NFB Sensible Finance Magazine Issue 24

A FREE publication distributed by NFB Private Wealth Management

NFB

Eastern Cape's Community...

Issue 24 July 2013

PERSONAL FINANCE Magazine

WHOSE ESTATE IS IT ANYWAY? key questions to ask when doing your estate planning

private wealth management

HAVE I MADE SUFFICIENT PROVISION FOR DEATH, DISABILITY & RETIREMENT?

REWARDS PROGRAMS how to make the most of them

“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

sensible finance

ED’SLETTER

editor Brendan Connellan bconnellan@nfbel.co.za

Contributors Julie McDonald (NFB East London),

a sensible read

Grant Berndt (Abdo & Abdo), Lunga Nkonki (NFB East London), Tiny Carroll (Glacier by Sanlam), Bryce Wild (NFB East London), Nicole Boucher (NFB East London), Glen Wattrus (NFB East London), Liberty Life, Shaun Murphy (Klinkradt Murphy), Zuki Mbekeni (NFB East London), Nina Joannou (NFB Gauteng), Debi Godwin (IE&T), Travis McClure (NFB East London), Robert McIntyre (NVest Securities)

Advertising Robyne Moore rmoore@nvestholdings.co.za

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

Address NFB Private Wealth Management 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 Web: www.nfbec.co.za

Photos used in this magazine - 123rf.com

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. ©2013 All Rights Reserved.

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

M

y usual eternal optimism tends to be balanced by the realist in me and so it's not always a case of looking at the world through rose tinted glasses; there are glaring realities that are difficult to ignore. One of those realities for me is the neglect that one sees on a daily basis and the seeming lack of realisation that unless we maintain what is good, and build what we lack, eventually things will implode, at which stage some quick patch-up work will no longer be possible.

I refer to the deplorable state of our state hospitals, our tatty beachfront (shouldn't it be our city's show point?) and decaying CBD, mammoth potholes, our beleaguered public services, neglect of parents for their own children (last night I received an email about a young child that NFB have been sponsoring to attend school to find out that she has been removed from her family owing to being repeatedly molested by her brother and the father's view that child protection should not have been contacted as it is quite the norm for young girls to be abused in their area) to name but a few.

I recently decided to drive through Bhisho, having not been there for a number of years. It was there that the reality struck me our current provincial leadership are certainly not going to be making any improvements any time soon. One would expect that they would ensure that the capital of the Eastern Cape was the ideal model on which the rest of the province would be based, but instead there is the same decay, the same litter on the doorsteps of government buildings and generally the same disrepair.

However, there is hope too and there are the Lindiwe Mazibuko's, Mamphela Ramphela's and Thuli Madonsela's of the world that are pillars of strength and beacons of hope. There are many others out there though, of all races and both genders who are doing their bit to make this country the place we aspire it to be.

And we need to play our parts too – and not by being arm-chair critics either!

With that said, don't exacerbate the problem by neglecting your own finances. A comfortable retirement, and having well managed finances takes planning and preparation. If you haven't already, I'd recommend picking up the phone and chatting to one of our financial advisors, or your financial future could end up looking like the Bhisho CBD. 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

July 2013

4 REWARDS PROGRAMS Are you making the most of them? By Julie McDonald, Financial Paraplanner - NFB East London.

6 PAYING FOR POOR SERVICE DELIVERY A blow to many rate payers. By Grandt Berndt - Abdo & Abdo.

7 COSTS OF PROVIDING FOR YOUR CHILDREN'S EDUCATION Having a plan in place is a must. By Lunga Nkonki, Trainee Financial Paraplanner - NFB East London.

8 WHOSE ESTATE IS IT ANYWAY?

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Key questions to ask when doing your estate planning. By Tiny Carroll, Fiduciary Specialist - Glacier by Sanlam.

9 INVESTING THROUGH UNIT TRUSTS Useful, flexible, affordable. By Zuki Mbekeni, Trainee Financial Paraplanner - NFB East London.

10 BY THE TIME YOU “MISS” ADVICE, IT IS TOO LATE Be fully informed about the “do's and don'ts” of insurance. By Barry Taylor, Chair of Short term Insurance Executive Committee of the FIA. Source: Cover Magazine.

11 MEDICAL TAX CREDITS The new system ensuring equality across the tax brackets. By Nicole Boucher, Trainee Financial Paraplanner - NFB East London.

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HAVE I MADE SUFFICIENT PROVISION FOR DEATH, DISABILITY AND RETIREMENT?

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

16 LIBERTY'S LIFESTYLE PROTECTOR

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Enhancements which add affordable customisation to income protection.

Contributed by Liberty.

18 THE TAX ADMINISTRATION ACT A summary. By Shaun Murphy - Klinkradt Murphy.

20 IS IT TIME TO LOOK OFFSHORE? Looking attractive to the local investor in terms of potential returns. By Bryce Wild, Trainee Financial Paraplanner - NFB East London.

21 RETIREMENT INVESTMENTS An integral part of an investment portfolio. By Nini Joannou, Trainee Financial Advisor NFB Gauteng.

24 DIVORCE ORDERS AND RETIREMENT SAVINGS An explanation of the “clean-break” principle. By Julie McDonald, Financial Paraplanner - NFB East London.

25 CALLING ALL NEW PARENTS Add your Will to your “to do” list today! By Debi Godwin, Director - Independent Executor & Trust.

27 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 GET INTO INTU A look at this rand hedge company. By Rob McIntyre, Portfolio Manager - NVest Securities.

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Rewards programs are you making the most of them?

By Julie McDonald B.Com, CFP速 Financial Paraplanner - NFB East London Holidays, your whole holiday is sorted every step of the way with vitality discounts ranging from 5% to 50%. A sure reason to improve your Vitality status!

Having a baby? The Baby benefit offered by Vitality gives you a free goodie bag with discount coupons for all those necessary baby items.

o you go to the gym, have regular health checkups and do assessments online in order to improve your status on the many wellness and rewards programs available such as Discovery's Vitality and Momentum's Multiply.

S

But the question is - are you taking full advantage of the rewards that they offer?

Wellness programs provide tools; information and incentives to adopt and maintain a healthy lifestyle, so why not take advantage of these incentives?

Besides the reduction in your life premiums and the paybacks on offer from Discovery and Momentum there is whole world of rewards on offer!

