NFB Sensible Finance Magazine Issue 31

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Issue 31 November 2015

PERSONAL FINANCE Magazine

KEEP CALM AND CARRY ON Have a plan and stick to it!

GETTING THE MOST OUT OF YOUR BONUS Think ahead and be prepared

TIPS FOR WEATHERING MARKET VOLATILITY Taking a long-term perspective NFB IS CELEBRATING ITS YEARS ANNIVERSARY

30 private wealth management

“Based on my calculations, I can retire about 5 years after I die.”

Anonymous, 2014

Are you this “guy”?

Don’t be. Talk to an NFB Private Wealth Manager today to plan your financial future. fortune favours the well advised

Contact one of NFB’s financial advisors: East London s tel no: (043) 735-2000 or e-mail: info@nfbel.co.za Port Elizabeth s tel no: (041) 582-3990 or e-mail: info@nfbpe.co.za Cape Town s tel no: (021) 202-0001 or e-mail: info@nfbct.co.za

web: www.nfbpwm.co.za NFB is an authorised Financial Services Provider

private wealth management

ED’S LETTER editor Brendan Connellan bconnellan@nvestholdings.co.za

Contributors Bryce Wild (NFB East London), Bjorn Laubscher – Mirfin Valuation Services and The Addsure website (contributed by NFB Insurance Brokers), Matthew Chapman (NFB Gauteng), Pieter Hugo (Prudential Unit Trusts), Alex Grunewald (NFB Port Elizabeth), Shaun Murphy (Klinkradt Murphy), Mikayla Collins (NFB Cape Town), Nonnie Canham (NFB East London), Ryno Oosthuizen (Glacier by Sanlam), Grant Berndt (Abdo & Abdo), Zukiswa Sonjica (NFB East London), Julie McDonald (NFB East London), Investec Asset Management, Debbie Jacobs (IE&T), Travis McClure (NFB East London), Rob McIntyre (NVest Securities)

layout and design Jacky Horn TA Willow Design jaxx@at-media.co.za

Photos used in this magazine - 123rf.com

Advertising 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.nfbpwm.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. ©2015 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

I

always tend to get reflective when writing the editorial for the last edition of the year (as this one is) and if I were to define a theme for 2015, I think I would define it as being “tough, yet character building”, not only for me personally, but us as a nation.

Character building was certainly the order of the day when the Springboks lost to Japan in their opening game of the RWC! At the time of writing this, we were still in the first round, so whether or not the loss built sufficient character to go ahead and win the tournament was not yet evident. But I will say, that I think that the loss was probably one of the best things that could have happened to the team and its supporters, showing that we should never get too complacent or arrogant, that there is usually someone better prepared than we are or that wants it a little more than we do; that positively managed change can bring about growth and that we can always do better!

Personally, the year has also been challenging and character building for various reasons. But if, from a purely personal perspective, I want to remember the year for any one thing, it will be the fact that several colleagues and I completed a near 120 kilometre three-day run in the Transkei in September. If you had asked me a year ago if I was even capable of doing that (essentially running the distance of three marathons back-to-back), I would not even have taken the question seriously. In fact, I was fairly sure while standing at the starting line, that I would not be capable.

However, 120 kilometres, many blisters and three lost toenails later, I completed the run with a body that still felt strangely strong and energized. It is experiences such as this, when we realise that what may have previously seemed unachievable is most certainly achievable; when we just stretch our limits and strive for more than we did before. And thereafter, our benchmarks move a little further out and what was normal just a little while before, is suddenly no longer good enough.

And with that 'insightful' thought, I wish all of our readers and our clients a wonderful end to the year and a 2016 that leaves you with many happy memories to look back on in the future – and may all of us strive to do and be better, stretch ourselves and continue extending our benchmarks.

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 NOVEMBER 2015

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THE RAND Some factors highlighting its depreciation. By Bryce Wild, Private Wealth Manager - NFB East London.

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RETAINING WALLS AND INSURANCE Ensuring you are adequately covered.

Sourced from: Bjorn Laubscher – Mirfin Valuation Services and The Addsure website.

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VOLATILITY Cause for concern? By Matthew Chapman, Private Wealth Manager - NFB Gauteng.

10 TIPS FOR WEATHERING MARKET VOLATILITY Taking a long-term perspective. Pieter Hugo, Managing Director - Prudential Unit Trusts.

12 THE NFB CAPE RECIFE TRAIL RUN Starting a Heritage Day tradition. By Alex Grunewald, MD/Private Wealth Manager - NFB Port Elizabeth.

13 EMPOWERING SUPPLIER The amended B-BBEE codes explained. By Pharyn Botha, BBBEE Manager - Klinkradt Murphy.

14 KEEP CALM AND CARRY ON The grass isn't necessarily greener elsewhere. By Mikayla Collins, Private Wealth Manager - NFB Cape Town.

16 GETTING THE MOST OUT OF YOUR BONUS Don't spend it before you have it. By Nonnie Canham, Financial Paraplanner - NFB East London.

17 CAPTIAL GAINS TAX EXPLAINED Some important notes to be cognizant of. By

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Ryno Oosthuizen, Business Development Manager at Glacier by Sanlam.

18 FESTIVE SEASON WARNING The Courts are now taking a stricter stance on drinking and driving. By Grandt Berndt Abdo & Abdo.

21 EQUITIES Currently navigating its way through stormy seas. By Zukiswa Sonjica, Financial Paraplanner - NFB East London.

24 BREAST, PROSTRATE & TESTICULAR CANCER Prevention is better than cure.

By Julie McDonald, Risk Assurance Specialist - NFB East London.

25 CONSERVATIVE POSITIONING Providing a 'shock absorber' against a multitude of market risks. Contributed by Investec Asset Management.

26 WHY SHOULD I HAVE AN ESTATE PLAN? No matter how small your estate, begin the process now. By Debbie Jacobs, Senior Estate Administrator 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, Director/Private Wealth Manager - NFB East London.

28 WHAT TO PUT IN YOUR CHRISTMAS STOCKING? Some locally listed stocks that may deserve a place in your portfolio. By Rob Mc Intyre, Director/Portfolio Manager - NVest Securities.

SENSIBLE EXPOSURE

THE RAND Some factors highlighting the Rand’s depreciation. By Bryce Wild, Private Wealth Manager - NFB East London.

With the Rand having depreciated against the Euro, British Pound and US Dollar over the past year by 9.7%, 16.1% and 23.1% respectively, it is important to touch on some of the factors causing this material depreciation, which I have highlighted below.

Federal Reserve does eventually decide to start raising interest rates, the outflow of foreigners' funds from our local bond market is likely to pick up substantially, as the bond yields in SA become relatively less attractive. This is likely to be a major factor that contributes to the further depreciation of the Rand.

China's Growth

South African Fundamentals

As China attempts to move from an export-led growth economy to a consumption-driven economy, their economic growth has slowed considerably, with estimates that its GDP will grow by approximately 6.8% this year as opposed to the double digit growth we have become accustomed to in China each year. This apparent economic slowdown, the drive to become a consumption-driven economy and the fact that China recently devalued the Yuan, all contribute to a situation where it is becoming increasingly difficult to rely on China as an export destination (making the Trade Deficit more difficult to keep under control for South Africa).

