Risk ortfolio i half yearly istalmets over the ext 5 years. This meas that less of his ud redit will ow be ivested i shares. After oh turs 58, all his ud redit, which is ow i the Medium Risk ortfolio, will the be moved to the Low Risk ortfolio i half yearly istalmets over the ext 2 years. Why the Life Stage ortfolio Works for Most Members: The Life Stage ortfolio has bee desiged by the Trustees together with the ud s Ivestmet osultats to meet the ivestmet eeds of most members durig their workig life ad as they get closer to retiremet The Life Stage ortfolio automatically chooses portfolios for you, which relate to your age ad the umber of years util you reach Normal Retiremet Age, takig the stress of choice off your shoulders This ortfolio is desiged to protect your retiremet savigs from the effects of iflatio, as you save for retiremet over the log term The Life Stage ortfolio has a built i protectio agaist markets which may move sharply dowwards, just before you reach your Normal Retiremet Age. p a g e 7 ITY O OHANNESBURG ENSION UND

10 lease remember that your retiremet savigs will move up ad dow over short periods of time if you are ivested i the Life Stage ortfolio. Youger members will be heavily ivested i shares, i order to have a better chace that their ivestmets ear more tha iflatio over a loger period of savig. Eve if your retiremet savigs move dow because of share market movemets, you wo't suffer ay actual loss, uless you take your ivestmets out of the Life Stage ortfolio (by switchig i ad out of this portfolio at the wrog time, or by takig your ud redit as cash, whe you chage jobs). If You Wat to Make Your Ow Ivestmet hoice: 7. Get Advice If You Need it If you feel that the Life Stage ortfolio is ot for you ad does't meet your eeds, you are welcome to choose betwee ay of the portfolios uder this sectio, or a combiatio of these portfolios. However, the Trustees caot take ay resposibility for the choice you make ad strogly suggest that you take fiacial advice, before makig this choice, to make sure that your choices fit your fiacial plaig eeds. If you do't have your ow fiacial advisor, the Trustees have put together a shortlist of fiacial advisors, which you ca choose from. A list of fiacial advisors who the Trustees are comfortable with, is available at the esio ud Office. lease ote that either the Trustees or the esio ud Office: a provide you with ivestmet advice Take resposibility for ay choice of a fiacial advisor you may make. If you decide to make your ow ivestmet choice, the Trustees are ot resposible for your choice. What should oe look for i a fiacial advisor? Qualificatios: Is your fiacial advisor a ertified iacial laer ( ) with a qualificatio from the iacial laig Istitute? Is your fiacial advisor registered to give the required advice i terms of the iacial Advisories ad Itermediaries Services (AIS) Act? Experiece: Do they have the ecessary fiacial plaig experiece? Idepedece: a they advise you of the right product for you, or are they sellig oe compay's offerigs? Support: Does the compay they represet have a strog reputatio? Will they provide you with advice ad iformatio o a ogoig basis after a product is sold to you? ees: How are they earig their fees? Are their fees charged for time spet, or are they earig a commissio? Reports: Request a writte report coverig all the advice give to you. p a g e 8 ITY O OHANNESBURG ENSION UND

11 Uderstad Your hoice of Ivestmet ortfolios If you would like to decide where to ivest your ud redit, you have 4 ivestmet portfolios to choose from: High Risk ortfolio (high ivestmet i shares - suitable for youger members) Medium Risk ortfolio (medium ivestmet i shares) Low Risk ortfolio (lower ivestmet i shares - suitable for older members) Moey Market ortfolio (oly suitable for short term protectio of capital value) Be careful whe makig your decisio though - remember, it is risky for youger members to choose ivestmet portfolios that wo't give ivestmet returs that are higher tha iflatio, over the log term. O the other had, it may be risky for older members to ivest their ud redit i portfolios which have a high amout i shares, shortly before they retire. STO The 4 ivestmet portfolios for you to choose from are described below. It's a good idea to look at the sectios about the asset classes i sectio 3 of this guide, whe you read this sectio. 8. High Risk ortfolio Suitable for members who have more tha 10 years before retiremet 85% of this portfolio is ivested i shares The aim of this portfolio is to ear ivestmet returs above iflatio, over the log term 65% Ivestig i this portfolio will mea that your ud redit ca move up ad dow sharply, over short periods of time. 2% 8% 5% Local Shares Overseas Shares 20% Local Bods Iflatio Liked Bods Local ash The High Risk ortfolio ca go up ad dow sharply over short periods of time, but it is more likely to ear ivestmet returs above iflatio, over the log term (20-30 years) p a g e 9 ITY O OHANNESBURG ENSION UND

9. Medium Risk ortfolio Suitable for members who have betwee 3-10 years util they

ivestmet returs above iflatio, over the medium term This portfolio will move up ad dow

55% 5% 5% 15% 5% 15% Local Shares Overseas Shares Local Bods Iflatio Liked Bods Local