If you belong to Momentum Multiply do you know that you can take advantage of the flight discounts on Virgin Atlantic and enjoy being royally treated at Bidvest premier lounge at a discount while waiting for your flight? While on a business trip or holiday, look at staying, at a fraction of the price, at a Protea Hotel or Citi Lodge. There are great discounts on a wide selection of magazine subscriptions for the whole family including the Getaway, Popular Mechanics, Ideas, FinWeek, House & Garden, Complete Golfer and National Geographic Kids.

Looking for a great gift? Utilize the discounts by buying some books, DVD's and CD's online with Kalahari. For the sports lovers, discounts are available on certain cricket match tickets.

Wellness programs really do offer an extensive range of benefits for the whole family.

For example if you are on Discovery Vitality, have you taken advantage of the extra cashbacks available from Clicks by activating your Healthy care benefit? Received your cash back from buying healthy foods at Pick'n Pay with the Healthy Foods Benefits? Do you enjoy the lower movie price at Ster-Kinekor? Have you taken advantage of the great savings available when travelling?

Remember that increasing and maintaining your status on the various wellness programs is not difficult to do:

Example: on Discovery Vitality and planning a trip to Thailand? Take advantage of the discounts along the way! Get in shape for the trip first by working out at Virgin Active. Get magazine subscriptions via Vitality Mall giving you reading material for your trip and buy all your travel necessities from Clicks. You could fly to Johannesburg with Kulula, rent a car from Europcar for the day and stay over at a Southern Sun hotel.

You could then fly with Emirates to Thailand and if you have the Discovery Card and your accommodation is booked through World Leisure

Besides all the discounts and savings, the underlying benefits such as death, disability and severe illness by the likes of Discovery and Momentum are comprehensive and top quality. By using these wellness programmes and your savings in premium, you can also look to increase your risk benefits while at the same time getting some value back from what is often felt is a grudge payment.

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1. Do a few online assessments 2. Have your health checkups and 3. Have a fitness assessment / keep active and enjoy the wide range of rewards on offer!

Contact your Private Wealth Manager for more details on how to enjoy these rewards and improve your benefits.

SENSIBLE SERVICE

PAYING FOR

POOR

SERVICE

I

n the previous edition we commented on a case, then before the Constitutional Court, where a Mrs Rademan, a member of the Moqhaka Ratepayers and Residents Association, withheld her payment of property rates as a protest against poor service delivery by the local Municipality.

The formation of Ratepayers Associations and the drive to withhold the payment of rates or making payment of the rates portion of one's Municipal account into the Association's banking account, is well established.

The Moqhaka Ratepayers and Residents Association declared a dispute with the Municipality and Mrs Rademan withheld her payment of rates. The Municipality then disconnected her electricity, despite that portion of her account being up to date. Mrs Rademan obtained an Order from the Magistrate's Court against the Municipality, where they were ordered to reconnect her electricity. The Municipality then took the matter to the High Court where the Court agreed that they had the right to disconnect the electricity for non-payment of property rates. Mrs Rademan then took the matter to the Supreme Court of Appeal where she again lost.

In the Constitutional Court, Mrs Rademan argued that the Municipality was not entitled to disconnect her electricity supply due to the provisions of the Electricity Regulation Act, as none of the grounds on which the Municipality may cut off electricity in terms of the Electricity Regulation Act were applicable to her. She maintained that there was a conflict between the Electricity Regulation Act and the Local Government: Municipal Systems Act and the Municipality's Credit Control and Debt Collection By-Laws, and that the

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DELIVERY A blow to many rate payers. By Grandt Berndt - Abdo & Abdo.

Electricity Regulation Act should override the Municipal Systems Act. The Constitutional Court found that the matter dealt with a failure to pay property rates and not a failure to pay electricity. The Electricity Regulation Act deals with the supply of electricity on a national level and gives the basis for termination of electricity supply. The Municipal Systems Act, deals with the supply and right to disconnect at a local level and thus there is no conflict between the two Acts.

The Municipality also maintained that in terms of the Municipal Systems Act and its By-Laws, that it was entitled to consolidate various accounts and disconnect Mrs Rademan's electricity for nonpayment of the property rates component of the consolidated account. The Court held that the consolidation of an account means that the different components of the accounts belong to one account and one cannot pick and choose which component to pay. Thus the Court upheld the Municipality's right to disconnect electricity for non-payment of property rates.

This judgment will be a blow to many Ratepayers Associations who have been advocating a rates boycott due to poor service delivery. Unless one has proven in Court that services have not been rendered, or rendered poorly or inefficiently, one must settle one's Municipal account or face the disconnection of services.

SENSIBLE EDUCATION

COSTS OF PROVIDING FOR YOUR

CHILDRENS' EDUCATION Having a plan in place is a must. By Lunga Nkonki, Trainee Financial Paraplanner - NFB East London.

W

ith South Africa's unemployment rate currently sitting at just over 25% and numbers of unemployed youths growing by the day, there has never been a better time to think about the costs involved in ensuring your child doesn't fall victim to circumstance, anchoring them down to the growing census of the unemployed.

The national unemployment figure, however, does not reflect the full grimness of the picture.

When you consider how many people currently have a matric certificate and yet are unemployed, the figure clocks in at an alarming 27% which sits roughly at 2% above the national average. So it becomes interesting to note that the need to provide for your child's education extends right through to some level of tertiary education, not just basic schooling, so as to increase their employability, thus lessening the financial burden on yourself as you approach retirement age.

While parents want to provide the best form of education, the rising cost of education is putting an increasing strain on family finances. Figures from Stats SA show that the cost of education has increased well above that of ordinary inflation.

Since 1990, inflation for day-to-day living expenses has climbed by about 7% per annum. Education costs, however, have increased by 13% per annum over the same period. Meaning if your salary increased in line with inflation, which is a reasonable assumption, you would be around 6% short each year in terms of providing adequate funding for your child's education.

Here are a few ways to go about lessening the financial load: Have a structured savings plan in place: it is important to start early and to stay committed to

the cause. Also important to keep in mind is education inflation when considering the growth rate that the particular savings vehicle offers. If you are saving for 5 or 10 years before you will need the money, ensure that you invest in a fund that will grow faster than the increases in school fees. Very vital that you entrust your savings to well- managed corporations.