The following local factors have also contributed to a weakening Rand: < Strikes in the commodity sector. The most recent of these strikes was the coal strike, which started on 04 October. < The issue with Eskom battling to keep the lights on, which in turn affects productivity levels. < Rating Agency credit downgrade pressures. < Trade Deficit (as mentioned above).

Background

The US Ecomomy With Quantitative Easing a distant memory and the developing world economies holding their breath in anticipation of the first interest rate hike in the US, the September US jobs data have been released and they indicate that the non-farm payrolls rose by 142 000 last month (well below the expected number of 203 000). These job numbers, along with the fact that the Federal Reserve decided not to start raising interest rates last month due to volatility in financial markets and weakness in the global economy perhaps indicates that it may not only be the Chinese economy that is slowing down, but the US economy as well. Economists are beginning to believe that the Federal Reserve may not even raise interest rates until December this year, or possibly even early next year. However, when the

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Conclusion Due to all of the abovementioned factors, it is clear that the Rand is on a slippery slope at the moment, with all of the underlying fundamentals seeming to point to a continued weakening of the Rand against other major developed market currencies.

Trying to predict the value of the Rand going forward is not an easy task and anyone who claims to be able to do this with any conviction is probably taking an educated guess. My advice would be to link up with an NFB financial advisor and to consider increasing your offshore exposure (dependant on your specific risk profile). Not only will this increase your protection against Rand weakness, but investors are also able to purchase equities offshore that offer better value for money from a valuation perspective.

NFB's contact telephone numbers are as follows: East London 043-735 2000 Port Elizabeth 041-582 3990 Cape Town 021-202 0001

SENSIBLE INSURANCE

RETAINING WALLS AND INSURANCE Ensuring you are adequately covered.

What is a retaining wall?

Things to be aware of

A retaining wall is any wall that is retaining or holding back soil or other material on one side of the wall. A retaining wall serves the purpose of separating different ground elevations in a terrain which nature intended (and still intends) to be a slope.

It often occurs over a period of time that a simple boundary wall assumes the duties of a retaining wall owing to the soil level being raised on one side of the wall as a result of landscaping, property development or natural soil movement. This wall will ultimately fail as it has not been designed to withstand the forces exerted on it. There are usually obvious signs warning of a retaining wall's impending failure such as mortar crumbling, joints cracking or the wall bowing outwards. These symptoms can be treated, however, in the long term the most economic way of dealing with the declining state of a retaining wall is usually to demolish it and rebuild according to an engineer's design based on the specific environment, thereby making it an insurable risk.

Some developers have been known to â&#x20AC;&#x153;cut cornersâ&#x20AC;? and erect retaining walls contrary to engineers' specifications. Problems may not come to light initially, however, when they do, they often do so with catastrophic consequences for the property owner. Insurers will not provide cover where defective or ineffective construction is the cause of the incident giving rise to the damage.

In conclusion, it is essential to ensure that any retaining wall is constructed according to engineers' specifications and that your insurance broker is made aware of the fact that your property has retaining walls so that they can place your policy with an insurer that will provide the necessary cover.

Should you require further information on the intricacies of retaining walls please do not hesitate to contact our office on (043) 735 2460.

Why is the insurance pertaining to retaining walls problematic?

Retaining walls by virtue of their nature and purpose are subject to very different influences and pressures when compared with other walls such as boundary or load bearing walls. There is a constant natural force behind the wall, pressing against it and trying to return the soil to its natural sloping state.

The lateral forces exerted on a retaining wall by earth and water can be immense, and it is therefore vital that the structure be designed to withstand such pressure which may cause it to overturn or slide. In addition, ground water collecting behind the wall must be dissipated by a drainage system, thereby reducing the hydrostatic pressure and improving the stability of the material behind the wall.

In order to ensure that a retaining wall can withstand the forces and pressures exerted on it, it is essential that very specific design criteria are followed. These criteria must be determined and approved by suitable, qualified engineers.

The majority of insurance policies exclude loss or damage to a retaining wall caused by storm, wind, water, hail and snow. If cover is required, insurers will require a stability report before they agree to provide cover. In order to obtain this report the foundations will have to be exposed in various locations to allow a suitably qualified engineer to examine the retaining wall's structural integrity. The cost of this exercise may render it unfeasible for many property owners.

Information sourced from: Bjorn Laubscher â&#x20AC;&#x201C; Mirfin Valuation Services and The Addsure website.

insurance brokers (border)(pty)ltd.

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By Matthew Chapman, Private Wealth Manager - NFB Gauteng.

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hose with an eye on the markets over the last couple of weeks would have noticed the extreme levels of volatility which will have caused some alarm bells to ring.

The CBOE (Chicago Board Options Exchange) SPX Volatility Index, or VIX, which measures the market's expectation of 30-day volatility on the S&P 500, shot up dramatically to above 40 on Monday 24th August signalling heightened volatility causing investor panic. A move above 20 usually indicates a near-term sign of elevated risk and volatility, while a move above 30 typically signals a stock market correction and extreme volatility.

Please refer graph on the right.

The major cause of this spike in volatility and accompanying market correction has been termed China's Black Monday. The recent surge and subsequent plunge in the Shanghai Composite Index on the back of unsustainable Chinese retail investors inflating market prices with borrowed capital has been well documented and discussed of late. As the bubble began to burst and margin calls were initiated, traders, as they tend to do, panicked which resulted in a vicious cycle of selling

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and led to a dramatic fall of the Index of over 30% before stabilizing somewhat in early July.

Losses continued through the week of the

SENSIBLE PORTFOLIO 24th August with the Shanghai Index falling 8.5% on the 24th alone. This had a contagious effect on global markets, especially in emerging markets (EM) where investors swapped riskier positions for more stable developed market assets in what is known as a 'flight to safety.' Commodity prices were hit especially hard as the weak manufacturing numbers affirmed a slowdown in Chinese growth, having a large negative effect on already weak commodity stocks.

The further knock-on effect from this was a rapid depreciation of emerging market currencies, with the rand particularly vulnerable being one of the most liquid and commodity linked EM currencies.

relatively flat from September 2014, the Shanghai composite has risen more than 120% and then subsequently fallen 40%.

So what caused this correction?

As previously discussed the rapid growth in the Chinese market has been on the back of deregulation of the country's banking and financial markets. The People's Bank of China had been actively attempting to boost economic growth through several interest rate cuts and a reduction in the cash reserve requirement for banks. This was accompanied by an increase in the amount of retail investors piling into the market with borrowed money. According to Reuters, almost 85% of trades are retail, with 81% of these 200 million traders executing trades at least once a month.

Compounded by the 'unsophisticated' nature and inexperience of retail traders, the Chinese market was a breeding ground for irrationality with momentum fuelled by sentiment rather than fundamentals. As the story goes, Joseph Kennedy sold his stocks prior to the 1929 Great Crash after realizing the market was bound to fall as a shoe shine boy shared stock tips with him, similarities can be found in the case of the Chinese investors' level of sophistication. The graphic below, based on a study conducted at the end of 2014 by Professor Li Gan of the Southwestern University of Finance and Economics, illustrates that over two thirds of new equity investors in China have an education level below that of a matric qualification in South Africa.

More than 30% didn't even make it to high school.

