Sensible Finance Magazine Issue 26

NFB

A FREE publication distributed by NFB Private Wealth Management

Eastern Cape's Community...

Issue 26 March 2014

PERSONAL FINANCE Magazine

Revisiting your Will as part of your holistic financial planning where usufructs are involved TREATING CUSTOMERS FAIRLY (TCF) embedding this culture into financial firms

2014 TAX RELATED BUDGET PROPOSALS a summary of the tax related budget proposals private wealth management

“The best way of preparing for the future is to take good care of the present, because we know that if the present is made up of the past, then the future will be made up of the present.

Only the present is within our reach. To care for the present is to care for the future.�

- Buddha

private wealth management

Providing quality retirement, investment and risk planning advice since 1985. fortune favours the well-advised contact one of NFB's private wealth managers: East London tel no: (043) 735-2000 or e-mail: info@nfbel.co.za Port Elizabeth tel no: (041) 582-3990 or email: info@nfbpe.co.za Johannesburg tel no: (011) 895-8000 or email: nfb@nfb.co.za Web: www.nfbec.co.za NFB is an authorised Financial Services Provider

editor

ED’SLETTER

Brendan Connellan bconnellan@nfbel.co.za

Contributors Julie McDonald (NFB East London), Grant Berndt (Abdo & Abdo), Michelle Wolmarans (NFBIB East London), Wade Witbooi (Glacier

by Sanlam), Lunga Nkonki (NFB East London), Debbie Jacobs (IE&T), Bryce Wild (NFB East London), Glen Wattrus (NFB East London), Zuki Sonjica (NFB East London), Shaun Murphy (Klinkradt Murphy), Robyne Moore (NVest Holdings East London), Mikayla Collins (NFB Cape Town), Travis McClure (NFB East London), Mandy Botha (NVest Securities)

Advertising

layout and design Jacky Horn TA Willow Design jacky@e-mailer.co.za

Photos used in this magazine - 123rf.com

Robyne Moore rmoore@nvestholdings.co.za

Address East London Office NFB House, 42 Beach Road Nahoon, East London, 5241 Tel: (043) 735-2000 Fax: (043) 735-2001 E-mail: info@nfbel.co.za Port Elizabeth Office Ground Floor, Building 6, Ascot Office Park, Cnr. Ascot and Conyngham Roads, Greenacres, 6045 Tel: (041) 582-3990 Fax: (041) 586-0053 Email: info@nfbpe.co.za Web: www.nfbec.co.za The views expressed in articles by external columnists are the views of the relevant authors and do not necessarily reflect the views of the editor or the NFB Private Wealth Management. ©2014 All Rights Reserved.

No part of this publication may be reproduced in any form or medium without prior written consent from the Editor.

a sensible read

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eople throughout the country are generally disgruntled with the current government. Corruption, factionalism, lack of accountability and transparency, and an apparent lack of care, seem to be elements that are becoming endemic and deeply entrenched in our public sector. I think that many South Africans are growing increasingly concerned as to where we are headed, whether we will be taken beyond a point of no return or whether a tipping point will be reached where the majority of our people decide that enough is enough and take the ANC out of power.

I had a very interesting conversation with a friend of mine earlier today. We discussed how people seem to have lost their sense of humanity in their perpetual pursuit of wealth creation. Ubuntu (roughly translated as “human kindness” and being the belief in a universal bond of sharing that connects all humanity), one of Southern Africa's most beautiful philosophies, is slowly being lost to the seemingly more fashionable philosophies of greed, entitlement and self above all.

Our growing middle and elite classes are losing empathy for others. There is the tragic belief amongst too many that until they have reached the highest levels of prosperity (a moving target in itself), that there is no need to help others as they themselves do not yet have enough. Coupled with that is a growing view that people locked in poverty must clearly be lacking in ambition and thus have only themselves to blame.

I have even heard that there are views that people like Tokyo Sexwale or Cyril Ramaphosa are not privileged; they are simply people who have come to own what they are entitled to. Now, I do not begrudge anyone success, especially when it's been earned.

But how did we reach a point where people who can afford any privilege that they want, are not even seen as privileged?

One of NFB's roles is helping people to preserve and build wealth and it is a role that we are proud to say that we do very well.

However, we are ever supportive of wealth creation within ethical boundaries and fully recognise the responsibility that corporate and individuals have towards helping build a stronger South Africa.

We hope that individuals will realise, in the spirit of Ubuntu, that a strong collective is far more powerful than strong individuals. A sense of human kindness and collectivism is certainly something that all South Africans could do with.

Brendan Connellan - Editor and Director of NFB Email your full name to info @nfbel.co.za to subscribe to NFB's free economic electronic newsletters. another aspect of our comprehensive service

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SENSIBLE CONTENTS

nfb sensible finance

March 2014

4 DREAD DISEASE/SEVERE ILLNESS What is this cover and is it necessary? By Julie McDonald, Risk Assurance Specialist NFB East London.

6 THE SALE OF PROPERTY AND THE CPA Not applicable to the seller/purchaser transaction. By Grandt Berndt - Abdo & Abdo.

7 TREATING CUSTOMERS FAIRLY (TCF) Embedding this culture into financial firms. By Michelle Wolmarans, Manager - NFB Insurance Brokers.

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8 NEW YEAR, SAME OLD INVESTMENT PRINCIPLES Are your investment objectives still being met? By Wade Witbooi, Investment Analyst Glacier by Sanlam.

9 THE EFFECTS OF AN INTEREST RATE HIKE ON YOUR FINANCES What does this mean for the South African consumer? By Lunga Nkonki, Trainee Financial Paraplanner - NFB East London.

10 SHOULD I HAVE A SEPARATE WILL FOR FOREIGN ASSETS? Discussing the practical advantages. By Debbie Jacobs, Senior Estate Administrator Independent Executor & Trust.

11 THE IMPORTANCE OF GEOGRAPHICAL DIVERSIFICATION Offering protection in an unpredictable economy. By Bryce Wild, Private Wealth Manager - NFB East London.

12 REVISITING YOUR WILL AS PART OF YOUR HOLISTIC

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FINANCIAL PLANNING WHERE USUFRUCTS ARE INVOLVED

By Glen Wattrus, Private Wealth Manager - NFB East London.

15 THE PROTECTIVE NATURE OF RETIREMENT ANNUITIES Using the RA to your advantage. By Zukiswa Sonjica, Financial Paraplanner - NFB East London.

16 2014 TAX RELATED BUDGET PROPOSALS

By Shaun Murphy, Partner – Klinkradt Murphy.

20 THE BIG MOVE NFBPE's new offices. By Robyne Moore, Compliance & Operations Administrator NVest Financial Holdings.

21 DON'T STICK YOUR HEAD IN THE SAND WHEN IT COMES TO OWNING PROPERTY

By Mikayla Collins, Private Wealth Manager - NFB Cape Town.

