Dear Private Banking Client

I was astounded the other day when someone asked me what I had in mind for the April holidays. I thought to myself that it was just the other day that we were ushering in the New Year and here we are already in the April holidays!

I trust your year has been rewarding so far and that you are already well on your way to realising your 2017 goals.

I am sure one of them is to maintain your savings and, perhaps, invest even more for your retirement.

This year could turn out to be another year of consolidation. You might need to make adjustments to your investment strategy by increasing risk, so as to achieve better returns, to make up for 2016.

Adjusting to volatile times can understandably be stressful. Was one of your resolutions to deal with stress more effectively in 2017? Stress is unavoidable, yet manageable. Shawn Achor, a positive psychology expert and founder of Goodthink Inc., says the key to dealing with the inevitability of stress is to change the way we handle it. He suggests you read further to understand more about managing stress.

Failure to manage stress appropriately can have a serious negative impact on your health. Recent studies have shown that it is linked to the top six causes of death.

While death is unpredictable, it is possible, and essential, to safeguard your loved ones’ future by drafting your Will. Bear in mind that without a Will, your wishes might not be carried out, your loved ones’ financial needs might be neglected, and your assets could even be seized and sold to cover liabilities. So, make the commitment to get this essential task done today.

Our Fiduciary Specialists at Absa Trust can take the stress out of your estate planning by advising and

assisting you with establishing a trust, or making necessary amendments to an existing one, allowing you to utilise a trust as an effective estate planning vehicle.

And last, but not least, Absa Rewards now puts even more cash back into your pocket. We have added Rewards tiers so you can enjoy higher earning rates or get more cash back with our new partners. Another reason why you should take that short break to de-stress – perhaps a romantic weekend away with your better half?

Enjoy the read.

Warm regards

Happy RalinalaManaging Executive: Private and Wealth Banking

Creating wealth in an uncertain world

Johan Gouws, Head: Absa Asset Consultants, explains how to successfully navigate the investment market storms.

Investment managers and investors had to navigate through the investment storms that raged through most of 2016. These developments resulted in lacklustre portfolio returns and left investors with a sense of unease about what the future holds. But creating wealth is a long-term process that requires insight, patience, emotional resilience and a sound investment strategy.

It is, therefore, necessary for South African investors to gain a proper perspective of the difficult investment environment as they enter a new year on their journey towards financial independence.

2016, the year of seismic shiftMost South African investors will remember 2016 as a year of great political, economic and market noise that delivered poor investment returns. Global equity markets had their worst start in years and concerns about rapidly slowing growth in China, as the largest consumer of resources, resulted in a negative outlook for most commodities. Slower demand from China together with a strong dollar resulted in declining commodity prices and low levels of economic growth in many emerging market

economies. During the middle of 2016 the decision by the United Kingdom to leave the European Union came as a huge surprise that caught the market off guard and saw the pound losing 10% in value against the US dollar overnight.

Throughout 2016 the market kept an eye on the US Federal Reserve, trying to determine when and by how much interest rates would be raised and what this could mean for global economic growth and emerging market investment flows and currencies. Politics, however, dominated the latter part of 2016 in the run-up to the US Presidential election. The elections resulted in the second big surprise of the year when Donald Trump was elected as the 45th president of the United States, largely on the back of

his non-establishment credentials. While investment markets responded well to Mr Trump’s election, much uncertainty remains about the Republican candidate’s economic policy and diplomatic relations with China and Russia.

Positive, but not real returnsSlow economic growth, weak commodity markets, a stronger rand, political uncertainty, the possibility of a credit rating downgrade together with low interest rates resulted in the local equity and property markets delivering below average returns in 2016. The all-share index returned 2.6% during 2016, down from an average return of 13% per annum over the past 5 years. Listed property recorded a

return of 10.2%, which was also well below the average return of 17.3% per annum over the past 5 years. The bond market was the best performing asset class with a return of 15.4% during 2016, but few asset managers capitalised on these returns as they held short-dated instruments given the high levels of market uncertainty. Local cash was able to marginally beat inflation with the money market delivering a return of 7.4%. The global equity market returned 8.1% while global bonds and cash returned close to 0% in US dollar terms. With the rand, however, strengthening by 11.5% against the US dollar, 14% against the euro and 26% against the pound, offshore investments delivered negative returns in rand terms during 2016.