Set realistic goals: it is extremely difficult to pay for your child's secondary or tertiary education in full. Rather focus on targeting the gap between your salary increases and increases in school fees.

In other words, have savings to supplement school fees. Important to cater also for the jump in school fees when your child moves into high school as the difference in fees between primary and high school can be as much as 20%.

Determine the total cost of education today: remembering to include all costs such as travel, study material, pocket money and boarding if applicable.

Make use of government initiatives: there are initiatives in place provided by government to enable you to save for or fund your child's studies towards an accredited qualification at either a public college or university; Fundisa and the National Student Financial Aid Scheme (NSFAS) being prime examples of such.

Study loans: not the most attractive form of action, but can be necessitated by circumstance.

Parents can assist by paying off the interest portion each month so that when the child graduates they only have to pay off the capital and not the accumulated interest.

Today, more than ever, affording your child's education requires active planning, diligence and commitment. By having a plan in place, you can find a way to put the money away.

Should you need assistance with your plan or need more information on how to save for your child's education, contact one of NFB's Private Wealth Managers.

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SENSIBLE PLANNING

Whose estate is it anyway?

Key questions to ask when doing your estate planning. By Tiny Carroll, Fiduciary Specialist Glacier by Sanlam.

A

n estate planning process involves aligning your estate planning instruments for your benefit during your lifetime and the benefit of your ultimate beneficiaries.

These are some of the key questions you should be asking yourself when doing your estate planning: 1. Do you have a strategic estate plan in place?

Does the plan meet the long-term wishes you hold for your estate? Is the plan flexible enough to allow you to change the structure should your circumstances change?

2. Do you have a signed and up-to-date will?

This is the pivotal point of a successful estate plan.

A will must express your wishes, be valid, signed and up-to-date. It can only deal with your personal assets; it cannot deal with trust assets.

3. Is “my” family trust at risk?

Trustees are required to: ~ give effect to the provisions of the trust deed ~ perform their duties with care, skill and diligence which can be expected of a person who manages the affairs of another ~ exercise their discretion with the necessary objectivity and independence.

Often in family trust situations these requirements are ignored. The control, ownership and benefits become so mixed up that there is no trust and the risk exists that the trust assets actually vest in the “planner/client” thereby doing away with most of the benefits of the trust as an instrument in your estate planning.

Experience has shown that the validity of almost 80% of trust deeds can be questioned.

Trustees have often not kept pace with current legislation or the trust has not been properly established. Often, the planner or client has been given too many powers, taking away from the independence of the trust. It is always advisable to submit the trust deed for a full legal audit.

At Glacier, we see many cases where a trust has not met with the necessary requirements. As a result assets have been attached by creditors or taken into account for division on divorce. Using the services of a professional trustee, with the relevant experience and qualifications, helps mitigate this risk. A professional trustee will be able to guide the decision-making process, bring independence to the trust deed decisions and

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provide guidance with regard to record-keeping.

4. Are my buy & sell agreements going to protect my family?

Research shows that 75% of buy & sell agreements don't work to the benefit of the client. Typical problems include agreements not properly signed, agreements in conflict with a client's will, or incommunity of property marriages not taken into account.

5. Are my policy beneficiary nominations up to date?

It's important to note that nominating a beneficiary can save on executor's fees, but won't save on estate duty (as the policy still forms part of the estate).

6. Have I made sufficient provision for liquidity?

An estate plan should also provide for expenses incurred in winding up the estate, to prevent dependants having to sell off assets to meet these expenses. A life assurance policy is a reliable and convenient way to provide for liquidity within the estate.

7. How will my retirement fund benefits be dealt with?

Whilst you are still a member of a retirement fund you can nominate a beneficiary, but you need to make sure that you know how the benefits will be dealt with in terms of the fund rules.

8. Will my family know what to do in the event of my death?

Make sure that you, your spouse and family build a relationship with a good financial adviser who will be able to walk a surviving spouse through the financial intricacies of the death of a family member. Also make sure that your family knows where to access a copy of your will.

SENSIBLE DIVERSIFICATION

Investing Through

Unit Trusts Useful, flexible, affordable. By Zuki Mbekeni, Trainee Financial Paraplanner - NFB East London.

U

nit Trusts are investments in which investors' funds are pooled and managed by professional managers. They are useful products that cater for individuals of different financial capacity and various financial goals at different stages of life. Whether you want to save up for an overseas trip, your child's education or more importantly, to attain long term capital growth to fund your retirement, there will be a unit trust or a combination of unit trust funds suitable for you.

Unit trusts are different from money market bank accounts, as they do not offer a set rate of interest at any given time. They introduce 'savers' to the world of 'investing' by bringing in the element of market risk. Unit trust products offered on the market have different levels of market risk which depends mainly on the underlying asset classes that the unit trust holds. In most instances, greater risk is rewarded by greater return over the long term. Investors should, however, be prepared for the possibility of losing some value in their investments in the shorter term periods if invested in unit trust funds of an aggressive nature.

There is a vast range of unit trusts. Some invest in different geographical locations, some in different market sectors. Others specialise only in certain sectors, like property stocks, resource companies, small market capitalisation companies, or corporate bonds. As the phrase of “putting all your eggs in one basket” suggests, funds that specialise in one area of the market tend to be high risk funds, depending on the underlying assets held. This is because a negative impact in the economic drivers of that particular asset class will inevitably result in the poor performance of that specialist unit trust. Unit trusts that invest in different sectors and asset classes are seen as taking on a more balanced view and a medium risk approach, as the performance of the unit trust does not rest on the health of one aspect of the economic

environment.

Unit trusts are safe investments. They are regulated by the Financial Services Board. The Collective Investment Schemes Control Act requires that all investments in a unit trust be kept separate from the assets of the management company. Daily transactions are closely administered by the unit trust fund trustee to safeguard investors' investments from mismanagement by the asset management company.

Investing in a unit trust is flexible and affordable. Investors have the option of making ad hoc lump sum investments, and/or investing through a monthly debit order. A unit trust investment can be started with a minimal monthly or lump sum amount that may be stopped and resumed at any time. Should the need arise, investors may also make withdrawals from their unit trust investment.

A financial advisor can add value by helping investors identify the appropriate unit trust portfolio to achieve financial goals without taking on unnecessary risk. Once an investor commits to an investment, it is advisable and most rewarding to practice discipline by staying invested for at least 5 years. This gives the capital invested the opportunity to grow to a significant figure.