23 Q &A. You ask. We answer. Advice column answering your investment, personal finance, life and/or risk insurance questions with Travis McClure, Private Wealth Manager - NFB East London.

24 GLENCORE XSTRATA – THE NEW KID ON THE BLOCK A look at one of the world's largest, natural resource companies. By Mandy Botha, Portfolio Manager - NVest Securities.

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SENSIBLE COVER

Dread disease / Severe / Critical Illness

Most people may have heard about cover for dreaded diseases or severe illnesses – what is this cover and should you have this cover in place? By Julie McDonald, Risk Specialist - NFB East London.

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evere illness cover (also known as dread disease or critical illness cover) is to cover those extra costs associated with a lifestyle change if you have any one of the severe illnesses. The major illnesses covered by all life assurance companies are: = Heart attack = Stroke = Cancer and = Coronary artery bypass graft

However, there is a universe of other illnesses that may affect you, whether it is a currently unknown tropical disease or something like Multiple Sclerosis or Bacterial Meningitis. Most companies have lists of included illnesses, as well as some sort of a “Catch All” benefit which caters for currently unknown or rare diseases not listed. Some companies don't look at specific illnesses, but rather at how an illness affects a bodily system.

The proceeds of a severe illness benefit are there to cover costs that are not covered by medical aid: the costs of travelling and staying in Cape Town for cancer treatment, for example. It could also be used if your house needed wheelchair friendly modifications, or for the costs of a private caregiver/nurse. The proceeds could also be used for financial support if a spouse needs to resign from their employment in order to look after you.

Some real life statistics about severe illnesses: = The age group of 40 – 60 have the highest percentage of claims – around 70%. = More than 50% of all claims are cancer

related

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= 1 in 3 men and 1 in 4 women will suffer from

a stroke or heart attack before age 60 = 1 in 7 women will get cancer.

Claims are assessed differently by each life company – as a standard 25%, 50%, 75% or 100% claim - and payment is usually based on the severity level (e.g. cancer stage 1 or stage 4) of the illness concerned. Certain “add on's” allow cover for lower severity claims (5%, 10%, 15%), while others allow a claim to be upgraded e.g. with an “addon”, a 25% claim can be boosted to a 50% payment.

Each life company provides different benefits; some options available allow for multiple claims for the same illness (a higher, same or lower severity) e.g. claiming for a minor heart attack and then a major heart attack, while others provide multiple claims for unrelated illnesses e.g. claiming for a major heart attack and then claiming for cancer.

Certain life assurance companies include free child and/or parent severe illness cover on your personal cover, while with others this is an additional option that would need to be selected and an additional cost would be involved.

In the society we live in, due to the high probability of claims, this benefit is more costly than life or disability cover. However, if you do not have any severe illness cover, you should be asking yourself the serious question - can I afford not to have this cover in place?

Contact Julie McDonald, Risk Assurance Specialist at NFB Private Wealth Management for all your risk assurance needs.

SENSIBLE SALE

THE SALE OF PROPERTY AND THE CPA The Consumer Protection Act (CPA) is law which has affected everyone involved in business.

There has been debate, however, on its effect on the sale of immovable property. By Grandt Berndt - Abdo & Abdo.

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transaction is defined in the CPA as meaning a person acting in the ordinary course of business for the supply of goods or services. An estate agent, in obtaining a mandate or when selling a property, will always be subject to the CPA and will need to comply with the terms of the Act. A mandate given to an agent is usually for a fixed period and would be a fixed term agreement. This agreement may be cancelled by the Seller at the expiry of the stipulated time period, or at any time during the mandate period, by giving the estate agent 20 business days notice in writing. Should the Seller, however, do this, he will be liable to pay a reasonable penalty for the services the agent has provided up to the date of cancellation, which services would probably be the advertising costs and administrative expenses incurred by the agent. It may well be advisable for mandates to make provision for a reasonable cancellation fee equal to a percentage of the commission the agent would have been entitled to, should a sale have been concluded.

Should the mandate not be cancelled, the agent must not more than 80 business days and not less than 40 business days before the expiry of the mandate, inform the Seller of the impending expiry, any material changes that will apply and that the mandate will continue on a month to month basis unless the Seller expressly cancels the mandate or agrees to a renewal for a further fixed term.

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However, the sale of the immovable property between the Seller and Purchaser may not be subject to the Consumer Protection Act. The sale of one's home registered in the Seller's personal name is not a transaction done in the ordinary course of the Seller's business and the CPA does not apply.

The traditional "voetstoots" or "as is" clause will then apply to this transaction.

The sale of investment property, even if this is property used for residential purposes and leased to a tenant, will fall within the CPA, provided the purchaser is not a juristic person (company or trust) with assets or a turnover exceeding R2 000 000.00.

Estate agents have, as a result of the Consumer Protection act, developed the practice of having the Seller complete a declaration as regards the condition of their property and any defects known to the Seller, irrespective of whether the sale is subject to the CPA or not. This is of benefit to the Purchaser as the Seller is effectively giving a warranty as to the condition of the property. The Seller must apply his mind to the questions in the declaration and make full disclosure of any defects, both current and historic, failing which the Seller is, through the signing of the declaration, issuing a warrantee as to the condition of the property. The Seller may thus end up having to effect repairs he would not previously have been liable for, had he not signed the declaration.

The position of the Purchaser has been strengthened, notwithstanding the fact that the CPA does not apply to the transaction.

SENSIBLE CONDUCT

TREATING CUSTOMERS FAIRLY (TCF) Embedding this culture into financial firms. By Michelle Wolmarans, Manager - NFB Insurance Brokers.

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rior to 2002 the conduct of persons operating in the financial services sector was unregulated.

Anyone, regardless of their qualifications or experience, could offer the public financial advice and sell financial products. The industry as a whole was not accountable to any umbrella body which meant that the advice offered by some financial advisors was driven by their greed and not the consumers' needs.

The inherent problem with financial services is that they fall into the category of services whose quality can often only be ascertained some time after purchase, and often at considerable cost, when disaster occurs.

The Financial and Advisory Intermediary Services Act (FAIS) was promulgated in 2002. The purpose of the act is to regulate the conduct of financial advisors in South Africa to ensure that clients are dealt with properly, responsibly and professionally. The act prescribes minimum levels of experience and education required by financial advisors and regulates the giving of advice and intermediary services. The act stipulates that the financial needs of a client must be established and evaluated and that appropriate advice must then be given based on those needs. In South Africa the regulatory authority in the non-banking financial industry responsible for enforcing the FAIS act is the Financial Services Board (FSB).

By regulating the industry the FSB strives to promote and maintain a sound investment environment in South Africa. The latest regulatory initiative launched by the FSB is Treating Customers Fairly (TCF). TCF requires all regulated businesses to consider their treatment of customers at all stages of their relationship with the customer from product design and marketing through to advice, point of sale and after sale stages.