It is against this background that most local investors were either treading water or saw their wealth declining in real terms as their investment portfolios were not able to beat inflation. The average balanced collective investment scheme, or unit trust, achieved a return of between 1.5% and 2.5% while the average offshore balanced portfolio delivered a return of around -7.5% for the year. Investors were not compensated for taking investment risk in their portfolios as the main sources of capital growth, namely equities, listed property and offshore assets, delivered the worst returns.

Putting 2016 behind usThe below average returns achieved in 2016 need to be viewed against the background of a period of

above average growth during the bull market that started after the financial crisis in 2008/09. From time to time investment markets go through weaker growth periods of consolidation or what is also known as a process of reversion to the mean. These weaker periods in investment markets result in returns moving back to a more realistic long-term average and also lead to investment markets offering better value. This consolidation allows for a base to be formed from which better investment returns can again be achieved in years to come.

Looking ahead into 2017, the unknown outcomes of developments relating to Brexit, political elections

in Europe, the start of the Trump era, the ANC leadership elections and South Africa’s now sub-investment (or “junk”) foreign currency credit ratings status, are all expected to result in continued investor nervousness. It could also turn out to be another year of consolidation, the same as for 2016. But what does this mean for investors that are saving and investing for retirement or other medium to long-term objectives? Should they adjust their investment strategy by taking less risk or should they increase their portfolio risk in order to try and get better returns to make up for 2016?

Where to from here?It is important to avoid material short-term focused and emotion-based changes to one’s investment

strategy when looking to achieve a long-term investment goal with your investments. By adopting and aligning various key elements as part of their investment planning approach, investors are able to achieve a high probability of investment success in growing their wealth over time. The first element involves having clarity about the investment objective that has to be achieved. This objective needs to be expressed in clear terms by being specific, being measurable, being achievable (or realistic) and by having an end goal or target. The second element is the timeframe or investment horizon in years over which the objective(s) need to be achieved. The third element is determined by the investment objective and timeframe and involves determining the most appropriate investment strategy in terms of what combination of asset classes to invest in. Once the third element is in place the fourth element of

implementing the investment strategy in the most effective manner needs to be introduced. This involves the selection of the most appropriate investment platforms, products and asset managers through which the investments can be made. The final element involves the ongoing review of the original objectives, the timeframe, the appropriateness of the current investment and the implemented solution.

While much uncertainty remains for South African investors during 2017 (including a possible credit ratings downgrade of the sovereign by Moody’s, in line with recent moves by Fitch and Standard & Poor’s), it is important to understand that uncertainty and volatility in investment markets do not only

represent risk, they also represent opportunities. By seeking investment advice from a qualified financial planner, keeping the various elements of their investment plan aligned and by improving their knowledge about investments as well as remaining informed about their investments, investors will be able to successfully navigate the investment market storms on their journey to wealth creation.

Experience offer

Treat yourself and a loved one with a much deserved unique experience from Absa Rewards partner Celestial Gifts.

Helicopter flight, cruise and dinner for two at the V&A WaterfrontLooking for a really special late afternoon date or the perfect setting to propose? Take a sunset helicopter flight from the V&A Waterfront towards Clifton, followed by dinner at one of the Waterfront's top three restaurants.

Set off on a scenic 15-minute helicopter flight along the spectacular Cape coastline, and take in incredible aerial views of Table Mountain and Lion's Head before heading back to the V&A Waterfront, from where you will board the Spirit of Victoria for your sunset cruise.

The Spirit of Victoria is a 58ft gaff-rigged schooner with red-brick sails that offer a laid-back, authentic sailing experience. Your 90-minute cruise will set off in the late afternoon. Sip on a cocktail or a glass of champagne as you enjoy the beautiful sunset so typical of the Cape.