In order to comprehend the extraordinary magnitude of the past year we only need to look at the graph below. To give a sense of comparison with both the S&P500 and the JSE ALSI which were

This is not the first time the Chinese market has behaved irrationally â&#x20AC;&#x201C; in 2008 the index rose over 400% in the two years leading up to the Credit Crisis and was then unwound to the effect of 70%.

Should you be concerned?

The unprecedented growth China has had over the past couple of decades has led it to become the major trading partner of a large number of nations, including South Africa. Therefore a slowing China will undoubtedly have an effect on both local and global GDP figures as well as markets.

However, because the Chinese equity market is so insulated, with only 2% held by foreigners according to CNBC, the effect of stock market contagion is somewhat limited and thus the risk to global asset allocations funds may not be as material as one would initially anticipate.

The fact of the matter is equity markets are volatile and short term drops are to be expected, especially in a world flush with excess liquidity.

However, over the long term equities have outperformed other traditional asset classes and you should thus be rewarded for short term volatility with long term excess return. Investors should always aim to position themselves to be able to SWAN (sleep well at night). Whilst we can all easily get caught up in the hysteria of daily market movements, it's important to take a step back, take a deep breath and rationalize your portfolio in line with your long term views.

At the end of the day, your NFB advisor is there to correctly position your portfolio and maintain your allocation in line with that of your calculated risk profile. There will always be times where markets are volatile and these times should present opportunity rather than cause for concern.

Should you wish to confirm the correct positioning of your portfolio at this time, please do not hesitate to contact an NFB financial advisor at any one of the NFB offices.

NFB's contact telephone numbers are as follows: East London 043-735 2000 Port Elizabeth 041-582 3990 Cape Town 021-202 0001 sensible finance Nov15

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SENSIBLE PERSPECTIVE

TIPS FOR WEATHERING

MARKET VOLATILITY Taking a long-term perspective. Pieter Hugo, Managing Director - Prudential Unit Trusts.

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hile the financial market turmoil seen in

and unlisted property, cash and offshore assets

August may now have passed, most market commentators expect such

typically all react differently than equities in times of market turmoil, so be sure that you have the

volatility to be with us for some time to come. It is

correct asset diversification in place. The best way

therefore worth revisiting some of the key ways of managing volatility, as well as managing your own

to achieve this is to invest in a multi-asset portfolio

behaviour in times of turmoil.

Investors should remember that equity market volatility is normal: many of us have already forgotten that the US S&P500 experienced a 16% drop in 2010 and a 19% drop in 2011, both of which form part of the current seven-year equity bull market. Investors need to expect ups and downs and be prepared to ride out the downside, recognising that higher-risk, higher-returning equity assets comprise a necessary part of their portfolios if they are to meet their longer-term investment goals.

The most important cautionary for investors following precipitous market falls is not to panic in the face of weakness and sell out of their holdings â&#x20AC;&#x201C; this could simply lock in losses, which is usually very hard to recover from. It is the antithesis of sound investment management to sell when market values are low. Simple investment theory states that you should buy when markets are low and sell when they are high; but we all realise this is not always very easy to do, especially when we see bad news in the media. It is best to be patient and wait for markets to recover â&#x20AC;&#x201C; and history has shown that markets will eventually rebound.

One of the best strategies for weathering market volatility is to ensure that your portfolio is sufficiently diversified across asset classes, industries and geographies so that all is not lost when the South African equity market plunges. Bonds, listed

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with an investment objective that matches your own.

For those who have invested in actively managed unit trusts, investors should trust their managers to position their funds to best meet their funds' investment objectives, no matter what the market conditions. For example, ahead of the August downturn Prudential had already moved to more defensive positioning in its multi-asset funds like the Balanced and Inflation Plus Funds, with higher cash holdings and near- maximum offshore exposure. We had also bought some equity market protection in some of our funds. This was in recognition of the lack of good value opportunities in most markets, particularly local equities. In our view at the time, some market correction was not unexpected, and we saw the sell-off as a possible opportunity to buy mispriced assets.

Looking ahead, we would expect markets to remain volatile in the face of uncertain global economic growth (in Europe, China and other emerging markets), combined with ongoing anxiety over the rise in US interest rates. However, as we manage portfolios for the long term, and believe that asset prices will correct over time, we would urge investors to also take a long-term perspective.

THE NFB

CAPE RECIFE

TRAIL RUN

Starting a Heritage Day tradition. By Alex Grunewald, MD/Private Wealth Manager - NFB Port Elizabeth.

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FB Port Elizabeth were privileged enough to be approached by Dale Tucker of Pine Lodge to get involved in sponsorship towards the Cape Recife Trail race to be run on Heritage Day this year.

The trail run formed part of an action packed weekend at Pine Lodge that included the Cobbles Longboard Classic, the Penguin Plod and the Artisan Food Market. We thought it would be a wonderful idea to get involved especially as there were three events, namely the 3.5km fun run, the 8.5km trail run and then a 20km trail relay (made up of four loops of 5km) which could be run as an individual, in teams of two or teams of four. This meant that one would be able to cater for a vast group of entrants, from your weekend warrior to your mum's and dad's with little ones.

In the financial services industry there is an association with spending time on the golf course (not that I am saying that there is anything wrong with a round of golf!), but NFB saw an opportunity that we could be associated with an event that would reach a far wider audience.

The 24th September turned out to be an awesome day - perfect for braaing and the small

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matter of running a trail race.

Conditions were perfect for a run - no wind!

The 8.5 km trail runners were sent off first, followed by the fun runners and then the intrepid 20km clan. The race announcer definitely got it wrong, stipulating that the first two kilometres were the easy part!

Shoo... that damn hill was a killer. Although the last 5 kilometres, run along the beach, certainly did not help the cause!

123 runners finished the 8,5km with a winning time of 35:50 by Thando Bixa. The individual 20km race was won by Obey Mtetwa in a time of 01:34; the two man team by Free Spirit Adventures in a time of 01:32, and the 4 man team by Aranjo's with a time of 01:58. The 3.5km fun run was won by Sipho Madyo in a time of 19:07.

All in all, over 250 people entered all three of the races, which bodes well for the future of the race. It was also great to see All Black great, Carlos Spencer, on the starting line and finishing the 8.5km race strong!

A big thank you must go to the Pine Lodge staff for the organization and running of a fantastic event and we at NFB look forward to being part of the team for next year. Maybe I will brave the 20 km race!!!

SENSIBLE SUPPLIER

EMPOWERING

SUPPLIER The amended B-BBEE codes explained. By Pharyn Botha, BBBEE Manager - Klinkradt Murphy.

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ne of the most significant changes in the amended codes is the requirement that suppliers be â&#x20AC;&#x153;Empowering Suppliersâ&#x20AC;? to be claimed under Preferential Procurement. When Klinkradt Murphy, the Verification Agency, starts your verification WE will do the verification of Empowering Supplier first. If the result is that the company is an Empowering Supplier, then the verification will continue; if not, the verification will likely stop.

The Preferential Procurement Policy Framework Act, which is meant to drive Government Procurement, is silent on the matter of Empowering Suppliers as it was promulgated before the new codes. We do not know if companies need to be Empowering Suppliers to do business with Government. In fact, some industries/companies will not be able to qualify as Empowering Suppliers.