Firms will be required to demonstrate that they are consistently delivering the following outcomes for their customers: Outcome 1: Culture and governance – Customers are confident that they are dealing with providers where the fair treatment of customers is central to the provider's culture.

Outcome 2: Product suitability – Products and services marketed and sold in the retail market are designed to meet the needs of identified customer groups and are targeted accordingly.

Outcome 3: Disclosure – Customers are given clear information and are kept appropriately informed before, during and after the time of contracting.

Outcome 4: Suitable advice – Where customers receive advice, the advice is suitable and takes account of their circumstances.

Outcome 5: Performance against expectations – Customers are provided with products that perform as providers have led them to expect, and the associated service is both of an acceptable standard and what they have been led to expect.

Outcome 6: Claims, complaints and changes – Customers do not face unreasonable post–sale barriers to change product, switch provider, submit a claim or make a complaint.

The FSB will be enforcing adherence to the TCF framework, and has advised that it would first negotiate any corrective action by engaging with the firm's senior management. Where this fails, and there is a serious risk to consumers, formal action will be taken against the firm.

TCF is not the same as being nice to customers, nor does it necessarily mean that satisfied customers are being treated fairly. The complexity of many products, combined often with low levels of consumer understanding means that there could be occasions where customers are satisfied because they do not realise they have been unfairly treated. Conversely, customers with unrealistic expectations might feel dissatisfied even though the firm has treated them fairly.

The exposé of the practices of Lewis Stores in the Sunday Times (17/11/2013) clearly contradicts the principles of TCF. Consumers purchasing a fridge on credit would end up paying nearly three times the advertised cost of the fridge over 3 years. Compulsory charges levied by the retailer include: R750 – delivery charge (compulsory for first purchases so they know where you live) R1197 – maintenance change in case the fridge stops working R1140 – initiation fee The customer is also required to purchase credit life and insurance products which results in the customer paying effective insurance rates annualised at 26.8%.

It is practices such as this that TCF seeks to address.

If TCF is implemented by firms it will ensure that the fair treatment of customers is embedded within the culture of financial firms. Firms need to put customers at the heart of their business which will in turn help build consumer confidence in the financial services industry.

insurance brokers (border)(pty)ltd.

SENSIBLE OBJECTIVES

New Year, Same Old Investment Principles Are your investment objectives still being met? By Wade Witbooi, Investment Analyst - Glacier by Sanlam.

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o the dust has settled from all the New Year celebrations. Just as quickly as the holiday period began, it all came to an abrupt end and it's time to refocus and bed down our goals and ambitions for 2014. As our individual resolutions change with each year, one topic should continually be addressed with similar diligence: “Are my investment objectives still being met?�

Personal finance is exactly that: personal. As time evolves and your lifestyle changes it is important to ensure that your investment objectives are still being met. Here are some important considerations when revisiting your investment objectives: = Have my personal circumstances changed?

Getting married, expanding your family, or the purchase of additional assets may affect your propensity to save. Ensure that your personal savings and investments are geared around your ever-changing financial situation. = Has my personal income changed? Income levels change frequently, especially for young professionals climbing the corporate ladder. It is important to ensure that your investment/savings not only keep up with inflation, but with your personal income growth as well. Another consideration when assessing personal income growth is tax sensitivity. Your current savings could be better suited to a product or fund which is more tax-efficient for long-term savings. = How has my investment been performing?

Last year showed strong diversion between the returns from equities, bonds, property and cash, and knowing your portfolio's exposure to these asset classes may help you understand the performance of your fund. = Have there been major changes in the management of my funds? A new fund manager or investment team could have a completely different philosophy and investment process which could dramatically affect the performance and

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volatility of your investment. Make sure to keep an eye on any changes at the investment house with which you are invested.

If you're new to investing and don't have any savings vehicles, now is the perfect time to start!

Albert Einstein once claimed compound interest to be the eighth wonder of the world, and the sooner you start saving the sooner you'll benefit from the power of compounding. Make sure to establish investment goals and be diligent in your monthly saving and over time you'll be handsomely rewarded.

The world of investing can seem really complex, but it's actually much simpler than you think. If you're unsure of which instruments or funds to invest in, choose the simple or low-risk ones as a starting point. Their potential returns may seem feeble, but they'll allow you peace of mind as an inexperienced investor. The role of a financial adviser is important in these instances, so seek financial advice before making a decision. Once you become more financially savvy, the world of investments becomes less intimidating and you can invest with confidence.

The evolution of the internet has made it much easier to become an educated investor. Be an astute investor, educate yourself and reap the benefits of financial intelligence.

The current investment environment is shrouded by market commentators claiming unsustainable valuations and warning against the likelihood of past performance repeating itself.

However, the basic principles of long-term investing remain. There have been periods of market correction before, so remove emotion and remain committed to your long-term investment objectives to reap the rewards.

We're all hoping for a happy and prosperous 2014. Take a step in the right direction by contacting your financial adviser and ensuring your financial fitness is one resolution you will accomplish this year.

SENSIBLE BUDGET

THE EFFECTS OF AN INTEREST RATE HIKE ON YOUR FINANCES What does this mean for the South African consumer? By Lunga Nkonki, Trainee Financial Paraplanner - NFB East London.

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n January 29th 2014, the South African Reserve Bank (SARB), led by Gill Marcus, took a surprise decision to hike the Bank lending rate by 50 basis points (bps) or half a per cent, having seen their inflation forecasts weakening significantly as a result of the sharply weaker rand exchange rate. This came as a surprise to many, merely due to the fact that it came sooner than most had anticipated.

It had been public perception for a while, with the US Federal Reserve slowly tapering its supporting monetary policy, that interest rates would increase over the next two to three years by as much as 2.5%; some analysts forecast by the end of 2015.

But the question is: what does this really mean for the South African consumer? Well, let's look at “borrowers” for starters.

The repo rate increase of 50 bps meant that commercial banks soon followed with an increase in prime lending rates to consumers from 8.5% to 9%. If we look at what's typically the biggest household debt, the mortgage bond, a 50 bps increase in the prime lending rate results in monthly repayments on 20 year mortgages rising by R160pm on a R500 000 loan, and R319pm on a loan amount of R1 million. This means that for some already over-indebted consumers, who have only recently had hikes in electricity, rates and petrol prices to contend with, the marginal increase in bond repayments, could stretch household budgets to a point of credit default should the lending rate be raised further as is predicted.

The Reserve Bank subsequently urged

consumers to prioritise repayment of debt while interest rates remained, as they put it, “still relatively low”. A clear indication of what 'surprises' lie further ahead for the consumer.

So, who are the winners in this current financial environment?

Generally speaking, with all else being equal, a continued rise in interest rates means the cost of securing an income at retirement will decrease.