On your return to the docks, you will head to one of the Waterfront's top three restaurants — City Grill,

Greek Fisherman or Meloncino — for a superb three-course dinner.

Absa Private Banking clients pay only R3 395* for this popular experience. To book, please send an email to info@celestialgifts.co.za

Need to know

• Special rate applicable to EFT payments only*

• This package is suitable for adults only

• Beverages are excluded, unless otherwise stated

• All helicopter flights are for 15 minutes and are shared flights

• Flight and cruise times vary and are based on season

• Book early to avoid disappointment

• All flights and cruises are weather-dependent

• Allow a full evening for this experience

• Participation is at your own risk

• Dress for the weather

• Offer valid until 31 May 2017

Importance of estate planning

Success, whether in your business or personal life, is the result of good planning. The essence of estate planning is the preservation of wealth.

Estate planning, therefore, may be viewed in light of two facets: firstly, a plan for the creation of wealth during your lifetime and, secondly, the implementation of that plan once you have passed away.

Comprehensive estate planning should consider life policies, trusts and donations, and take into account

marital contracts, capital gains tax and income tax in a way that will ensure your financial affairs are managed according to your wishes when you pass away.

Estate planning need not necessarily be complex, and it should be sufficiently flexible to meet your ever-changing needs. Good estate planning is focused, clear and designed to do a specific job — leaving nothing to chance. It is about investing in future goals and laying the foundation for wealth preservation. At the heart of this is your last will and testament: a valid and up-to-date will, prepared by a professional, should be aligned to your vision and wishes for your family.

Having a will is vital, because, without it, one dies intestate, with very negative consequences, which include your wishes being ignored and the financial needs of your loved ones being neglected, and it may even lead to assets being sold. Furthermore, there will be delays in the administration of your estate, and assets will be distributed in accordance with a set legislative formula. It also means that minors’ inheritance will be held with the Master of the High Court until they reach majority.

A valid will is one that is clearly worded, legally enforceable, ensures that your assets are distributed according to your wishes, and allows you to name beneficiaries who aren’t family members. It will keep estate administration costs to a minimum, and should ideally be drawn up in a way that avoids delays in

winding up the estate.

Top 10 reasons to have a will

• You decide how your estate will be distributed. If you die without a will, the distribution of your estate will be determined by the Intestate Succession Act, 81 of 1987.

• You can decide who will take care of your minor children by nominating a guardian.

• Your heirs avoid a lengthy process in winding up your estate.

• It could minimise taxes and costs related to estate duty, capital gains tax, executor’s remuneration, etc.

• You can decide who will wind up your estate and determine the cost upfront.

• Protection of your assets:

◦ You could set up testamentary trusts for your beneficiaries.

◦ You can protect bequeathed assets against the legal consequences of the beneficiaries’ marriage.

• You can ensure that your estate is properly funded.

• You can change your mind if your circumstances change.

• You can decide on and provide for burial preferences.

For more information on estate planning, please contact your banker, who will refer you to one of our

in-house wills, trust and estates specialists.

Taxation of loans to trusts

The Taxation Laws Amendment Act 2016 has been approved by Parliament and came into

effect on 1 March 2017.

The effective changes will apply in respect of years of assessment commencing after 1 March 2017. Section 7C of the amendments deals with the treatment of interest-free loans to trusts and was

accepted without any changes. National Treasury’s aim with section 7C is to prevent the shifting of assets to a trust through the use of interest-free loans in order to avoid estate duty and donation tax.

National Treasury says an interest-free loan to a trust has a negative impact on taxation due, as no interest accrues on which tax is payable, while the time value of money erodes the value of the loan in the long term, leading to diminished estate duty payable.

Section 7C applies where any natural person, or a company to which that person is connected, as per the definition as stated, provides a loan, advance or credit to a trust in relation to which that person or company is a connected person. There are certain exemptions set out under the amendments where the provisions do not apply which, among others, include if the trust is a public benefit organisation or a small business funding entity or if the loan, advance or credit was provided to the trust in terms of a Shari’ah-compliant financing agreement.