DID YOU KNOW: · R1 000.00 invested monthly in a moderate return fund of 8% p.a. for 30 years will grow to R1 192 288.00. · Balanced funds of three top fund managers have averaged a return of 19% over the last 10 years.

Should you require further information on investing in unit trusts contact one of NFB's Private Wealth Managers on 043 – 735 2000.

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SENSIBLE ADVICE

By the time you 'miss' advice, it is too late Be fully informed about the “do's and don'ts� of insurance. By Barry Taylor, Chair of Short term Insurance Executive Committee of the FIA. Source: Cover Magazine

T

he Court upheld the direct insurer's decision to repudiate a claim for R609 000 for accident damage to an Audi R8 Quattro on the grounds that the insured, Sherwin Jerrier, had failed to notify Outsurance of two previous accidents events. Jerrier self funded R15,000.00 for a wheel replacement in April 2008 and a further R200,000.00 in accident damages in April 2009, but in each case, chose not to lodge a claim nor report the incident to his insurer.

This case delves into the insurance concepts of materiality and disclosure, and again highlights the importance of contracting for insurance with the assistance of an intermediary. Insurance brokers are an essential link in the communication process between consumers and insurers; they possess the necessary skill and experience to advise consumers to disclose events that may have an impact on their insurance premium, whether from a claims history perspective or due to increased moral risk.

The events following on from the Court decision indicate how quickly damage can be done to the image and reputation of the short term insurance industry. National treasury has already indicated its desire to meet with the South African Insurance Association (SAIA) to ensure that the Court decision will not negatively impact on other insurance clients. Although Treasury's concerns are valid, we should not lose sight of the fact that the domestic short term insurance industry protects the personal assets - motor vehicle and household contents - of millions of insured South Africans.

Sound financial advice could have kept this out of the courtroom The material non-disclosure finding of the high Court should not be misrepresented as an injustice to consumers. All insurance clients should learn a positive lesson from this case. To be fully informed about the Do's and Do Not's of insurance, you need a registered and qualified intermediary.

You should discuss accident or damage events involving your insured property with your insurance

advisor whether you decide to claim or not - and no matter how insignificant you believe the incident to be. Your intermediary will be able to advise you on appropriate action, including notifying the insurer. More importantly, you should always transact for insurance with the assistance of an independent financial intermediary. You do not appreciate the value of good advice until disaster strikes.

Educating consumers on disclosure The Jerrier versus Outsurance case confirms that the insurance industry still has some way to go with regards educating consumers on disclosure. It is our view that the mandate and relationship between an intermediary and his/her clients go a long way towards preventing confusion and uncertainty where an insurer's disclosure requirements are concerned. The regulatory requirements introduced by the FAIS Act already require that intermediaries interact with their clients in a professional manner, including conducting a proper needs analysis and giving specific product and service advice. These requirements do not currently extend to the non-intermediated segments of the market, but hopefully the Treating Customers Fairly (TCF) will address the shortcoming.

Earlier Ombud rulings have suggested that the unroadworthy state of a vehicle may not be the cause of the loss or damage, and the claim could therefore not be repudiated. We are talking about different principles - on the one hand, disclosure and materiality of disclosure versus causality on the other. What policyholders should be made aware of are the conditions contained in their policy and the duty of due care that they assume for the assets insured on the policies. If the insured assets are not kept in a good state of repair, this could prejudice the consumer in the event of a claim.

Once again, this raises the issue of what the individual policy wordings require of the policyholder, with some requirements being more onerous than others. It begs the question: Where does the consumer get the proper guidance and advice, if not from an intermediary?

insurance brokers (border)(pty)ltd.

SENSIBLE SAVINGS

MEDICAL TAX CREDITS The new system ensuring equality across the tax brackets. By Nicole Boucher, Trainee Financial Paraplanner - NFB East London.

C

ontributing to a medical aid scheme is seen as an unnecessary expense to many.

Some individuals pay a couple of thousand rand per month and don't use their medical aid at all. There are hospitals and clinics that one can visit and not have to pay, so why contribute hard earned income to a medical aid scheme?

Being able to go to a private hospital is seen as something that only the wealthy can do, due to the high premiums charged on medical aids. There are, however, cheaper options that are offered by companies that work according to income levels, thus making it more affordable to lower income earning individuals.

So, as a means of encouragement – I'm sure the government gives a form of tax relief to individuals who contribute to medical aid schemes because this takes the pressure off of the overcrowded government hospitals.

Previously the tax benefit on medical aid schemes benefited the higher income earners as the amount of tax relief was calculated according to an individual's marginal tax rate. With this tax system, a monthly tax deduction of R720.00 each for the first two members and then R440.00 per additional beneficiary was allocated to a tax payer. Someone (with his spouse and say two beneficiaries) would receive a monthly tax deduction of R2,320.00. This would then be subject to the members' tax rate. Therefore, an individual with a 40% tax rate would get a higher tax benefit.

This was seen as “the rich get richer”; therefore, from 1st March 2012 the MEDICAL TAX CREDITS system was implemented, for taxpayers below the age of 65, to achieve greater equality. For taxpayers above the age of 65 the old tax system applies. However, from 1st March 2014 they will convert to the new tax credit system.

Under the new system, a monthly tax credit of R242.00 each for the first two members and R162.00 per additional beneficiary will be allocated to the tax payer. This means that someone who (with his spouse and say two beneficiaries) belongs to a medical aid scheme will be allocated a total credit of R808.00. This credit will be the same irrespective of the taxpayers' marginal tax rate.

If you are below the age of 65, in addition to the tax credit, you will be granted a deduction based on: l A deduction in respect of contributions made by you that exceeds four times the medical tax credit determined. l A deduction in respect of contributions and outof-pocket medical expenses paid by you – all contributions as exceeds four times the medical tax credit as determined and other medical expenditure not recoverable from the medical scheme that, in aggregate, exceeds 7.5% of your taxable income. The out-of-pocket expenses include: l Payments to medical practitioners, nursing homes and hospitals l Payments to pharmacists for prescribed medicines l Payments for physical disabilities, including remedial teaching and expenditure incurred for mentally handicapped persons.

It is clear when we compare before and after that the higher income earners benefited with the previous tax system. The new Medical Tax Credit System ensures that everyone gets the same subsidy from the state with regards to their medical contributions.