Otherwise put, higher interest rates result in higher guaranteed annuities purchased for retiring individuals who purchase their pensions through traditional life assurance companies, locking in incomes at present interest rates. Interest-bearing assets, such as cash and bonds, which make up the greater proportion of retirement saving vehicles, are also now able to afford more attractive yields for those who seek the safety-net of such investment.

So how can consumers buckle up for the windy road that lies ahead?

The first, most prudent step is to budget accordingly. Prepare for increased home and vehicle repayments and reduce bad debt as much as possible. The present economic environment presents good opportunity for some.

With careful scrutiny of your investment portfolio, one can ensure that opportunity is found, even in what may seem like the face of adversity.

Should you require assistance in looking for those opportunities, contact a financial advisor at NFB on 043 – 735 2000.

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SENSIBLE ADVICE

Should I have a separate Will for Foreign Assets?

Discussing the practical advantages.

By Debbie Jacobs, Senior Estate Administrator - Independent Executor & Trust.

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f an individual owns foreign assets, the question arises as to whether more than one Will is required. The reason for this, is that the provisions in a Will made in one jurisdiction may not necessarily be recognised in another jurisdiction where the offshore assets are registered.

In some cases, although one Will could be used, there may be practical advantages in having separate Wills for each jurisdiction. It is preferable to have a separate foreign Will dealing with offshore assets, as this will address jurisdiction specific requirements.

For example, a South African Will would not be effective to deal with a house in Jersey unless the necessary formalities of having read the Will out loud and witnessed by a notary public had been observed.

Another common query is why an offshore Will is necessary at all if the executor has the authority provided by South African Letters of Executorship.

The answer is that the majority of asset holders registered outside of SA will not recognise Letters of Executorship and will request a local probate before they will allow an executor to administer the assets.

Since the relaxation of exchange control an increasing number of South Africans have been investing offshore. If a South African resident has only a South African Last Will and Testament, the executor of his estate may have to apply for foreign orders to recognise his right to deal with the property; this will result in delays, problems with foreign language and additional administration costs.

It is important to specify in the foreign Will, that

it deals specifically, and only, with those foreign assets, and in the South African Will, that it deals only with the South African assets, as we do not want the one Will to revoke the other.

Will this affect my Estate Duty? Estate duty is payable on all assets, wherever your assets are situated (except where assets were acquired by the deceased before he became ordinarily resident for the first time, or even after he became ordinarily resident, if he acquired the property from a non-resident donor or a non-resident deceased estate).

Tips for individuals:1. Always advise a Will draftsman if you own foreign assets. Do not assume that an SA Will can adequately dispose of foreign assets in the way you wish.

2. Always advise a Will draftsman if you already have an offshore Will. If you do not mention this, a later Will may accidentally revoke your offshore Will, which is already in existence.

3. Where you own immovable property abroad, it is almost always essential to have a local Will in place to deal with the succession of the property.

In this case, it is usual practice to obtain advice from a lawyer in the jurisdiction where the property is situated.

4. When an offshore Will is signed in South Africa, depending in which jurisdiction the offshore Will is to be used, there are specific signing formalities that need to be adhered to - ensure your Wills draftsmen is aware of these.

At Independent Executor & Trust we are committed to personalized service and individual attention. With combined experience of 65 years, we specialize in the Drafting of Wills, Administration of Estates & Testamentary Trusts.

49 Beach Road, Nahoon, East London, 5241 | PO Box 8081, Nahoon, 5210 Telephone: (043) 735 4633 Fax: 086 693 3356 / (043) 735 3942 | e-mail: info@iet.co.za

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SENSIBLY DIVERSE

The Importance of Geographical Diversification Offering protection in an unpredictable economy. By Bryce Wild, Private Wealth Manager - NFB East London.

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outh Africa, India, Brazil, Turkey and Indonesia are currently known as the 'Fragile Five' economies of the world. Each of these developing nations relies heavily on foreign direct investment to fund their current account deficits and they have all been under increasing pressure, battling to keep their inflation levels in check. A long-brewing storm has hit these nations, as the US has finally started unwinding quantitative easing and China's import demand from these nations has slowed somewhat (which is a knock-on effect of decelerating Chinese growth).

This initially resulted in a sudden sell-off of these countries' currencies, leaving the 'Fragile Five' in a situation where they felt compelled to intervene, by raising interest rates, to protect the value of their currency and curb rising inflation. Indonesia were the first to act, tightening up last year, but South Africa, Turkey, Brazil and India all followed suit and raised interest rates last month. In addition to this, a combination of new cash injections from China's Central Bank helped stabilise China and the most recent, disappointing US non-farm payroll jobs data, has also thrown the 'Fragile Five' an additional lifeline.

The above-mentioned factors seem to have stifled the sell-off of foreign currency for now, but the fact of the matter is that the economic fundamentals of these developing nations (including South Africa) have not changed and they are still struggling to get on their feet financially, in the aftermath of the 2008-2009 financial crisis. In the long-term, Ben Bernanke's quantitative easing is likely to be phased out and the effects of China's stifled growth are also still likely to negatively affect these developing nations' attempts to fund their current account deficits.

Many economists believe the Rand is undervalued at current levels and that the fair value is at around R10/USD. However, because of

the above-mentioned factors, decreased productivity levels, strike action gaining momentum and further credit downgrades looking imminent, it is possible that the Rand will continue to depreciate against other major currencies, especially in the short-term.

It is for this reason that it is important for investors to at least have some offshore exposure in their investment portfolios. The effects of currency movements are often overlooked when considering investment returns. For example, if one looks at the returns on the JSE All Share Index for 2013, they appear very impressive at first glance.

However, if one delves deeper and has a look at what the returns on the All Share Index were in Dollar terms, they ended up being materially less, due to the Dollar strengthening significantly against the Rand. This, along with the fact that South Africa makes up approximately 0.62% of the world economy, drives home the point that geographical diversification cannot be overlooked when investing, and returns that initially seem impressive, can actually turn out less so, once the real situation is exposed and currency movements are taken into account.

Geographical diversification will not necessarily guarantee investors a better return, but will certainly offer protection (in the form of diversification) to the investor as we enter an unpredictable economic period, where the interference of the US will no longer be around as a safeguard and where emerging markets are going to have to learn to deal with the uncertain economic environment themselves.

If you need assistance setting up a portfolio, that is appropriately diversified geographically and across the appropriate asset classes, contact an NFB financial advisor on 043 – 735 2000.

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Revisiting your will as part of your holistic financial planning where usufructs are involved

By Glen Wattrus, Private Wealth Manager - NFB East London

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t may seem rather morbid to start off a year filled with all sorts of wonderful prospects by suggesting that you re-look at your will as part of your overall financial planning, but as Reverend Ford reminded us in the sermon from Pollyanna, death often comes unexpectedly, so it is best to ensure that you are prepared in every possible way.