If the loan is interest-free or if the interest rate applied is less than the official rate as prescribed by SARS (currently 8%), then the difference between the actual interest charged and interest charged at

the official rate will be taxed as a donation in the hands of the lender and will be subject to 20% Donations Tax. The annual exemption of the first R100 000 of donations will apply to the donation envisaged in this section.

The typical scenarios relevant to trusts which will be effected by this legislative change are, for example, where a person sells an asset to a trust on an interest-free loan or at a rate less than the official rate prescribed by SARS, or where the trustees of a trust make a distribution to trust beneficiaries and the beneficiaries loan the money back to the trust.

Although the new provisions will have an effect on estate planning, careful planning by well-informed advisers should still make it possible to utilise a trust as a valuable vehicle in estate planning.

If you have any questions or concerns, please contact Absa Trust at absatrust@absa.co.za so that one of our Fiduciary Specialists can contact you to set up an appointment.

Managing stress

We live in a world driven by deadlines, rapid change and a trillion other reasons to work ourselves into a constant state of stress.

While stress is unavoidable, it is also manageable. “Stress can be good or bad, depending on how you use it," says Shawn Achor, a positive psychology expert and founder of Good Think Inc. The key to dealing with the inevitability of stress is to change the way we handle it. If we don’t, unmanaged stress will wreak havoc in our bodies and lives.

Stress is our body’s way of responding to any demanding situation. This response instantly releases chemicals into our blood to give us more strength and energy. Endorphins are released and adrenaline is secreted, causing palpitations, increased blood pressure and a release of vital nutrients.

Emotions such as anger, anxiety and impatience are continuous stress stimulators and, without our knowledge, our body is put (and stays) in 'fight' mode. An overdose of adrenaline often causes irritability and uneasiness, while too much cortisol suppresses the immune system, making us vulnerable to a host of diseases. In ‘fight’ mode, our bodies retain extra sodium, which adversely affects our cardiovascular and other systems.

Symptoms of stress manifest in a host of conditions ranging from poor sleep to loss of appetite, chest pains, headaches, digestive problems, back pain, acne, etc. The effects of long-term stress can also cause heart disease, high blood pressure, strokes, mental illness, drug dependency and a breakdown in our bodies’ ability to fight off diseases.

Dealing with stress means either changing the situation that is causing it, or changing our reaction to it. “The core principle of stress management is to realise that you are in control,” say Melinda Smith and Robert Segal of the non-profit resource, Helpguide. “It means taking charge of our thoughts, emotions,

schedules, environment and the way we deal with our problems.”

According to Smith and Segal, the first step in dealing with stress triggers is to identify the source by analysing our habits, attitudes and excuses. For example, the problem might not be your tight deadline, but your tendency to procrastinate. It might not be your workload, but failing to plan tasks properly. Keeping a stress journal is one way to identify your unique stress pattern. Note what caused the stress, what emotions you experienced, your reaction and what you did to make yourself feel better.

Smith and Segal also suggest choosing a stress response according to the ‘4 As’: Avoid, Alter, Adapt or

Accept. Which ‘A’ to choose, depends on the nature of the situation. It could be having to say ‘no’ (Avoid), being willing to compromise (Alter), looking at the ‘bigger picture’ (Adapt) or realising that we can’t control the uncontrollable (Accept).

Stress should never become a constant state of being. If you feel that stress is impacting negatively on your mental or physical wellbeing, it is prudent to contact a health care professional.

Wine-tasting

Learning to appreciate wine is similar to learning to appreciate music or art – the pleasure you receive depends on the effort you put in.

Enhancing your tasting experienceAlways hold the glass by the stem, else the heat from your hand may warm the glass and alter your experience of the wine.

Hold the glass in front of your eyes at a slight angle so that you can get a view of the wine’s colour and clarity – doing so in front of a white background is all the better. Cloudiness indicates faulty or unfiltered wine. A younger wine is lighter in colour while an older wine’s colour is deeper and richer.