FYI – the 1st July 2013 is the start of the 2013 Personal Income Tax Filing Season.

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Have I Made Sufficient Provision for Death, Disability and Retirement?

Image credit: 123RF Stock Photo

The heading to this article is a question often posed to financial planners, often expecting an answer based more on a hope than one based on facts. By Glen Wattrus, NFB East London, Private Wealth Manager

a client would need to do a fair bit of homework on nett amount required to live according to their lifestyle on a monthly basis, preferably after taking income tax and medical aid into account. In my

T

here is never an easy answer to the question

calculations I prefer to exclude these two: tax for

as there are so many factors that need to be

obvious reasons, but medical aid is excluded as the

taken into account when arriving at a

inflation rate on this grudge purchase is significantly

possible solution. Furthermore, this answer is

higher than the usual rate of inflation. A recent

never a line in the sand as a multitude of factors

article in this publication highlighted the silent killer

influence the outcome and the end result is a

that is inflation, but even more so inflation on

shifting goalpost. There is never a once-size-fits-all

medical expenses. A 2% variation over a life span

answer, but I will visit a number of aspects that I

of 30 years for medical aid needs has a

would take into account when trying to provide a

mindboggling effect on the end result of capital

client with an answer at that particular point in

required. Thus a client would need to do a detailed

time. Ideally, one's financial position should be

analysis of expenses such as bond repayments,

revisited every two years to ensure that any

education requirements, rates and taxes, as well as

intervening factors have not significantly altered

water and electricity, groceries, travel and

your planning.

entertainment, tithes and any other expenses

To arrive anywhere near a satisfactory answer,

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beyond the obvious.

Morbid as it may sound, death is the easiest

Property.............This may well be true if the person

aspect for which to plan and the easiest to

making the statement has a particularly large

implement. One merely needs to establish the level

property portfolio that is well diversified across

of cover required and then shop around for the

office, commercial and possibly residential areas,

most appropriate quote. Life cover costing, over

but no asset class can claim to be devoid of risk.

time, has become progressively more competitive

Particularly in the residential market there is a

and a policy that was purchased 10 years ago

particular risk of a tenant defaulting on payments

may be significantly more expensive than one sold

and upkeep of this class of property is usually more

at current rates. Be aware, though, that premiums

intense than the other types. In our planning we do

may escalate at a higher rate than the original

favour property exposure, but certainly in a

policy and there may be exclusions relating to

diversified asset class offering instead of in an

certain medical conditions.

exclusive one. Along with property we would prefer

Disability is somewhat more problematic to

our client has exposure to asset classes that offer a

address as it would encapsulate ensuring that any

good income stream, along with the probability of

monthly income does not exceed 75% of what the

an increase in capital value should the client be a

client was receiving prior to becoming disabled.

retiree.

This is an industry-related matter and is basically

How then should we approach retirement

implemented to “disincentivise” (if there is such a

provision for the client in the accumulation phase

word) people from claiming to be disabled and

of their life? Number-crunching can lead to a

being in the same position as if they were working.

feeling of despair when the client looks at the

The level of capital disability required would only

“here” picture and sees how much capital is still

be realistically ascertainable when the client's

required to get to a position where a sustainable

special needs have been determined after the

income can be expected upon retirement.

disabling event. For instance, a specially adapted

Inflation and expected returns are assumptions,

vehicle may be required or alterations made to the

nothing more than that, in planning for the future.

home to accommodate any physical needs.

One should view any answer to the question posed

Certainly in cases like these it is better to prepare

at the beginning of this article as a starting point to

for the worst, but trust for the “best”. Although

achieving the respective goals. More often than

strictly speaking dread disease provision does not

not the amounts required may seem unachievable,

fall into this category I would urge every reader of

but start with whatever is possible in terms of your

this article to seriously consider adding this cover to

budget and make a concerted effort to cut out

their policy. Yes, it is usually frightfully expensive, but

any unnecessary expenses. Older clients will be

one should bear in mind that this type of cover is

familiar with the term “a penny saved is a penny

usually unobtainable after a dread disease illness

earned” and this is particularly apt in the area of

has surfaced, or it is available at prohibitive rates

financial planning where the effects of compound

thereafter.

The final aspect to consider, and certainly the

interest are most evident. Remember that knowledge is power and it is crucial that you know

most problematic, is ensuring that one has made

where you stand in terms of your financial planning

sufficient provision for the retirement years or, if

and do something about it rather than fear where

those are already upon you, to ensure that they

you may be and avoid the issue as best you can as

are sustainable for the remainder of your life. How

you are certain that you will not like the answer.

often does one hear that the answer to a happy retirement devoid of worry is Property, Property,

To obtain clarity on your position please talk to your NFB financial advisor.

sensible finance july13

15

SENSIBLE SUBMISSIONS

Tax Administration Act, 2011 (Act No. 28 of 2011)

A summary. By Shaun Murphy - Klinkradt Murphy.

T

he Tax Administration Act came into operation on 01 October 2011 and the purpose of the act is the effective and efficient collection of revenue for SARS. The Act only deals with tax administration and seeks to regulate the administration of all tax Acts by simplifying administrative provisions between the tax Acts into a single Act. It removes duplication and aligns the various obligations that currently exist in the different tax Acts. These tax Acts include, among others, the Income Tax Act, 1962; Value-Added Tax Act, 1991; Transfer Duty Act, 1949; and Estate Duty Act, 1955. The taxpayer may be familiar with many of the provisions contained in the Act as it refines and modifies a number of provisions that were contained in other tax Acts and it introduces various new provisions. It is easier for a taxpayer to fully comply with law he or she understands.

The Act also strives to promote a better balance between the powers and duties of SARS and the rights and obligations of taxpayers, which would greatly contribute to the equity and fairness of tax administration. If taxpayers perceive and experience the tax system as fair and equitable, they will be more inclined to fully and voluntarily comply with it.

It is important that taxpayers and SARS officials alike are aware of the provisions of the Act so as to ensure that the provisions of the Act are complied with. It is provided that SARS is responsible for the administration of the Act under the control or direction of the Commissioner. The burden of proof generally lies with the taxpayer. The Act intends to ensure that every person pays his or her fair share by enhancing tax compliance. It is important to ensure that a person's tax affairs are kept in order to avoid any penalties that SARS may charge.