Wills that have been drafted years ago when things like marital power were still in existence, and the husband (in theory at least) made all the decisions regarding how the estate would devolve, may have totally unexpected consequences. I will sketch a hypothetical situation where changes in taxation laws have had a rather dramatic effect on beneficiaries and one which I hope you will be able to avoid should your will have such a clause.

As you may well be aware, part of our offering to

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clients is that we are able to assist in the drafting of wills and acting as executors through one of our “sister� companies located in East London so assistance is just around the corner.

The facts surrounding the usufruct in question will be as follows: A middle class husband and wife bought a home in the name of the husband only, even though they jointly contributed to the bond repayments over the ensuing years and were able to repay the loan in its entirety prior to their respective retirements. Unfortunately, the husband passed away soon after his retirement and in his will he left the house to his three children subject, of course, to his wife having the usufruct over the home until her death. The will had been held at a bank in the closest large centre where banks had offices to deal with estates. As such, the lack of personal contact with the beneficiaries by the

executors failed to bring to light the fact that the children were entitled to reject the will and allow the house to pass in full ownership to the mother.

She had, after all, contributed in equal part to the bond payments and should thus have had as much right to the home as the deceased husband.

However noble the husband's intentions may have been of ensuring that his children would one day have some small inheritance, the consequences were rather unfortunate.

Assume that the year of his death was 1997 and he, of course, had no way of knowing that the tentacles of revenue collection would extend to a new form of taxation in 2001, namely Capital Gains Tax (hereafter CGT). In the year 2000, the surviving spouse wished to relocate to another part of the country and the home was sold and a replacement bought in her new home town.

Remember that the home was never registered in her name, but in the name of her three children.

The replacement home would thus have been bought and owned in equal parts by those children and thus recorded on the title deed as such. CGT made its unwelcome appearance soon after, but no more thought was given to the situation as, in the children's minds, it was always really Mom's house. The replacement home was bought for R300 000 so for the purposes of CGT this would have been the amount to take into account for any calculations. Along the way, various improvements were made to the house although records of these expenses were never kept by her.

By the time she was ready to move into an old age home, the house had appreciated in value to R1 500 000 due to the popularity of the area where it was located and, of course, those improvements mentioned earlier.

Now let us examine the consequences of that clause in the will. Because the children were now joint owners, the advent of CGT meant that they inadvertently had a secondary home on which no rebates are allowed as they are for a primary residence. Once the house was sold and the proceeds were used to buy the unit in the old age home, the children's tax liability for that tax year shot up significantly. Remember that the current rebate amounts to a measly R30 000 per individual tax payer on the property in question and it is not a cumulative R30 000 per annum. Each child would thus have a gain of R400 000 after deducting the base cost of the home. The documents to

substantiate any improvements were not kept, thus no further deductions are allowed. Further calculations are as follows: Gain (per child) Rebate Balance subject to 1/3rd inclusion rate Taxable gain Tax payable at 40% marginal rate

R400 000 R 30 000 R370 000 R123 333 R 49 333

I have kept these figures to a realistic level to try paint a picture of how even seemingly normal transactions can have an impact on the beneficiaries. An additional tax obligation on an even higher than average income earner will be significant in this scenario. There is no way that even the most creative of accountants can assist the beneficiaries as the purchase and sale price are listed in documents that are submitted to SARS which further indicate the percentages in which the home is held so no fudging of figures are possible, should you as the poor beneficiary even begin to entertain that possibility when faced with that unwelcome additional tax obligation.

The purpose of this article is not to minimise the benefit that a usufruct may have in certain instances, but to warn against potential problems that may arise where the wills were drafted prior to CGT becoming a relevant consideration. There are certain instances, particularly where large share portfolios are held, to confer usufructs on the surviving spouse and where there is adequate liquidity to one day meet the potential tax burden so please be objective in your evaluation of your will in its entirety. If it has been a while since you updated your will and if it does have a clause conferring a usufruct on a surviving spouse, please ensure that an adequately trained professional updates the “offending” clause or better still, have the will re-drafted to avoid such a burden on the beneficiaries who may not be able to front the money when “Jan Taks” comes knocking.

Alternatively, provision should be made for the availability of funds to assist the beneficiaries in meeting these unwelcome additional tax burdens.

Forewarned is forearmed so I trust that this will prompt you to re-evaluate whether a usufruct is indeed a suitable mechanism for your particular situation.

sensible finance march14

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SENSIBLY PROTECTED

The protective nature of Retirement Annuities Using the RA to your advantage. By Zukiswa Sonjica, Financial Paraplanner - NFB East London.

A

retirement annuity (RA) is an individualised pension plan, not linked to any employer, allowing flexible contributions: monthly, quarterly, or ad hoc lump sums, as allowed by the investment administration company.

The Pension Funds Act currently governing retirement annuity investments, allows financial planners to use this flexible retirement savings structure to work to their clients' advantage. We will look at the number of ways retirement annuities can be used to protect investors against various circumstances and entities. l Protection against Income Tax, Capital Gains Tax and Estate Duty: RA contributions are income tax deductible up to the greatest of: v 15% of non-retirement funding income v R3 500 less the current contributions to another retirement fund; or v R1 750 Excess contributions that do not qualify for the above deduction in the current tax year are added to the tax free amount allocated to the tax payer at retirement or when the RA reaches maturity.

The growth within the RA structure is tax exempt as RA's are exempt from capital gains tax. This allows investors to channel their savings towards high growth investments over their working life, and reap the rewards of a sizable nest egg at retirement.

At death, RA investments are totally exempt from estate duty and executor's fees. l Protection against creditors: - Only a limited number of institutions and creditors may claim from an RA investment: SARS, for outstanding taxes owed; Previous spouses in terms of the divorce settlement. l Protection against reckless investment decisions: - Regulation 28 of the Pension Funds Act stipulates prudent investment guidelines as far as asset class exposure

limits, exposure to hedge funds and limits on the funds borrowing capacity. This helps in limiting the RA's exposure to risky investments that could put investors' hard earned retirement capital in jeopardy at any point in time. A board of trustees is responsible for controlling, directing and overseeing the operations of the fund in accordance with the laws and regulations. They also ensure all protective measures are adhered to in order to ensure equitable investment strategies are applied to investors' RA funds. l Protection from reckless spending habits: As RA's cannot be accessed by the investor before the retirement age of 55, the investment is safeguarded until the investor decides to retire and draw an income from their RA investment. Even after age 55, the investor is permitted to withdraw only 1/3rd of the total investment value in cash. The rest of the investment value is to be directed towards a pension generating product to sustain the individual through their retirement years, or until the funds have been exhausted. l The extent of the protective nature of RA's extends beyond the investor's life.