Give the glass a gentle twirl with your wrist, making sure that the entire bowl is covered by the wine. The droplets formed on the inside of the glass are called “legs” and are used to determine the wine’s body – thin legs indicate a light-bodied wine while thicker legs imply a fuller-bodied wine. The “body” of the wine describes the feeling of the texture of the wine in your mouth – full-bodied wines have a bolder

taste while light-bodied wines are more refined. Wines with high alcohol content show more droplets than wines with a lower alcohol content.

Swirling the wine in the glass allows the taster to experience the full aromatic spectrum of the wine. The movement of the wine in the glass increases the wine’s exposure to oxygen, enhancing the aromas. To experience the “nose” of the wine, place your nose over the edge of the glass and keep your mouth open while sniffing deeply. Repeat the exercise after a few moments and try to identify familiar aromas. General terms to describe the aroma of a wine are words like “floral”, “fruity” or “earthy”. An unpleasant musty smell indicates that the wine has been “corked”, meaning that a fungus has contaminated the

cork and therefore also the wine.

The first sip of the wine should be accompanied by an intake of air, an action called “trilling”, which aerates the wine and releases the aroma. The wine should be rolled over the tongue for a number of seconds before it is swallowed. Exhaling through your nose as you swallow will enhance the taste experience further. Swishing the wine around the entire mouth is an action called “chewing”, which assists the drinker to experience the flavour of the wine through the nasal cavity via retro-olfaction (smelling through the mouth).

A wine’s taste is comprised of flavour and structure. Structure refers to the major elements that can be assessed when tasting a wine: acidity, sweetness, body, alcohol and tannin:

• Acidity often makes wines seem lighter, drier and tart or sour. The more the wine makes your mouth water when tasting, the higher the wine’s acidity.

• Sweetness refers to the presence or absence of sugar, ranging from dry (no perceptible sugar) to sweet.

• Body refers to the amount that a wine fills up your mouth (mouthfeel) and sits on your tongue (weight).

• Higher-alcohol wines will be fuller-bodied, and lower-alcohol wines will be lighter-bodied.

• Tannins are polyphenols found in grape ligature (skins, seeds, leaves and stems) and oak. They coat the mouth and leave a drying sensation.

To evaluate the wine, determine how long the aroma of the wine stays in your mouth after your last sip, the longer the aroma lingers, the better the quality of the wine.

Now all that is left for you to do is to pop down to your nearest tasting venue or function and start

enjoying you new-found knowledge.

The reward in rewards programmes

It seems that everyone, from banks to fast-food retailers, is intent on rewarding loyalty.

And it is a good idea to take advantage of their offers.

Rewards programmes are an increasingly popular way for businesses to encourage loyalty by offering various benefits – from discounts to lifestyle offers – and it makes sense to take advantage of their

offerings. After all, you are spending the money; you should be enjoying the added value.

Even if you do not want or need the benefits on offer, many programmes allow you to give back to those in need by donating your rewards currency to a charity, or to grow your wealth by investing the money in a savings or investment product. Either way, you will be using your money wisely.

Some programmes are better than others – a case in point is the re-launched Absa Rewards

programme. Not only can you get real cash back (as opposed to points), we have also recently increased members’ earn rates, increased the ways in which members can increase their earn, signed up new partners and added two more tiers. This means that you now have the chance to spend more, earn more, save more or donate more. And, if you are a Private Banking Exceller or Private Banking Marhaba client, you automatically start on Tier 3.

Here is how it works

1. Enjoy higher earn rates

• Swipe your Absa card anywhere to earn as much as 1,5%

• Fill up with fuel anywhere and earn as much as 1,5% or make it even better by earning as much as 15% at Sasol

• Earn as much as 20% at our partners

2. More places to earn

• 15% from Avis

• 15% from Samsung

• 10% from Carrol Boyes

• 5% with Absa Stockbrokers

• 3,5% from Bidvest Waltons

• 2% with an Absa Multi-currency Cash Passport™ card

3. Increase your Rewards TierThe number of accounts you hold with us and the way you manage your account, will help you earn more.