For example, let's use a firm of consulting engineers with turnover in excess of R50 million as a test case: = They will be scored on the Generic scorecard (which requires them to score on 3 of the 5 specific requirements laid out in the amended codes). = They should be scored as a BEP (Build Environment Professional) under the Construction Sector Code (the amended Construction Sector Code has not been issued, but Sector Councils have been instructed that their amended Sector Codes cannot be easier to comply with than the amended general codes).

EMPOWERING SUPPLIER REQUIREMENTS Overall Requirements: 1. B-BBEE Compliant Entity This is not defined. It is reasonable to believe that if the company has obtained a B-BBEE certificate this requirement has been met.

There is a concern if the company has not been verified in the past. If the assumption above is applied then the company would NOT be B-BBEE compliant. Does taking steps to get a certificate make the company compliant?

2. Complying with all laws How do we define compliance with all laws?

Does it go as far as checking that the company has an SABC TV licence for the TV in the board room?

We believe that the intention is to check compliance with major business laws such as Income Tax, VAT, Labour Relations, Workmen's Compensation, Basic Conditions of Employment, Employment Equity and such, but we need clarity on this.

Work may need to be outsourced. As examples, external auditors will look at compliance with laws as part of the business risks facing the company; there may be compliance audits by bodies such as SABS, and Health and Safety, or Environmental law experts may be hired to perform portions of the verification. continued on page 20...

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Keep Calm and Carry On The grass isn't necessarily greener elsewhere. By Mikayla Collins, Private Wealth Manager - NFB Cape Town.

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f you reacted to what the headlines are telling you on a daily basis, then no doubt your money would be under your mattress, or worse – packed in a bag along with your passport, ready to leave the country.

Today they are all about a sharp drop in exports, gold at a 3 month low, the R24.2 billion trade deficit reported in January (the highest we have had yet), and the Rand at a 13-year low against the US Dollar. In the last month we faced bad press surrounding the State of the Nation Address and continued load shedding as the Eskom crisis sees no end. Even when the news is good, it is usually with an underlying warning of “we can't keep this up”. And every time bad news breaks, investors become nervous and start thinking of withdrawing their money, expecting the worst. Yet the All Share Index had already climbed nearly 8% by the end of February, the growth outlook is positive compared to what we faced a year ago, and when we start comparing ourselves to the rest of the world, the grass isn't necessarily greener elsewhere.

In terms of Global Competitiveness, South Africa is currently ranked 56 out of 144 countries.

This is down from previous years, but still probably better than the headlines would have you believe.

The areas in which we rank near the bottom are

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labour market efficiency and health and primary school education, which aren't new developments.

We are well aware of these obstacles and therefore they don't affect our markets too much in the short term. In the Long Term, however, they are a drag on potential growth and we have already seen the massive effect of strikes in particular on GDP figures for 2014.

Stage of development Transition 1–2

1 Factor driven

Transition 2 –3

2

3

Efficiency driven

Innovation driven

Institutions 7

Innovation

6

Infrastructure

5

Business sophistication

Macroeconomic environment

4 3 2

Market size

Health and primary education

1

Higher education and training

Technological readiness Financial market development

Goods market ef ciency Labor market ef ciency

South Africa

Sub-Saharan Africa

Source: Global Competitiveness Report 2014 - 2015

SENSIBLE INVESTING That being said, we still fare better than many of our counterparts in terms of efficiency - financial market development, market size, business sophistication and innovation. We rank first out of the 144 countries assessed in terms of regulation and securities exchanges and strength of auditing and reporting standards; and in the top five in terms of protection of minority shareholders' interests, efficacy of corporate boards and financing through the local equity market.

This explains some of the reasons why, even though headlines may be to the largest extent “doom and gloom”, and despite high volatility, our markets are still producing good, long term returns.

So where does this leave you as the investor? The truth is that with all the conflicting information we hear on a daily basis, it is easy to become panicked. At the same time as some investors are calling to ask whether they should withdraw their funds, others are calling to ask whether they should move their money into more aggressive strategies.

And all are reacting to something they have heard or an article of news that is a very small piece of the bigger picture.

“Moody's downgrades SA credit rating” – 06 November 2014 “Abil swings to headline loss of 240.7 cents per share”- 19 May 2014 “South African Stocks Retreat from Record High.

Abil Soars” – 07 July 2014 “Capitec: the next Abil?” – 24 August 2014 “Capitec expects 22% rise in earnings, share price jumps” - 04 September 2014 “Platinum may be Best Bet among Precious Metals, and a Hedge against Gold, whatever happens” – 03 October 2013 “South African miners return to work after longest platinum strike” – 25 June 2014 If you had listened to those headlines, what was left of your money would no doubt be under your mattress.

And yet through all of this, the All Share Index still

When it comes to investing, this is where your focus should be:

Gather information so that you can make an informed decision. This is where an experienced financial advisor will guide you and assist in comparing different options and making sure you are comfortable with the plan being set in place; Pick a strategy that is suitable for you in terms of the risk involved and the time horizon, and STICK TO IT; Don't chase short term returns - remember that you are investing for the LONG TERM; Don't speculate based on what you hear in the news – that will only make you nervous and tempt you into withdrawing at the wrong time or changing your investment strategy too often.

Taking action as a result of nervousness is going to have a worse effect on your investment than “waiting for the storm to pass” and the recent behaviour in our stock markets is testament to this.

It is interesting to note some of the headlines of the past year: “SA Tourism Stats Hits Record High” – 15 April 2014 “SA Tourism Feels Effect of Ebola” – 19 August 2014 “Election Result 'Credit Positive' for South Africa: Moody's” – 14 May 2014

had growth in excess of inflation for 2014.

In essence, despite what you hear in the news daily, have a plan and stick to it. Be informed, but don't let it dictate your investment decisions. A year of more volatility awaits and if you are patient and keep your focus on the end goal rather than on all the “noise” in between, you will come out on top.

"Do you know what investing for the long run, but listening to market news everyday is like? It's like a man walking up a big hill with a yo-yo and keeping his eyes fixed on the yo-yo instead of the hill." - Alan Abelson Should you require assistance in refocusing your financial plan, please don't hesitate to contact an NFB financial advisor at any one of the NFB offices.

NFB's contact telephone numbers are as follows: East London 043-735 2000 Port Elizabeth 041-582 3990 Cape Town 021-202 0001 sensible finance Nov15

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SENSIBLE TAX

GETTING THE MOST OUT OF YOUR BONUS Don't spend it before you have it.

By Nonnie Canham, Financial Paraplanner - NFB East London.

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t's November... the countdown to the festivities of December is well under way... and let's be honest... if you are expecting a 13th cheque in December, chances are you have already mentally spent the money that you THINK you are going to receive (and mentally acclimatized to all the Boney M you will be subjected to in the malls)...

But be prepared. Every year we forget that our festive cheer could be dampened by the big chunk of income tax that SARS will siphon from our bonuses. Also, keep in mind you will only receive a 13th cheque or performance bonus if it's guaranteed in your employment contract. If not, it's best to save upfront for the holidays.

The best way to soften the blow is to ask your employer to spread your tax payments for your annual bonus over the preceding months of the tax year.

And how would that work? Imagine, for example, that you're earning a salary of R 25,000 per month, adding up to R300,000 for the tax year.