Dependants of the deceased RA investor are protected, as the trustees of the fund ensure that they distribute the deceased's remaining investment value, as fairly as possible, to the investor's rightful dependants that are in need of financial maintenance.

Nominated beneficiaries who are not considered to be in financial need are considered only if funds remain after the dependants have been allocated their fair share.

If you would like one of our financial advisors to discuss your financial affairs with you and provide advice on how an RA investment can best fit into your overall investment portfolio, please feel free to contact us on 043 – 735 2000.

sensible finance march14

15

2014 TAX RELATED BUDGET PROPOSALS

By Shaun Murphy, CA (SA), Partner Klinkradt Murphy The following is a summary of the tax related budget proposals announced by the Minister of Finance on 26 February 2014.

BUDGET HIGHLIGHTS The main tax proposals for 2014 include the following: = Adjustments to tax tables relating to retirement lump-sum payments. = Tax breaks to encourage household saving. = Measures to encourage small enterprise development. = Clarity on valuation of company cars for fringe-benefit tax purposes. = Government proposes an increase of 12c/litre in fuel levy and an increase of 8c/litre on the Road Accident Fund levy. The effective date for both levies is 2 April 2014. = Reforms to tax treatment of the risk business of long-term insurers. = Amending rules for VAT input tax to combat gold smuggling. = Measures to address acid mine drainage. = Postponement of carbon tax to 2016 in order to ensure its alignment with desired emission-reduction outcomes identified by the Department of Environmental Affairs.

INDIVIDUALS Personal income tax The 2014 Budget proposes direct personal income tax relief to individuals amounting to R9.25 billion.

The tax threshold for individuals younger than 65 will be R70 700, for individuals 65 years and older, but younger than 75 will be R110 200 and for individuals 75 years and older will be R123 350.

Exemption for interest and dividend

income The annual exemption on interest earned for individuals younger than 65 years is R23 800 and the exemption for individuals 65 years and older is R34 500.

Medical expenses Monthly medical tax credits for medical aid contributions from 1 March 2014: = R257 for the taxpayer and first dependant, and = R172 for each additional dependant Other tax proposals affecting individuals Tax-preferred savings accounts Tax-preferred savings accounts (including bank deposits, collective investment schemes, exchangetraded funds and retail savings bonds) are to be introduced over the next 12 months and in terms of this, tax exemptions for interest, dividends and capital gains will be granted for investments with an initial annual contribution limit of R30 000 and a lifetime contribution limit of R500 000.

COMPANIES Corporate tax rates No change is proposed to corporate tax rates.

Turnover tax for micro businesses The turnover tax regime is targeted at businesses with an annual turnover of up to R1 million. It is proposed that turnover up to R335 000 should be taxfree and the maximum tax rate should be reduced from the current 6% to 5%.

Other suggestions include scrapping the requirement for businesses to opt into the regime for 3 years and requiring annual, rather than biannual, tax returns.

Small business corporations (SBC) The reduced tax rates applicable to SBC's are considered ineffective in encouraging investment as the compliance cost for these types of Retirement savings reforms Further refinements will be made to the entities is still very high. It is proposed that the reduced tax rate regime be current legislation in order to provide replaced with an annual refundable clarification. The methodology for calculating the formula to determine tax compliance rebate. the contribution amount for defined Employment tax incentive benefit plans will be detailed by way Excess amounts of the employment tax of regulation in 2014. The policy approach for the timing of accrual of incentive can be set off against future PAYE liabilities. To enhance this retirement fund benefits will be incentive, SARS is developing a reviewed to provide certainty and mechanism to reimburse firms in ease practical application. instances where the incentive exceeds PAYE payable. The refund system will Retirement fund lump-sum tax tables become effective during the fourth Lump sum payments from retirement quarter of 2014. funds are taxed using specific tax

TAX GUIDE Individuals and trusts Income tax rates for natural persons and special trusts Year of assessment ending 28 February 2015 Taxable income Taxable rates 0 – 174 550 18% of each R1 174 551 – 272 700 31 419 + 25% of the amount above 174 550 272 701 – 377 450 55 957 + 30% of the amount above 272 700 377 451 – 528 000 87 382 + 35% of the amount above 377 450 528 001 – 673 100 140 074 + 38% of the amount above 528 000 673 101 and above 195 212 + 40% of the amount above 673 100

Natural persons Tax thresholds 2013/14 Below 65 years of age R67 111 Aged 65 and below 75 R104 611 Aged 75 and over R117 111 Tax rebates

2014/15 R70 700 R110 200 R123 350

2014/15 Primary – all natural persons R12 726 Secondary – persons aged 65 & older R7 110 Secondary – persons aged 75 & above R2 367

as a taxable fringe benefit in the hands of the employee. Individuals will from that date be allowed to deduct up to 27.5% of the higher of taxable income or remuneration for contributions to pension, provident and retirement annuity funds with a DEDUCTIONS maximum annual deduction of R350 Retirement fund contributions from 000. Contributions above the cap are 1 March 2015 carried forward for deduction in future Contributions to retirement funds on behalf of an employee will be treated tax years.

Trusts The tax rate on trusts (other than special trusts which are taxed at rates applicable to individuals) remains unchanged at 40%.

tables. The rates applicable are to be adjusted to limit instances where lower income taxpayers are required to pay tax on lump sums even though they did not benefit from a deduction for contributions to the retirement fund. In effect, the first R500 000 of a retirement lump sum payable will be tax free.

Donations Deductions in respect of donations to certain public benefit organisations are limited to 10% of taxable income before deducting medical expenses (excluding retirement fund lump sums).

The excess may be carried forward for deduction in the following year.

“Managing success into the future” Our services include: Accounting • Auditing • Taxation Planning Estate Planning • All Statutory Registration • Business Structuring Concessions • Due Diligence • Business Succession Planning

Contact us on 043 726 9555 for all your queries. partners: Gary Klinkradt ca (sa) and Shaun murphy CA (SA)

SENSIBLE MOVE

THE BIG MOVE NFB PORT ELIZABETH

By Robyne Moore, Compliance & Operations Administrator - NVest Financial Holdings.

NFB Private Wealth Management's Port Elizabeth office moved into new premises towards the end of November 2013. Much thought, work and excitement went into the design, look and feel of the new office space.

If you are based in Port Elizabeth or surrounds and need financial planning assistance, please feel free to visit or contact our office to set up an appointment to see a financial advisor for a free consultation.

Still offering you the same expert, comprehensive and personalised advice.

Reception area under construction

Gordon at his new desk – still busy moving in

New offices complete

NFB's new PE-based office address is:

Other contact details remain the same:

Ground Floor, Building 6, Ascot Office Park, Cnr Ascot & Conyngham Roads, Greenacres.