Where a taxpayer has understated their tax liability

Item

Behaviour

to SARS, they will incur an understatement penalty, which would be in addition to the tax payable. For the understatement penalty percentage, please see the table below.

Should a taxpayer believe that he or she is aggrieved by an assessment issued by SARS, they have a right to dispute it. There is legal framework for these disputes across all tax types found in the relevant tax Acts and requirements to follow to ensure the dispute remains valid.

The Act also contains a permanent voluntary disclosure programme whereby taxpayers can approach the Commissioner to rectify previous defaults under various tax acts. However, taxpayers will still be liable for interest due to SARS, and, depending on their particular circumstances, may remain liable for an understatement penalty.

Certain provisions contained in the Act do enhance the protection of taxpayers' rights for the compliant taxpayers by way of new, modified administrative procedures which were not found in the other tax Acts. However, with the introduction of the Tax Administration Act, SARS's collection powers have been significantly strengthened, which highlights the importance of ensuring that tax affairs are kept in order with SARS. Based on the above Act, the taxpayer needs to be doubly sure that their submissions for all taxes have been done so with due care, of particular importance would be your estimates of taxable income for provisional tax. My advice would be if you are responsible for the submission of any taxes and something appears to be out of sorts in any small way, contact your accountant to verify your submission - the extra cost could land up saving you substantially more in penalties.

For more information contact me on 043 7269555 or drop me an email at shaun@kliwal.co.za

Standard Case

If obstructive or 'repeat case'

Voluntary disclosure Voluntary disclosure before notification after notification of of audit audit

(i)

‘Substantial understatement'

25%

50%

5%

0%

(ii)

Reasonable care not taken in completing return

50%

75%

25%

0%

(iii)

No reasonable grounds for 'tax position' taken

75%

100%

35%

0%

(iv)

Gross negligence

100%

125%

50%

5%

(v)

Intentional tax evasion

150%

200%

75%

10%

“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 RETURNS

Is it Time to look Offshore?

Looking attractive to the local investor in terms of potential returns. By Bryce Wild, Trainee Financial Paraplanner - NFB East London.

P

ositive sentiment has crept into the global economy as the recovery from the 2008 financial crisis has started to gain momentum. For anyone who has previously burnt their fingers investing abroad or has only been around long enough to catch the local equity bull run of the past decade, the case for investing offshore looks more promising than it has in a long time.

Even though local equities and local property have shot the lights out over the past decade (giving investors returns of 21.4% pa and 25.6% pa respectively), the general consensus fund managers have reached, is that South African equities are overvalued on a global basis. This view is backed by the fact that the MSCI World Index has beaten the JSE All Share Index for the past three years and the number of JSE listings has also been in decline. With other emerging markets offering higher fundamental growth than South Africa and developed economies offering better value from an investment point of view, there is no doubt that offshore investment is looking attractive to the local investor in terms of potential returns.

Coronation predicts that the next decade will see global equities giving investors returns of between 10% pa and13% pa, followed by local equity and local property, both predicted to give returns of between 7% pa and 10% pa.

It must be remembered that there are essentially two drivers of offshore return: namely the

20

sensible finance july13

performance of the underlying asset class and the movement of the Rand. Issues such as the growing current account deficit, spiralling increases in petrol and electricity prices, lower labour productivity and higher wage demands, make the fundamentals of the Rand weak and thus the chances are, that over the long term, the Rand is set to depreciate against other major currencies. This currency play presents an opportunity to boost the returns achieved from underlying asset classes.

Another major obstacle in the past has been the effort required to obtain tax clearance, in order to take funds abroad. Government addressed this issue at the beginning of last year and now one can invest R1 million per year outside South African borders, without having to obtain a tax clearance certificate.

As a developing economy (making up 0.7% of Global GDP), we are extremely susceptible to global capital flows, exogenous shocks and the movement of money between a limited range of industries and investment sectors. Applying the principle of diversification, looking offshore makes sense in more ways than one.

The most important decision an investor can make is to choose an asset allocation that is in line with their risk profile, especially as alpha becomes critical in a low-return environment. If you are needing assistance with making this decision or require further information do not hesitate to contact an NFB financial advisor.

Retirement Investments Retirement investments are an integral part of an investment portfolio.

The rationale behind these investments has often been criticised, however, when their features and considerations are understood in conjunction with each other, these investments are an enhancement when appropriately structured into a portfolio. By Nina Joannou, Trainee Financial Advisor - NFB Gauteng

Considerations Liquidity: Retirement assets are illiquid prior to age 55 thus there should be sufficient liquidity elsewhere in a portfolio before considering an investment into retirement assets. Upon retirement, up to one third may be withdrawn as a lump sum whilst the remainder will be transferred to a living annuity to generate a regular income for the annuitant (the investor).

*The example assumes that there is a 40/60 split between income and capital growth and that income, within the unit trust, has been taxed on an annual basis at 40%.

Asset Allocation: Retirement annuities are governed by Regulation 28 of the Prudential Investment Guidelines of the Pension Funds Act in terms of asset class exposure. These assets cannot have an equity exposure of more than 75%, a property exposure of more than 25% and a foreign exposure of more than 25%. This limitation can easily be managed in conjunction with your advisor. If necessary, one could adjust other investments to set off the impact of the Regulation 28 requirements.

Estate Efficiency: Retirement assets are not subject to estate duty or the associated costs on death. This translates into a 20% saving on estate duty, up to 3.99% saving on executor's fees and up to 13.3% saving on capital gains tax.

Revisiting the example we used previously, these savings are illustrated as follows:

Beneficiary Nominations: Although the investment allows for nominated beneficiaries, the fund has trustees who must sanction these, giving consideration to other dependants of the investor.

Features

Unit Trust

Retirement Annuity

Original Value

R 5 000 000

Value @date of death

R 23 406 484 R 30 624 927

CGT

-R 1 751 245

R0

-R 933 919

R0

Executor’s Fees

Year

Unit Trust

Investment

R 5 000 000

Retirement Annuity R 5 000 000

1 2 3 4 5

Compounded Returns: Retirement investments are not subject to any tax on the growth generated by the underlying investment portfolios. This means that there will be no income tax, no capital gains tax and no dividend withholding tax applicable. For the high net worth individual, this can be translated into a 40% saving on income tax, a 13.3% saving on capital gains tax and a 15% saving on dividend withholding tax. Below is a simulated example of a ten year investment of R5 million into a unit trust and a retirement annuity. The underlying investment portfolio and platform fee is identical for both investments. This is solely the result of the favourable tax treatment and the powerful impact of compounding.