Low Risk ortfolio Suitable for members who have less tha 3 years to go before they

ivestmet returs above iflatio, over the short term This portfolio is ot usually

12 9. Medium Risk ortfolio Suitable for members who have betwee 3-10 years util they retire 70% of this portfolio is ivested i shares The aim of this portfolio is to ear ivestmet returs above iflatio, over the medium term This portfolio will move up ad dow less tha the High Risk ortfolio, but still has a large amout ivested i shares. 55% 5% 5% 15% 5% 15% Local Shares Overseas Shares Local Bods Iflatio Liked Bods Local ash Overseas Bods 10.Low Risk ortfolio Suitable for members who have less tha 3 years to go before they retire 50% of this portfolio is ivested i shares The aim of this portfolio is to ear ivestmet returs above iflatio, over the short term This portfolio is ot usually suitable for youger members. 40% 10% 10% 10% 10% 20% Local Shares Overseas Shares Local Bods Iflatio Liked Bods Local ash Overseas Bods p a g e 1 0 ITY O OHANNESBURG ENSION UND

13 11.Moey Market ortfolio This portfolio may be used by members who are about to retire This portfolio has o ivestmets i shares, ad is ivested 100% i cash-like ivestmets The value of your ud redit will ot move up ad dow i this portfolio. However, this portfolio probably wo't ear returs above iflatio, over the log term. 100% Local ash 12. What You Need to Do if You Wat to Make a Ivestmet hoice If you wat your ud redit ivested i the Life Stage ortfolio, do othig! However, if you wat to make a ivestmet choice: Make sure that you have carefully read ad uderstood this guide otact a idepedet fiacial advisor (registered i terms of the AIS Act) if you require ivestmet advice. (lease remember that either the Trustees or the esio ud Office ca provide you with ivestmet advice) Make your ivestmet decisio as set out i this guide omplete ad sig your ivestmet optio form (switchig form) cofirmig your Ivestmet decisio ad retur it to the ud s Admiistrators (NMG) by the deadlie date, beig 31 March (otact details for the Admiistrators, (NMG), are o the back of this booklet.) If your form is ot received before the deadlie date, your moey will be ivested i the Life Stage ortfolio, the default optio. 13.How Ivestmet Switches Work How Do I hage My Ivestmet hoice? Dates for Switchig: You have the choice, four times a year i March / ue / September ad December of each year, to switch to other ivestmet portfolios. Whe Must Your Switchig orm be Retured: lease esure that your switchig form is retured to the ud s Admiistrators NMG by 31 March, 30 ue, 30 September or 31 December (ie oe moth before the date that the switch will be doe by the Admiistrator). Switchig forms are available at the esio ud Office. p a g e 1 1 ITY O OHANNESBURG ENSION UND

14 Eg: if you would like to switch ivestmet portfolios i April, your switchig form must be received by the ud s Admiistrators (NMG) by 31 March. Your switch would the be put through by the ud s Admiistrators (NMG), by 30 April.? Switchig ees: You wo't be charged for 2 switches a year. However, if you wat to switch ivestmet portfolios more ofte tha twice durig the ud s iacial Year, you will be charged at a rate of R1,000 (reviewed aually) for your third ad fourth switch of the year. Latest ud redit Values: The will be givig you olie access to your latest ud redit value, ito the future. or ow, if you eed to look at your latest ud redit value, please cotact the esio ud Office (cotact details are o the back cover of this guide). Do't forget though, ivestig for retiremet takes place over a log period of time. It's ot a good idea to chop ad chage out of your log term pla. 14.Do You Have More Questios? We would like you to be comfortable with the. If you have ay more questios, or eed ay clarity, please cotact the esio ud Office o: tel umber: (011) / fax umber: (011) ; or NMG o (011) You ca also cotact oe of the 's Trustees (a list of the Trustees is o the iside back cover). ud Name: ity of ohaesburg esio ud SB Referece Number: 12 / 8 / 3722 p a g e 1 2 ITY O OHANNESBURG ENSION UND

15 Do You Kow Who Your urret Trustees are? The 's curret Trustees are: Ms harity hisadza Mr Leo de Bruy Mr Eugee du reez Mr Mike Dube Ms ae Eagle Ms races eig Mr ieter Louwres Ms Nomsa Mgida Mr Adrew Rawlis Mr Mbulelo Ruda Mr Leo va Toder p a g e 1 3 ITY O OHANNESBURG ENSION UND

16 otactig the : The esio ud Office otact Details: hysical Address: 1st loor, West Wig Oakhurst Buildig 11 / 13 St Adrews Road (Behid Mike's Kitche), arktow Telephoe umber: (011) ax umber: (011) addresses: cjpf@telkomsa.et The 's Details: ud Name: ity of ohaesburg esio ud SB Referece Number: 12 / 8 / 3722 's Registered Address: 1st loor, West Wig Oakhurst Buildig 11 / 13 St Adrews Road, arktow The Admiistrator's otact Details: NMG osultats Actuaries Admiistrators (ty) Ltd: Telephoe umber: (011) ax umber: (011) addresses: joburgfuds@mg.co.za

City of Johannesburg Pension Fund

City of Johannesburg Pension Fund future your egg for ITY O OHANNESBURG E N S I O N U N D S E NN STRENGTH i l A est ia depedece th c grow peace of mid a f i develop stability BURG ENSION UND OH RETIREMENT O I TY security ity of ohaesburg