Tel: 041 – 582 3990 | Fax: 041 – 586 0053 E-mail: info@nfbpe.co.za | Website: www.nfbec.co.za

Don't stick your head in the sand when it comes to

owning property

By Mikayla Collins, Private Wealth Manager - NFB Cape Town.

O

ne of the most common mistakes investors make is to put their money into an investment and “forget about it�. While a long term outlook is advantageous, the problem is that most people do not monitor their investments regularly, which means they have no idea what fees they are paying or how much better their investments could be doing. The result is often a percentage of performance lost here and there, which doesn't seem a serious problem, but in the long term can have a substantial effect.

In most cases, as soon as a person has spare income to invest, the first thing they consider is buying property. It seems the most straightforward way to invest and we have all heard many success stories that started this way. Most young people aspire to own their own home and this is the first proper investment that they make.

However, not many people stop to consider all of the consequences of owning property. As with any investment, all of the fees, related expenses and opportunity costs should be taken into account. But often all you hear is what it cost originally and what it sold for, which makes it seem very attractive indeed.

So what are some of the things we forget to consider?

1. Costs: The costs involved in buying and owning a residential property: transfer duty, conveyancing fees, bond registration costs and initiation fees, rates and taxes, levies, insurance, maintenance, letting agents fees if renting, estate agent's fees when selling, etc.

These should all be considered before calculating the return you can reasonably expect from or have earned on property you own.

2. Time Horizon: because of all the costs involved, especially in buying and selling, one should only purchase with a long term view. The once-off costs will have less of an impact on returns when spread over a number of years.

3. Liquidity: Sale of property takes time, sometimes months. As an asset, physical property cannot be converted to cash immediately if the need arises.

Most people buy property without even considering other alternatives such as a unit trust investment or share portfolio (where one can also have exposure to property if desired) which have a number of advantages over property:

1. Diversification: Although property is often considered a less risky investment, to expose all your capital to only one asset is risky in itself. Investing not only in property or in one specific property, but in a number of different types of assets which may also include property stocks, can lower your risk substantially. This includes diversification in terms of the geographic area as well as the type of property - i.e. retail, industrial, commercial, residential, etc. In addition, you can benefit from exposure to other assets - general equity (shares), bonds and cash, both local and offshore.

2. Liquidity: Unit Trusts/shares can be sold and the cash paid out to you in about a week, as opposed to physical property which can take months.

3. You can benefit from a regular income when you need it as well as market-related capital growth. There is no cost to you in selling unit trusts whereas you would incur estate agent's fees in selling a physical property.

The income from property stocks is more stable than rental income from residential property as leases are longer and across different types of property.

The above points are nothing new yet so many people choose to ignore them and go on believing that they are making fantastic profits when in fact that may not be the case. This isn't to say that one shouldn't invest in property, but in doing so, consider the following: = Are you buying the property for emotional

reasons (you want to own your own home) or for the purpose of making an income or profit? = Have you taken into account ALL the extra costs, and have you considered alternatives that may produce more income and/or growth with less time, energy and cash invested? = How long do you see yourself owning the property? = If you already own property, are you evaluating the returns post all fees and costs and is it worth your while to continue holding the property or could your money be put to better use elsewhere?

Information is the ultimate tool - ask the questions and do the research, and you will reap the benefits in the long run.

sensible finance march14

21

SENSIBLE Q&A

Travis McClure

“Sensible Finance - Questions and Answers” is an advice column that will allow our readers the opportunity to write to a professional and experienced financial advisor for advice regarding investments, personal finance, life and/or risk cover. Travis McClure will be answering any questions that you may have.

Q:

I often hear the term P/E Ratio and Dividend Yield referred to when listening to market reports. I know these terms apply to companies and their value, but am not sure how to interpret them. Can you help me understand?

A: These ratios are used by analysts and investors as tools or guidelines to determine whether or not a share is worth buying or selling. It must be stressed that these calculations are only as good as the data received on these companies and should only be used as a guideline. In the investment world you need to do research and then more research, throw in some “gut feel” and experience along with some logic and then finally a bit of luck. Part of the research, or number crunching, includes using the above-mentioned ratios to determine a shares value.

The P/E Ratio shows you the relationship between the current share price and the earnings or profit of the company. It is calculated by dividing the share price by the current Earnings Per Share. For example if a company's share price is R40 and its earnings over the last 12 months were R2 a share then the PE ratio would be 20. This is all good and well, but what does this number mean? The number reflects how much investors are prepared to pay per R1 of earnings. So in the above example we can interpret that the investor is willing to pay R20 for R1 of earnings. Another way of understanding this is to say that the investor is prepared to wait 20 years at the current profitability for his investment to be paid back by the company. In an ideal world one would want to buy shares at a low price with a good prospect that future earnings will grow. This would mean that it is best to buy shares when the P/E ratio is low. A high P/E ratio suggests that investors are expecting higher earnings growth in the future. One has to be careful, however, as the ratio needs to be compared with other companies in the same sector and compared with the historical average of the sector and the company itself.

A low P/E, although normally a good indicator, may also mean that the company is not doing well. If the price is low, and therefore a small multiple of the earnings, then the company will have a low P/E. This rerating of the price may be for good reason as the company may be perceived to be battling and earnings growth not forthcoming.

On the other hand a high P/E ratio is a warning that the share price may have re-rated too much and the price is now overvalued. In order to justify the price the earnings would need to continue at the current rate of

profitability as well as improve. This is similar to where we find ourselves on our local market at present. The current P/E ratio of the JSE ALSI is sitting close to 20 with the historical average at around 14. This signifies that a lot of our shares on the JSE may be overvalued. If earnings come through and improve then we can justify this high P/E, but in the current economic environment this is hard to believe.

In summary the P/E Ratio is a good indicator of the value of a particular share, but must be researched carefully and taken into context within its sector and economy.

The Dividend Yield gives you a way to measure how much cash flow you are getting for each Rand invested. It is a measure of the amount a company pays out in dividends each year relative to its share price. If a company paid out R1 per share and the share price was R20 then the dividend yield is 5%. If the same company's share price doubled suddenly to R40 then this yield would drop to 2.5%. From this you can see that by taking the dividend yield into account it can be used as an indicator as to whether or not the current price of a share is over or undervalued based on its historical dividends paid out and the yield. The Dividend Yield is a measure of how much value for money you are getting from the dividends. Mature and well-established companies (blue chips) tend to pay higher dividends and have higher dividend yields while younger companies looking to grow will have lower yields. Younger growth companies will tend to keep most of the profits back in the company to grow the company and pay out little in dividends.

In summary a higher than average dividend yield can mean that the company pays good dividends, but the price has not re-rated yet to bring the yield back in line presenting a buying opportunity. On the other hand a lower than average dividend yield could mean that the price has moved up too much and the share price may be overvalued.

There is obviously more to it than just crunching some numbers and comparing ratios. They do serve as a good guideline, but our advice would be to chat to your Wealth Manager or Stock Broker to get a decent analysis on the numbers and what other factors may be involved.