Variables

Within the retirement annuity, the investor has generated approximately R7.2 million more than within the unit trust, which represents almost 145% of the original investment.

R 5 000 000

Estate Duty

-R 4 144 264

R0

Net Value

R 16 577 056

R 30 624 927

6 7 8 9 10

R 23 406 484 R 30 624 927

* The example assumes that the estate duty abatement of R3.5 million has already been used and that, within the unit trust, capital gains tax has been applied at 13.32%.

The net value available to the investor's family is approximately R14 million more in the retirement annuity. The impact of the tax efficient compounded returns as well as pro-active estate planning has thus saved the investor approximately 280% of the original investment amount.

What's next?

New legislation has recently been promulgated which will further enhance the impact of retirement investments. The impact of these changes, in conjunction with current practice, potentially represents a material saving to you and your family. To learn more about this exciting opportunity, please contact your NFB Private Wealth Manager.

DIVORCE ORDERS AND RETIREMENT SAVINGS An explanation of the “clean-break” principle. By Julie McDonald, Financial Paraplanner - NFB East London.

W

ith the introduction of the 'clean-break' principle when the Pension Funds Act was amended in 2007, non-member spouses can get access to their award of their ex-spouses retirement savings (pensionable interest) as indicated in the divorce order immediately after divorce. The nonmember no longer has to wait for the retirement benefit to accrue to their ex-spouse, whether that being on retirement or exit from the fund - which may still be years away.

Pension Interest is defined as the following in the Divorce Act: In the case of a Pension Fund, Provident Fund or Preservation fund: The benefits to which a member would have been entitled to had he/she withdrawn from the fund on the date of divorce.

In the case of a Retirement Annuity: The total amount of the member's contributions to the fund up to the date of divorce, together with a total amount of annual simple interest on those contributions up to that date, calculated at the rate as imposed by the Prescribed Rate of Interest Act. The maximum simple interest may not exceed the fund return on the pension interest assigned to the non-member spouse.

Because of the change in legislation and amendments thereof, there are differing scenarios with regards to the tax payable.

If your Divorce Order was granted/dated before 13 September 2007: Date of deemed accrual: l Accrual date is the date of deduction from the fund. l Date of deduction is the date of election by nonmember spouse to take cash or transfer to another fund.

Tax position: l If your ex-spouse elected to make a deduction between 1 November 2008 & 1 March 2009, you were regarded as the taxpayer. The divorce award would have been taxed at your average rate of tax and you could claim back the tax from your exspouse. l However, if the deduction was/is made after 1 March 2009, no tax is payable by either parties which is a very favourable position.

If your Divorce Order is granted/dated after 13 September 2007: Date of deemed accrual: l Date of deduction from the fund.

Tax position: l Where the deduction is made after 1 March 2009,

the non-member is the tax payer and the retirement cumulative withdrawal table applies if a lump sum is taken (see below) l Upon retirement (after age 55) by the non-member, if they took a lump sum, the taxed divorce award would be aggregated with other lump sums according to the retirement tax tables.

Taxable portion of withdrawal R0 – 22 500 R22 501 – R600 000 R600 001 – R900 000 R900 001 +

Tax Rate 0% 18% on the amount over R22 500 R103 950 + 27% on the amount over R600 000 R184 950 + 36% on the amount over R900 000

l The non-member may transfer to an approved

retirement fund and such a transfer is tax-free (which is recommended). And then on retirement from age 55 onwards the cumulative retirement tax tables would apply to all of their retirement products.

Taxable Portion on lump sum R 0 - R315 000 R315 001 - R630 000 R630 001 - R945 000 R945 001 +

Rates of Tax 0% of taxable income R0 plus 18% of the amount exceeding R315 000 R54 000 plus 27% of the amount exceeding R630 000 R135 000 plus 36% of the amount exceeding R945 000

The GEPF (Government Employees Pension Fund) has also recently been amended to make allowance for the clean-break principle.

Therefore, if you currently have a divorce order that still requires a portion of your retirement savings to be given to your ex-spouse this can be done now: a 'clean-break'.

Remembering that if your retirement savings have been reduced by a divorce order against it, this could leave you with less than sufficient retirement savings when you do retire and therefore you would need look at additional retirement savings.

SENSIBLE TO DO

CALLING ALL NEW PARENTS Add your Will to your “to do” list today! By Debi Godwin, Director Independent Executor & Trust.

S

o you were probably woken up far too early, struggled to find something to wear that wasn't covered in baby dribble and now there is the “to do list” to tackle that just keeps getting longer. With small children there are not enough hours in the day to get things done (at least while they are asleep), but if you add anything new to your “to do list” it must be to ensure you have wills in place which provide for your family, especially your children, if anything should happen to you.

First it is important that your children are named as beneficiaries in your will and it is natural that, subject to making provision for your spouse, your children are next in line to inherit. If you have children from a previous relationship then we can advise you how best to provide for all of your family.

Another important factor to consider is the appointment of guardians to look after your

children when you cannot. If both mother and father have parental responsibility for the child, then the survivor of them would continue the parental role. But you should consider who you would like to appoint as guardians should something happen to both of you.

Guardians can be an awkward topic. You may have a strong preference as to who you would rather care for your children. By appointing guardians you make known your wishes. But don't forget to discuss it with your proposed guardian first, to ensure that they are willing and able to take on the role!

Wills are not always a subject that younger people automatically think of, particularly when they are busy raising a young family. However, it is important and when it is done it will give you peace of mind.

So go on, add it to your “to do list” today.

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

sensible finance july13

25

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 realise that not every asset class performs the best each year, but what asset class has been the most consistent performer over the longer period?

Does it pay off to just choose a well balanced portfolio or should one try and pick the asset class winners each year?

A: A tough question to answer. It is always easy looking at yesterday's winners, but much more difficult to pick the winners of the future. Having had a look at asset class performances over the past 10 years it is clear that each year is different and often the winners of last year are the losers of the next year.