According to the SARS tax tables, your tax payment for the year will be roughly R50,986, taken from your salary as a monthly deduction of ÂąR4,249.

Now, let's say you'll get a R30,000 bonus in December, increasing your annual taxable earnings to R330,000. You are still in the same tax bracket, except now with an annual tax of roughly R60,286.

If you pay all the tax due on your bonus in December, you'll be hit with an additional tax deduction of R9,300 over and above your regular monthly tax payment of R4,249. That's a December tax total of R13,549. Eina!

Your employer can help to make this pill less bitter by spreading out your tax payment for your bonus over the year. You could pay an additional

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R1 033 in tax each month, for nine months between March and December so that you receive a much healthier-looking pay package for the festive season holidays.

The drawback to this approach is that it only works if you receive a predictable or easily ascertainable annual bonus each year. If your bonus is not guaranteed, it will be difficult for payroll to guess what your bonus will be. The result could be that your company deducts monthly tax for no reason and then you have to wait to recover your money after you file your returns.

You also need to be certain that your budgeted monthly needs allow you to be able to live on R1,033 less each month. The additional monthly tax payment should not introduce financial strain to your life.

If you don't have your bonus earmarked for paying down debt or funding a holiday, you could put some or all of it (yes, all of it) into your Retirement Annuity or other retirement savings vehicle. This is a tax-efficient way to save for your future. You may also consider a Tax-Free Savings Investment where your capital will be more easily accessible in case of an emergency. The return you earn in your tax-free savings will not be taxable and if you save the maximum of R30,000 per year, you could grow your investment by at least R2,000 for the year, tax free.

Speak to your financial advisor regarding whether the tax-spread is for you.

NFB's contact telephone numbers are as follows: East London 043-735 2000 Port Elizabeth 041-582 3990 Cape Town 021-202 0001

SENSIBLE GAINS

CAPTIAL GAINS TAX EXPLAINED Some important notes to be cognizant of. By Ryno Oosthuizen, Business Development Manager at Glacier by Sanlam.

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hen investing in a unit trust or share portfolio there are generally two types of returns an investor can expect to earn, i.e. income and capital growth. Income earned can be received in the form of interest and dividends from unit trust funds or shares.

therefore be used to calculate the investor's tax liability upon disposal.

Thereafter, a third (33.3% of the capital gain) will be included in the client's gross income and taxed at his/her marginal rate.

Example: Tax treatment of Interest and Dividends Interest and dividends may be paid out or reinvested in the unit trust fund. Dividends and interest held in an investment account on a platform, such as Glacier, are re-invested and as a result, increase the number of units held by the investor. The taxability of these income payments is, however, treated differently. Interest earned is included in an investor's gross income for a particular tax year after which income tax is deducted. Dividends, however, do not get included in an investor's gross income. Instead, dividends are subject to a withholding tax.

Dividend withholding tax (DWT) is levied at 15% on the dividends earned by an investor. DWT is a tax levied by regulated intermediaries such as Glacier and does not form part of the investor's personal tax return.

In this example, the unrealized CGT is R97 374.59 and the marginal tax rate is 41%.

R97 374.59 â&#x20AC;&#x201C; R30 000 = R67 374.59 A third (33.3%) of the gain will be included when calculating the tax: R67 374.59 x 33.33% = R22 455.95 This amount will then be taxed at the client's marginal tax rate.

R22 455.95 x 41% = R9206.94 (potential tax to be paid)

Important things to note regarding Capital Gains Tax and your investment: l A Capital Gain is not realised when switching

between different fund classes. l A Capital Gain is not realised when transferring

l

Tax treatment of Capital Growth Capital growth (gains), on the other hand, is taxed very differently to income earned by an investor.

Capital growth (gains) is typically defined as the movement in price of an asset over a particular period of time (also referred to as market movement). As the price of an asset increases, so does the capital appreciation of the asset which in this case may be a unit trust fund or a share for example. Capital gains tax (CGT) is levied on the capital growth (gains) which an investor has earned when he disposes of the asset. This means whenever units/shares are sold, either to be reinvested or withdrawn, a capital gains event will be triggered. Natural persons and some special trusts are eligible for a CGT exemption of R30 000 per year which reduces the impact of the potential tax payable by the investor. Any gain over R30 000 will

l

l l

l

units of the same fund and class to another platform.

A Capital Gains event is triggered when an investment is transferred between different entities (natural person and trust for an example) Capital Gains Tax is not applicable to retirement funds such as a Retirement Annuity, Preservation Fund or Investment-Linked Living Annuity.

Capital gains are realised upon death. The CGT exemption upon death increases to R300 000.

A Capital Gain does not realise when an investment is transferred to a spouse. The CGT will roll-over to your spouse at the same base cost.

A Capital Gains Tax event is triggered when an investor transfers an existing investment into an Endowment/Sinking Fund.

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SENSIBLE FESTIVITIES

FESTIVE SEASON

WARNING The Courts are now taking a stricter stance on drinking and driving. By Grandt Berndt - Abdo & Abdo.

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he festive season and all its merriment is fast approaching, with its many associated Christmas parties. This brings with it the increase in the number of offenses relating to driving with a blood alcohol level above the statutory limit, or drunken driving as it is commonly known. The suspension of one's driver's licence in the case of a conviction is not a common occurrence.

With effect from 20 November 2010 the law in this regard was amended to make the suspension of the driver's licence peremptory, unless a contrary order is made. It is important to note that the same applies to speeding fines, in the case of a conviction for an offence where the speed is in excess of 30km per hour over the prescribed speed limit in an urban area, and 40km per hour over the prescribed speed limit outside of an urban area or on a freeway. In terms of the National Road Traffic Act, No. 93 of 1996, an Order not suspending the driver's licence can only be made if the Court is satisfied after hearing evidence under oath, that circumstances relating to the offence exist which do not justify the suspension of the licence or which justify the suspension for a shorter period.

The Act prescribes a driver's licence suspension of 6 months for first offenders, at least 5 years for second offenders and at least 10 years for third and subsequent offenders. The fact that the Courts have not been implementing the requirements of the law makers has recently come to the fore with the High Court in the Western Cape sending out strong messages to the Director of Public Prosecutions and the Magistrates of the greater Cape Town area.

The National Road Traffic Act previously imposed no limit on the circumstances to which a Court could have regard in determining whether the non-suspension of a licence would be justified.

Since the amendment, this has been narrowed to “circumstances relating to the offence”. Thus, before the amendment the Court could have taken all the circumstances of the crime into account, as well as the accused person's personal

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circumstances and the interests of the community.

With the insertion of the words “relating to the offence”, the Courts have found that the law makers have deliberately narrowed the circumstances which can be taken into account when considering the suspension of the driver's licence. Thus, before the amendment, the importance of having a licence for work or family reasons was of significant importance, but subsequent to the amendment, work or family reasons are not a circumstance that relate to the offence. It would appear that the Courts have continued to effectively apply the previous wording of the National Road Traffic Act, particularly by taking into account the need for a licence for work and family reasons. This appears to be based on the historical application of the National Road Traffic Act. However, in a recent judgment, the Court stated: “drunk driving is an enormous problem in South Africa. The deaths and injuries which are caused by the scourge have a huge personal and economic toll on the country. This is no doubt why Section 35 (the Section in question) has recently been made stricter”.