Whether you are already an Absa Rewards member or would like to become one, now is the time to make Absa Rewards work for you, your family or your community.

For more information or to sign up for Absa Rewards, please call Private Assist on 0860 553 553 or email privatebanking@absa.co.za

Make travel easier this holiday season

Are you keen to protect yourself against the possibility of the rand depreciating while you are on holiday?

Would you like to travel carefree with a prepaid travel card that allows you and your family to load up to four currencies onto one easy-to-use card? The PIN-protected Multi-currency Cash Passport is a prepaid travel money card that is a convenient and cost-effective option. With the option to add foreign banknotes, it is the start to a perfect holiday where you do not need to concern yourself with fluctuating foreign exchange rates. Absolute peace of mind!

And there is great news for existing cardholders. Reload your card and earn 2% of the total value of the reloaded amount in Absa Rewards until 31 July 2017. That’s up to R3 000 cash back. Undoubtedly an unexpected windfall to bump up your holiday travelling a little more. Just imagine treating yourself to that bag or watch you've been eyeing with the additional cash.

Load US dollars, British pound, euros and Australian dollar, in whatever combination you wish, onto one piece of plastic. This reloadable card, which offers the loading of funds in advance, protects against

currency fluctuations. Also, you can use the card for internet transactions in the currency of the wallet you've loaded. Use at locations or withdraw local currency from ATMs globally where the MasterCard® acceptance mark is displayed. No need to worry about bank operating hours or lengthy queues to access funds.

This innovative card is a market leader, flexible, convenient and a trusted solution to carrying foreign currency safely and securely. Another great feature is that should you run out of a currency, the card will automatically convert to the next available currency, provided there are sufficient funds to cover the withdrawal or payment. You can also reload via your private banker at any time.

For even more peace of mind there is 24/7 emergency assistance for lost, stolen or damaged cards and the replacement card carries no additional cost.

Want further peace of mind to stay on top of your spending? Keep track online via the secure ‘My Account’ or with the fantastically handy mobile app, which can be downloaded from SA Apple and Google Play stores by searching for “Cash Passport”. The integrated app supercharges the holiday experience to simplify budgeting and take another headache away. And here’s more: many shops overseas have free Wi-Fi so consider using it in stores to track your spend and not worry about data

charges.

The app helps with:

• viewing balances and transactions

• finding the nearest ATM

• moving money between currencies

We change how you travel

Benefits:

• Fix your rate before you travel

• Four currencies on one card

• Make budgeting simple

• Ideal for use and reuse, whether a once-off or a regular traveller

• Make online purchases

Don't forget, we also offer special fee and exchange rates to Private Bank Exceller and Marhaba accountholders.

What better companion to have with you on your global travels!

(Reserve Bank rules on exchange control and T&C apply.)

Creating wealth in an uncertain world

Johan Gouws, Head: Absa Asset Consultants, explains how to successfully navigate the

investment market storms.

Read More

Experience offer

Treat yourself and a loved one with a much deserved unique experience from Absa Rewards

partner Celestial Gifts.

Read More

Importance of estate planning

Success, whether in your business or personal life,

is the result of good planning. The essence of estate planning is the preservation of wealth.

Read More

Taxation of loans to trusts

The Taxation Laws Amendment Act 2016 has been

approved by Parliament and came into effect on 1 March 2017.

Read More

Managing stress

We live in a world driven by deadlines, rapid change and a trillion other reasons to work ourselves into a

constant state of stress.

Read More

Wine-tasting

Learning to appreciate wine is similar to learning to appreciate music or art – the pleasure you receive

depends on the effort you put in.

Read More

The reward in rewards programmes

It seems that everyone, from banks to fast-food

retailers, is intent on rewarding loyalty. And it is a good idea to take advantage of their offers.

Read More

Make travel easier this holiday season

Are you keen to protect yourself against the

possibility of the rand depreciating while you are on holiday?

Read More

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