Please address all Questions to: Travis McClure, NFB Sensible Finance Q&A, Box 8132, Nahoon, 5210 or email: info@nfbel.co.za sensible finance march14

23

Glencore Xstrata. The new kid on the block

Get into INTU

A look at one of the world's largest, natural resource companies.

By Mandy Botha, Portfolio Manager - NVest Securities. lencore Xstrata is one of the world's largest, diversified, natural resource companies operating in three core areas: Metals and Minerals, Energy Products and Agricultural Products. It is structured in such a way that it is able to capture value at every stage of the supply chain, achieving this by being not only the extractor and processor of resources, but the marketer of them as well.

Glencore Xstrata is primarily listed on the London Stock Exchange with secondary listings on the Stock Exchange of Hong Kong and since the 14th of November 2013, the Johannesburg Stock Exchange. Announcing Glencore Xstrata's intention to list on the JSE earlier in 2013, CEO Ivan Glasenberg said, “Africa is an important and growing market for the group and South Africa has a strong institutional investor base”. Capital was not raised through the listing, making Glencore's strategic play of exposing itself directly to an African market, a much discussed topic amongst investors and researchers alike.

There is speculation in the market that the rationale behind Glencore's listing on the JSE was related to potential mergers and acquisitions in the future. Prior to the Glencore and Xstrata merger, Xstrata failed at an attempted merger with Anglo American. The now bigger and better merged entity of Glencore Xstrata has the market buzzing with speculation over a possible acquisition of Anglo American by the industry's new giant.

Further, Glencore holds a 24.5% stake in Lonmin Platinum, which the company has openly indicated is non-core to its operations and is up for sale. This being said, the recent JSE listing together with access to South African paper, may facilitate the potential for a future takeover/merger of Anglo American and/or disposal of Glencore's holding in Lonmin.

With the onset of Glencore's listing we saw it as an opportunity to further expose our clients to a resource stock offering not only future growth, but a fair dividend yield of 3.6%. Similar to the other

G

resource industry giants, Glencore's listing allows local investors the prospect of buying shares in a foreign company without having to use their foreign investment allowances. A holding gives offshore exposure coupled with a hedge against any weakness in the Rand - an advantage, given the Rand's current track record.

With various diversified miners in the arena, many of which we hold, one might ask what the point of including another might achieve. The answer is diversification. When comparing the commodity exposure of Glencore Xstrata versus mining giants BHP Billiton and Anglo American, the glaring difference is Iron Ore exposure. Glencore, unlike its diversified peers Billiton and Anglo, has virtually no iron ore exposure, offering a strong alternative for investors who would in particular like to diversify themselves away from high iron ore exposure. Further, amongst its competitors it offers the biggest revenue exposure to copper and the second largest exposure to coal after Exxaro. An additional factor of interest to consider is Glencore's limited exposure to the South Africa market in relation to the rest of its global peers. Its South African operations consist mainly of thermal coal and ferrochrome assets together with its stake in Lonmin. Although its platinum stake is non-core, the company has expressed that its other South African operations are “world class”.

As at the 07 February 2014, Glencore was trading at R58.50 giving it a market capitalisation of R752 billion. Alpha Value, as at the 20 November 2013, has a 2014 EPS estimate for Glencore of $0.43 or R4.72 in current Rand terms, giving Glencore an estimated P/E of 12.4 times which is in line with the likes of Billiton and Anglos on 12.6 and 12.4 respectively. In our view, Glencore Xstrata deserves a spot in a growth orientated, diversified, general equity portfolio. If you have questions or would like to discuss Glencore Xstrata further, please feel free to contact the portfolio managers at NVest Securities.

EBITDA breakdown by division – source Ashcourt Rowan

Revenue exposure by commodity – source BofA Merrill Lynch Global Research

The Eastern Cape's first home-grown

STOCK BROKERAGE NVest Securities (Pty) Ltd NFB House, 42 Beach Road, Nahoon East London 5241 PO Box 8041, Nahoon 5210 Tel: (043) 735-1270, Fax: (043) 735-1337 Email: info@nvestel.co.za

www.nvestsecurities.co.za NVest Securities is an Authorised Financial Services Provider

NFB have a STRONG, REPUTABLE TEAM OF ADVISORS with a WEALTH OF EXPERIENCE between them: Anthony Godwin RFP™ І MIFM – Managing Director, 25 years experience;

Gordon Brown CFP® І PGDFP - Regional Manager – PE, 7 years experience;

Gavin Ramsay B.Com MIFM - Executive Director and Private Wealth Manager, 20 years experience;

® Mikayla Collins CFP І B.Com (Hons), PGDFP, CFA Level 1 - Private Wealth Manager, 2 years experience;

Andrew Kent MIFM - Executive Director and Share Portfolio Manager, 20 years experience; Walter Lowrie - Private Wealth Manager, 28 years experience; Robert Masters AFP™ | MIFM - Private Wealth Manager, 28 years experience; Bryan Lones AFP™ І PGDFP, MIFM - Private Wealth Manager, 22 years experience; ® Travis McClure CFP І B.Com, PGDFP, MIFM – Executive Director and Private Wealth Manager, 15 years experience; ® Marc Schroeder CFP І B.Com (Hons), PGDFP, MIFM - Private Wealth Manager, 9 years experience; ® Phillip Bartlett CFP І BA LLB, PGDFP, MIFM Executive Director and Private Wealth Manager, 11 years experience;

® Glen Wattrus CFP І B.Juris, LLB, PGDFP – Private Wealth Manager, 16 years experience; ® Julie McDonald CFP І B.Com, PGDFP – Financial Advisor (Risk Assurance Specialist), 3 years experience;

Bryce Wild B.Com (Hons) – Private Wealth Manager, 1 yr experience Leona Trollip RFP™ І Divisional Manager – Employee Benefits, 37 years experience; Leonie Schoeman RFP™ І Divisional Manager – Healthcare Advisory Services, 16 years experience; Nonnie Canham LLB – Healthcare Advisor, 2 years experience.

NFB has a separate specialist Short Term Insurance Division, as well as now offering specialist group companies in the fields of stock broking, wills and the administration of deceased estates.

“It requires a great deal of boldness and a great deal of caution to make a great fortune...but when you have got it, it requires 10 times as much wit to keep it” Nathan Rothschild, 1834

You’ve worked hard for your money... now let NFB make your money work for you. fortune favours the well advised contact one of NFB’s financial advisors East London • tel no: (043) 735-2000 or e-mail: info@nfbel.co.za Port Elizabeth • tel no: (041) 582 3990 or e-mail: info@nfbpe.co.za Johannesburg • tel no: (011) 895-8000 or e-mail: nfb@nfb.co.za Web: www.nfbec.co.za

private wealth management

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