The suspension of the driver's licence should, according to the Court, be the norm and not the exception, with it serving the dual purpose of protecting the public during the period of suspension and of high-lighting to the convicted person the importance of not driving after drinking.

The ramifications of having one's licence suspended are, as we all know, severe, and it appears that the Courts will now be taking a much stronger stance with regard to a stricter interpretation of the National Road Traffic Act and the suspension of drivers' licences as a norm.

With this in mind, may you have a good Festive Season and please be careful on the roads.

“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 SUPPLIER

Empowering Supplier Specific Requirements â&#x20AC;&#x201C; Companies must comply with 3 of 5 1. 25% of Cost of Sales, excluding Labour and Depreciation, must be procured from local suppliers or local producers. For the service industry labour costs are included, but capped at 15%; This is a measure of local content of the final product or service. In the case of service industries, salaries and wages will make up 15% of this amount, so companies in the service industry need to find another 10% to meet this requirement.

2. 50% of the jobs created must be for black people provided the number of black employees since the immediate prior verification B-BBEE certificate is maintained; In most companies head count management, if not head count reduction, is a management Key Performance Area. The slowing economy forces companies to watch staffing levels closely. While we can accept and understand the need to create jobs, it may not be practical.

Does retaining the same black staff levels, from one verification to the next, qualify, or must there be new positions created? We have spoken to other verification agencies and received differing interpretations.

3. At least 25% transformation of raw material/beneficiation including local manufacturing, production, and/or assembly, and/or packaging; No-one is certain what this means; it appears incomplete.

Most people we have spoken to believe this is one of two things. Firstly, is it a measure of Value Add to Raw Materials or their beneficiation? In other words, the increase in value of the product as a result of the production process. The second option is, is it a measure of the change in use of raw materials such as the stamping of a piece of sheet metal? The issue is, however, how would you

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...continued from page 13

quantify and verify the second option?

4. At least 12 days a year of productivity must be spent on skills transfer to assist Black EME & QSE to increase their operations or financial expertise Is this 12 days of the company's productivity, or 12 days of a designated person's or group of peoples' productivity? Most people believe it relates to the productivity of a designated person or group of people. If it means the company's productivity this could have severe profitability and sustainability issues.

Note the verification work will be performed on the Enterprise Development and Supplier Development elements, which is where the expenses will be claimed.

5. At least 85% of labour costs should be paid to South African employees by service industries.

This is applied only to companies in service industries. It will require accurate identification of people who are non-South Africans and their exclusion.

The identification of black people as South African citizens is often a problem. Black people must be naturalised before July 1994 to be a black person for B-BBEE, and this is often overlooked.

Is the naturalisation date for black and white immigrants relevant, or do we look at citizenship at date of verification? We should be consistent when applying definitions so the naturalisation date should be applied when determining citizenship for both black and white employees. This may lead to companies having unexpected and negative results.

Once read, is this really the intention of the drafter of the amended codes?

If most consulting engineers cannot become Empowering Suppliers, will they be able to work for government, and what impact will this have on infrastructure development?

How will your company measure up?

Please contact the Klinkradt Murphy offices for more information.

EQUITIES CURRENTLY NAVIGATING

ITS WAY THROUGH

STORMY SEAS Currently navigating its way through stormy seas. By Zukiswa Sonjica, Financial Paraplanner - NFB East London.

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he financial markets over the last 12 to 18 months have been challenging for fund managers, advisors and investors as we all find ourselves in a market delivering lower returns than that to which we have become accustomed. Some investors may have experienced a period of little or no growth, while others have had to face the harsh reality of decreasing capital value as their income drawn is greater than the returns currently generated by the underlying investment assets. This is especially tough for investors with no alternative income sources.

We often find the investment manager and advisor reassuring clients that staying invested will pay off over time, as the aim of investing is not to time the market and jump ship, but to stay the course and ride out the storm. One may change coarse slightly and batten down the hatches, but the end goal is to reach the destination port.

Investors need to give the markets time to recover from the austerity measures that were needed to mend world economies after the financial crisis.

Lower growth rates and lower market returns are to be expected on the way to recovery and rebuilding of the economies that collapsed seven years ago.

The important thing to remember when coming across uncertain times in the market is the investor's investment objectives as well as the risk profile. Many clients are requesting to go offshore in order to mitigate the negative impact of our weaker currency, low growth and overall loss of confidence in the local economy. Is the offshore market performing any better? The graph below shows that the poor performance in the equity markets is spread world-wide over the short term, and with equities being the asset class we look to for growth, it is clear why portfolio performance is what it is. The growth asset class is taking a knock.

Our local currency volatility and depreciation makes matters even worse as our reliance on 200

imported goods puts further pressure on inflation.

As a resource based economy and exporter, the slowdown in China and the world has meant weaker commodity prices which translate to a weaker Rand. Based on historical Price to Earnings ratios and in comparison to the local market, offshore markets seem to be fairly priced and hold more promise over the medium to long term.

However, as can be seen from the previously mentioned graph, offshore markets come with their own challenges as there is both market risk and currency risk. The decision to invest offshore should be taken in context with your current portfolio allocations, as well as your risk profile.

Whichever way one looks at it, the current financial market situation is definitely not for the faint-hearted. There is volatility at present, but this can also be seen as an opportunity. Stormy seas with the wind at your back are often better than a calm sea with no wind at all. Those entering the market should be ready to be in it for the long haul, and those investors already in the market need to look at the initial financial plan drafted with their financial advisor and stick to their plan, changing positions only if there has been a change in personal circumstances with regards to risk profile and financial objectives. If nothing has changed in terms of risk and objectives, the original financial plan towards those long term goals, has already taken into consideration the client's sensitivity to market volatility - so hang on tight, because with equities, the ride can get interesting, and it will not necessarily always be smooth sailing.

For further information on equities and investing offshore, please do not hesitate to contact an NFB financial advisor at any one of the NFB offices.

NFB's contact telephone numbers are as follows: East London 043-735 2000 Port Elizabeth 041-582 3990 Cape Town 021-202 0001

Market Indices Daily 2010/09/21 - 2015/09/21

150 100 50 0 2011 S&P 500 (USD) JSE ALL SHARE (USD) Source: Thomson Reuters Datastream

2012

2013 FTSE 100 (USD) HANG SENG (USD)

2014 NIKKEI 225 (USD) BRAZIL BOVESPA (USD)

2015

SENSIBLE PREVENTION

BREAST, PROSTRATE & TESTICULAR CANCER Prevention is better than cure. By Julie McDonald, Risk Assurance Specialist - NFB East London.

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uring the month of October, many will be showing their support by wearing their pink ribbons for breast cancer awareness month; and then it's the start of 'Movember', where men all over opt to skip the shave and show off their “'stashes and goatees” in order to raise awareness for prostate cancer and testicular cancer during the month of November.

We thought it an opportune time to share a few facts and statistics about these severe illnesses.

risk of testicular cancer. = Hormone replacement therapy (HRT)

There is a higher risk of breast cancer in women who have had hormone replacement therapy for several years. = Pregnancy and Breastfeeding Women who have their first child over the age of 30, or have not had any children, have an increased risk of breast cancer, while those who breastfeed have a lower risk, especially if they breastfeed for a year.