One theme that does ring true through these periods is that a diversified portfolio will give you the most consistent returns. It will never be the top performing asset class, but it has also never been the bottom. Over the past 10 years of data of year on year returns, SA Real Estate (Commercial listed property) and SA Equities have dominated the top spots. This is no surprise as SA has experienced a bull market in both these assets. It is not always the case, however, as often the second position is another asset class like bonds or cash. A case in point would be 2008 when Inflation and SA Cash were the top two performers with SA Real Estate at the bottom with a negative 15.7% return.

The last 2 years we have seen foreign equities make a comeback and the top spot is occupied

by Foreign Equity for 2013 with a return of 48.8%.

Over the past 5 years and 10 years it has been SA Real topping the charts with returns of 19% and 21% p.a. respectively. SA Equities would have given you a similar return over the 10 years. A Balanced or Diversified portfolio would have come in third and given you on average around 11% and 14% p.a. over 5 and 10 years. This return is well above the inflation and cash returns which averaged closer to 6% and 7%.

A diversified portfolio will also give you good returns at a much lower risk or volatility than an equity portfolio. There are some excellent fund managers who have achieved even better returns with their portfolios than the average diversified fund. These portfolio managers are able to actively manage their portfolios within a risk mandate that suits the client. This allows them to take advantage of the opportunities that the various asset classes provide. In a bear or risky market they can allocate more funds to more stable assets like cash and bonds. In an environment when things are going well they can take advantage of equities and properties. These mandates restrict the manager from being too aggressive in any one asset class and therefore ensure that returns are less volatile.

Looking at data from Prudential (source: I-Net Bridge) over the past 30 years, equities have given the best real return (the return over and above inflation) at 7.7% p.a., but this also comes with the highest Standard Deviation or risk at 20.2%. Property would have given you 6.6% p.a. at a Standard Deviation of 19.1%. It is interesting to note that Residential Property has only given a real return of 0.7%. Gold would have given you 2.6%, but with a Standard Deviation close to equities at 18%. Cash and Bonds would have given you a real return of 3% p.a. and 4.7% p.a. respectively.

In the end it is best to seek advice and select a portfolio that is best suited to your needs. It is no good chasing past winners. Pick a champion who can manage money consistently well over all asset classes and who is able to adapt to the changing economic environment.

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

sensible finance july13

27

SENSIBLE INVESTMENT

Get into INTU A look at this rand hedge company.

By Rob McIntyre, Stockbroker/Portfolio Manager - NVest Securities.

L

isted property is an important asset class for our income investors. The universe comprises property loan stocks and property unit trusts, all of which are in the process of converting to a Real Estate Investment Trust (REIT) regime. These units trade on (taxable) gross yield of between 5.5% and 9.5%, and comprise stocks such as Growthpoint, Redefine, Capital, Vukile, Emira, SA Corporate and Vividend.

Listed property also has a place in general equity portfolios, but the candidates that we would seek for inclusion would typically be international property development and owning companies such as Redefine International, New Europe Property Investments and Capital and Counties.

One such company that we will discuss today is INTU Properties PLC. INTU is the new name for Capital Shopping Centres (CSC). CSC traces its roots to the old Liberty International PLC structure that the founder of Liberty Life, Donny Gordon created. At its peak, Liberty International was a large UK based property owning and development company listed on the London Stock Exchange. A few years ago, following the effects of the global financial crisis, Liberty International was split into two separate companies, one being Capital and Counties (which focused on property development around the Covent Gardens area) and the other being INTU Properties (which is an owner of some of the largest regional shopping centres in the UK). Both companies remain listed in London and Johannesburg. The Gordon family still owns 9.5% of INTU. Other significant South African shareholders include Coronation Asset Management at 15.08% and the Public Investment Corporation at 5.71%.

Capital and Counties has done very well the past few years and this has been reflected in the share price, whilst the share price performance of INTU has lagged behind its sibling; however, the profile and investment proposition are very

28

sensible finance july13

different.

INTU owns some of the very best centres in the strongest locations right across the UK, offering easy access to great places for shopping and socialising to more people than anyone else; INTU attracts over 320 million customer visits each year. Given the level of urban development in the UK and the planning permission processes, many of these centres simply cannot be replicated without extraordinary effort, costs and time.

Given that INTU owns and operates some of the largest shopping centres in the UK, the foot traffic, trading patterns, basket sizes and tenant failures that drive the performance of the tenants and therefore INTU has been under some pressure due to the recession that the UK has been in. This has placed downward pressure of the carrying amount of the properties in INTU and on INTU's net rental income and therefore its distributions.

We believe that the trading environment has stabilised, that property valuations should begin to grow again and that INTU has built a base for future growth.

INTU has also taken advantage of acquiring further centres, albeit by the issue of equity over the past few years.

INTU is trading at about 90% of its net property value and has a forward gross distribution of 4.4%.

We have based this distribution on 15 pence per unit and an exchange rate of R15 to the Pound.

Increases in the distribution are likely to be muted for some time, until the recovery gains traction in the UK. For the quality of its business and in relation to its London listed peers, this is an attractive entry point.

For the patient investor, who wishes to accumulate a long term holding in a London listed property company that is well capitalised and with better prospects than the past few years, you would do well to buy this Rand hedge company.

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

NFB have a STRONG, REPUTABLE TEAM OF ADVISORS with a WEALTH OF EXPERIENCE between them: Anthony Godwin (RFP™, MIFM) - Managing Director and Private Wealth Manager, 25 years experience; Gavin Ramsay (BCom, MIFM) - Executive Director and Private Wealth Manager, 20 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™, MIFM) - Private Wealth Manager, 22 years experience; Travis McClure (BCom, CFP®) - Private Wealth Manager, 15 years experience; Marc Schroeder (BCom Hons(Ecos), CFP®) Private Wealth Manager, 9 years experience;

Phillip Bartlett (BA LLB, CFP®) - Private Wealth Manager, 11 years experience; Gordon Brown (CFP®) - Regional Manager – PE, 7 years experience; Mikayla Collins (BCom (Hons), CFP®) - Private Wealth Manager, 2 years experience; Glen Wattrus (B.Juris LL.B CFP®) – Private Wealth Manager, 16 years experience; Leona Trollip (RFP™) - Employee Benefits Divisional Manager and Advisor, 37 years experience; Leonie Schoeman (RFP™) - Healthcare Divisional Manager and Advisor, 16 years experience; Julie McDonald (BCom, CFP®) – Financial Paraplanner, 3 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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