Did you know? = One in 35 women will get breast cancer. = One in 26 men have a lifetime risk of getting

prostate cancer. = Breast cancer is the most common cancer

among women in South Africa. = When breast or prostate cancer is detected

early, the survival rate is very high. = Most breast lumps are detected by the women

herself – so monthly self-examinations are vital. = Prevention screening for prostate cancer can

be done by means of a simple blood test (Prostate Specific Antigen screening). All men over 40 should have this done. = Early detection is the best prevention.

The risk factors for breast, prostate and testicular cancer are: = Family History & Genetics About 20% of women with breast cancer have a family history of the disease; if a mother or sister has or had breast cancer at a young age (before 40) the women's risk doubles. 10% of testicular cancers appear to be genetically linked. = Age As you get older, the risk of breast and prostate cancer increases. = Exercise If you are not active or are overweight, your cancer risk is increased. By exercising your risk is reduced. = Diet Make sure your diet is filled with fresh fruits and vegetables, and avoid saturated fats. = Fertility problems Men with fertility problems have an increased

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While we can all try to reduce the controllable risks associated with these cancers, we cannot be immune to the disease. However, it would be prudent to have the necessary checks, screenings or mammograms done when we are at an age that this is recommended. What we can all do is make provision now, by taking out dread disease cover for the possible eventuality that we may be diagnosed with these or any other dreaded diseases.

Below are a few examples of unexpected, additional costs that you may face and which you need to bear in mind if you are diagnosed with a dreaded disease/illness: = Hiring of a caregiver = Rehabilitation = Lifestyle changes = Home modifications = Dietary changes = Travel for treatment = Medical bills / treatment costs not covered by your medical aid plan.

Dread disease cover is paid out on diagnosis of a disease and the percentage of your assured amount paid out is determined by the severity of the disease.

Contact your advisor or the risk assurance specialist at NFB on the following numbers to review your existing dread disease cover already in place, or for a quote on taking out this kind of cover if you do not already have it in place: East London 043-7352000 Port Elizabeth 041-5823990 Cape Town 021-7027880.

Sources: www.cansa.org.za | www.breasthealth.co.za

SENSIBLE POSITIONING

CONSERVATIVE POSITIONING Providing a 'shock absorber' against a multitude of market risks. Contributed by Investec Asset Management.

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arkets globally have had a lot to contend with in recent months: a surprise devaluation of the Renminbi (which sent equity markets into a tail-spin); the suspension of a significant portion of the Chinese stock market in an attempt to prop up equity valuations; Brazilian sovereign debt being downgraded to junk; the admission of diesel emissions rigging by Volkswagen; and the US Fed remaining on hold as a result of uncertainty about the ramifications of a Chinese slowdown on the US. According to Clyde Rossouw, portfolio manager at Investec Asset Management and manager of the Investec Opportunity Fund, these events serve as a reminder of the problems faced globally: a lack of growth, and the risk (and ensuing volatility) that continues to build in investment markets.

“This is a market where stock picking will be coming increasingly important. We've been through a period where markets have just been going higher and higher, and investors have been looking for low-cost ways to get exposure to that,” he says.

In bull markets, investors may not need a portfolio manager, but when times are tough, Rossouw says, avoiding the landmines and separating the good from the bad will ultimately define investment outcomes.

He cautions that the risk of a downturn in risky assets remains elevated, driven by high equity valuations, rising volatility and concerns about growth. “Slower economic growth is translating into weaker earnings. Average earnings in South Africa are turning down, and profit margins in the US are set to reduce if the US labour market tightens, borrowing costs rise (as suggested by rising corporate yields), and the extent of cost cutting reduces.

Rossouw says he and his team are conservatively positioned, but are not contrarian.

“This environment calls for a portfolio that aims both to ensure value accretion to our investors and to hedge against the multitude of risks we face.”

He says the best opportunity remains global equities, followed by select local equities. “Both opportunity sets provide significant exposure to

currencies other than the Rand, with strong valuation underpins in the form of free cash flow.”

Turning to the resources sector, Rossouw says resource companies present the largest risk, but therefore also the largest potential opportunity for outperformance. “The valuations of resource companies continue to imply Armageddon for the sector and we would expect there to be some fatalities if current commodity prices and the cash flow situation of some of these companies persist. While we have performed the most fundamental research in this area this year, there are as yet, however, few opportunities that provide us with our required margin of safety.”

Rossouw says they are finding opportunity in domestic bonds. “Given the dislocation between inflation expectations and the published figures, and weak economic growth, bonds continue to offer attractive value for our portfolios, and a natural hedge against any potential Rand strength or equity weakness,” he said.

Cash also remains a significant portion of the portfolio.

In conclusion, Rossouw says it is important to separate volatility (uncertainty) from an environment where there is a high probability of loss of capital. “We don't believe that the environment is such where people would be losing a lot of capital over time, provided they are correctly positioned within the right strategies and in the right parts of the market.

“There is opportunity in our portfolio for decent returns, but we have some shock absorbers built in.

This means that if things get more difficult, we should be well positioned to be able to continue to grow investors' capital over the long term, hopefully well ahead of inflation.”

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SENSIBLE PLANNING

WHY SHOULD I HAVE

AN ESTATE PLAN? No matter how small your estate, begin the process now. By Debbie Jacobs, Senior Estate Administrator Independent Executor & Trust.

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any may think that they are not old enough or wealthy enough to warrant doing any estate planning. However, if you are over the age of eighteen, no matter how small your estate, it is advisable to begin the process.

You can plan your estate, whether you are single, married, divorced, separated, or have minor/adult children.

Each plan will be unique and structured according to an estate planner's own unique set of circumstances, goals and objectives, and must be reviewed regularly to take account of personal changes and legislative changes.

=

=

= = =

What are the goals to Estate Planning?

Estate Planner should ensure family members have cash funds immediately available.

To ensure dependants and minors are provided for during the estate administration, including guardianship, and to avoid bequests to minors being paid to the Guardian's Fund until he/she reaches majority.

Ensure suitable planning to minimise the impact of taxation on an estate, although it is problematic to use estate planning tools solely to aim at paying less tax.

To provide future growth of your assets.

If you were previously married, provision needs to be made for minor children.

Need to account for Offshore Assets.

When should I revise my Estate Plan?

= The most important tool in estate planning is to

ensure your Last Will and Testament is in order.

= In the case of divorce (remember if you do not

= To ensure that the winding up of an estate takes =

=

=

=

place as efficiently and effectively as possible.

To appoint heirs or legatees of your choice and to ensure your assets are distributed as per your wishes.

Where there is no Last Will and Testament, the estate will be dealt with in accordance with the Law of Intestate Succession. This means that your assets may not be dealt with in the way which you intended.

To provide liquidity. Should an estate not be liquid at death, the deceased's family members and dependants may suffer hardship, i.e. if there is a shortfall (estate duty, liabilities, administration costs, tax, etc.), heirs would need to pay into the estate or assets would need to be sold.

Until the Master of the High Court has issued Letters of Executorship, accounts are frozen and the Executor can't act until appointed. The

= = =

= =

change your Will, after the 3 month provision period your ex-spouse will benefit, if this was your previous intention).

Review beneficiary nominations on any policies, annuities and Trust Deeds.

If you are newly married â&#x20AC;&#x201C; the marital property regime chosen will impact on an existing plan.

After the birth of children/grandchildren; while they are minors, ensure that the assets they will inherit are protected through your Will.

New business ownership - ensure business agreements are in place.

If there is a downturn in your financial position, review your Last Will and Testament. Should there be cash bequests, these will be paid to the legatees before any residual heirs i.e. perhaps your spouse, and this might not be the planners' intention.

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

Port Elizabeth clients can call 041-582 3990 and you will be re-directed accordingly

SENSIBLE QUESTIONS

Travis McClure

â&#x20AC;&#x153;Sensible Finance - Questions and Answersâ&#x20AC;? 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 have been reluctant to employ the services of a financial advisor and have rather made my own fund selection based on the reputation and brand strength of an asset management company.

This asset manager has been around for a very long time and they do have a really good track record. However, during the past few years the fund I am using has underperformed the market average. I am asking if it is a good idea to 'dilute' my conviction and try to use other asset managers too?

A:

Your strategy for choosing a fund or asset management house and sticking with it over the long term is not a bad one at all. The same applies when picking a good company on the stock market and holding it over the longer term. But unfortunately, just like the stock market, there are periods where companies/asset managers get their calls wrong and are faced with a period where the performance is not there.

A common mistake is to back last year's winners or base the decision on brand strength. This decision is often based on performance alone. The problem with performance numbers is that they are historical and do not dictate what the future performance will be. Basing your decision on a strong brand does have some merit as a brand does not get strong overnight, but this decision can be a bit naive.

Rather than focussing on returns, one needs to understand the mandate and fund objective applied by the asset manager. A company like Allan Gray, for example, are known to be more of a value manager and only buy stocks when they feel they are cheap and sell when they feel they have reached fair value. Other asset managers like Foord, may be more willing to ride out the momentum and growth of a share or asset class.

Coronation are strong multi-asset managers.

Companies often take a different approach and some will have different philosophies or investment cases.

Other factors that need to be considered

when choosing an asset management house are the size of the fund, their consistency over time, strength and experience of their management team, benchmarks and fund objectives, the ability to produce returns with lower volatility, and also their fee structures. This filtering or due diligence process helps narrow the playing field of over 1,200 unit trust funds down to a more manageable level where one can then select a portfolio or a fund that is suited to the individual investor.

When selecting a portfolio of funds, we as advisors also take into account the fact that diversification is important in reducing risk and enhancing returns. It is therefore important that the correlation between these fund managers is understood. You don't want all the funds doing the same thing as this will defeat the object of the diversification. Our NFB asset management team look into the above factors and try to ensure that the combination of funds will give a better result than just backing one team. The above can get quite technical and not all investors will have all the information readily at hand so it would make sense to have an advisor guiding you in this process.

Backing a single manager is like choosing a good rugby side to win the World Cup. Based on the strength of their brand and performance you would choose the All Blacks every time, but you would have only won 2 World Cups to show for it.

The All Blacks play a different game plan to the Boks strength game; and the Aussies are known for their dynamic backline play, and the Argentines for their strong scrum. The combination of the above would probably give you a better result than just backing the one team. Why win a World Cup once every now and then, when with the best combination you could win it every time.

I am, however, 100% emotionally invested in the Boks!!

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

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SENSIBLE STOCKS

WHAT TO PUT IN YOUR CHRISTMAS STOCKING? Some locally listed stocks that may deserve a place in your portfolio. By Rob Mc Intyre, Director/Portfolio Manager - NVest Securities.

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he past year has been a very difficult one for equities. We have seen a slow down coming out of China that has significantly weakened commodity prices and as a result the share prices of the resource companies that mine and trade in commodities. We have had to endure further bailouts for Greece and the prospect of the inevitable increase in US interest rates, alongside corporate scandals like VW, regional conflicts and a materially weaker South African Rand. We remain confident in buying well run companies that have strong balance sheets and good pricing power in the correct proportions so as to achieve a balanced portfolio.

Given the shake-out that has taken place in the equity markets, I thought it opportune to highlight a few locally listed opportunities that we believe deserve a place in your portfolios.

Aspen Pharmacare The multinational South African-based, Aspen, is a supplier of branded and generic pharmaceuticals in more than 150 countries across the world and of consumer and nutritional products in selected territories. The company is a constituent of the JSE Top 40 Index and we believe that it has one of the best management teams in South Africa. Aspen is an incredible growth story and has expanded rapidly over the past decade. Having fallen from over R440 a share the past year to the current R290, we believe that, notwithstanding slower growth rates and headwinds that it is facing in South Africa from the weaker Rand, the drop in the share price provides an opportunity to re-enter Aspen. At a forward price earnings ratio of 24 and a forward dividend yield of 1.5%, Aspen is not a cheap company, but this is materially lower than Aspen has been for a long time and must be bought on the basis of above average earnings growth over the long term.

MTN Group MTN is one of the largest mobile telephony companies in the Emerging Markets and firmly a constituent of the JSE Top 40 Index. It operates in many African and Middle Eastern countries with its largest markets being South Africa, Nigeria and Iran. The share price has fallen dramatically from over R260 a share to the current R178 over the past

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year, largely due to its exposure to Nigeria where the Nigerian economy and currency has come under pressure due to lower oil prices, as well as a softness in its main market of South Africa. We rate MTN as a quality company and based on its forward price earnings ratio of 12 and forward dividend yield of 7.7% (despite this being about a 93% payout ratio), we see considerable value in MTN for the patient investor.

BHP Billiton BHP Billiton is the world's largest and most diversified mining company. It has the benefit of owning and operating some of the longest life, lowest cost mining assets. This coupled with deep and disciplined management has seen it navigate the current commodity rout far better than most. BHP Billiton has a strong balance sheet and we believe that it is best placed to ride out the commodity cycle. We do believe that commodity prices will remain subdued for some time, but at a forward dividend of 7.5%, despite the weakness in current earnings, we continue to accumulate BHP Billiton at the expense of other mining companies.

Tiger Brands Tiger Brands is one of South Africa's largest branded consumer goods companies. It is a household name. Unfortunately, it has endured a terrible 10 years that has seen it implicated in price fixing, invest and then lose a considerable amount of money in Africa, and seen increased competition in its traditional South African market. Recent corporate news is that its CEO will shortly depart the group and we believe that this will lay the foundation for a turnaround strategy that will by necessity involve some corporate action. The brands and distribution are just too good to ignore.

Tiger, with a market capitalisation of R60bn and a rating much lower than Pioneer and other competitors, must represent good value, either as a recovery or an acquisition target. We continue to accumulate Tiger Brands into our portfolios.

Please contact your portfolio manager should you wish to discuss these opportunities in greater detail on 043 â&#x20AC;&#x201C; 735 1270.

All prices correct as at 5 October 2015.

The Eastern Cape's first home-grown

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Contact one of NFBâ&#x20AC;&#x2122;s financial advisors: East London s tel no: (043) 735-2000 or e-mail: info@nfbel.co.za Port Elizabeth s tel no: (041) 582-3990 or e-mail: info@nfbpe.co.za Cape Town s tel no: (021) 202-0001 or e-mail: info@nfbct.co.za

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