March 2008

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					                                    March 2008


                                                   of foreign exchange restrictions prompted
          Market Overview                                                                                               Contents
                                                   rand weakness which together with ongoing
                                                   strength in precious metals and commodity
                                                                                                                        Market Overview
Overview
                                                   prices resulted in an exceptionally strong                           Wealth Column
                                                   performance from the resources sector on                             Alternative Strategies
Signs of a global economic slowdown have
                                                   the JSE.
persisted, especially in the developed world.
                                                                                                                        NewGold
                                                                                                                        Ask the Pros
                                                   Outlook
ƒ   The    most    recent   U.S.    ISM    non-                                                                         Income Producing Investments
    manufacturing survey was particularly
                                                   While a further period of volatility should                          Interview with Tim Jillings
    weak and US retail sales growth has
                                                   not come as a surprise to investors, we
    continued to decelerate.
                                                   regard global equity markets as being
ƒ   The RICS survey showed that the outlook for
                                                   broadly undervalued. It will nevertheless                                Monthly Economic
    housing in the UK has also deteriorated.
                                                   require interest rates to be lowered further
                                                                                                                               Indicators
ƒ   In Europe both corporate data as well as                                                                                                   Monthly    YTD %
                                                   before investors are enticed away from their                     Indicator     28 Feb 08
                                                                                                                                               change     change
    official indicators are pointing to economic
                                                   generally risk-averse dispositions.                              Rand/US$          7.5       0.4%      10.4%
    weakness.
                                                                                                                    Rand/GBP         15.0       0.8%       9.9%
ƒ   Japan’s Q4 GDP release showed an
                                                   Locally it has all been about resources this year
    unexpected jump to an annualized pace                                                                           Rand/EUR         11.5       3.6%      15.4%
                                                   in performance terms. However, there is little
    of 3.7%, but leading economic indicators                                                                        USD/EUR           1.5       2.4%       4.3%
                                                   doubt that selected industrial and financial
    suggest a period of weakness lies ahead.
                                                   counters offer significant value, especially                     Gold             $971       5.0%      16.5%
                                                   given our view that interest rates should start
                                                                                                                    Platinum         $2137      23.4%     40.0%
Monetary authorities have responded to this
                                                   to decline towards the end of this year.
weakness. The US Federal Reserve cut the                                                                            Oil Price         $98       5.4%       2.4%

Fed Funds target rate by 50bps to 3% and is                                                                         JSE ALSI         30166      10.4%      4.2%
                                                   Listed property also appears attractively
likely to ease interest rates more over coming
                                                   valued with forward yields in excess of 8.8%.                    FTSE100          5966       1.5%      -7.6%
months. Likewise, the Bank of England (BoE)
                                                                                                                    S&P500           1368       -0.8%     -6.9%
cut rates by 25 basis points to 5.25% and          Contact Mark Appleton, Chief Investment Officer at BJMPCS
more easing is on the cards. In Europe the
                                                   on mappleton@bjm.co.za.                                          R157 Bond        8.9%       1.8%       4.5%

European Central Bank (ECB) softened its
previously hawkish rhetoric and kept interest            95                                                                                                  10.5
rates on hold, and in Japan the Bank of Japan
(BoJ) opted to leave the overnight lending               65                                                                                                  8.5

rate at 0.5%.
                                                         35                                                                                                  6.5

Following a very poor performance in January,             5                                                                                                  4.5
international equity markets continued to
experience significant volatility in February.          -25                                                                                                  2.5


                                                        -55                                                                                                  0.5
On the local front the SARB kept interest
                                                          Feb-90           Feb-93           Feb-96             Feb-99       Feb-02          Feb-05       Feb-08
rates on hold and a broadly financial market
friendly budget was announced. An easing                                  S&P Operating earnings                                      US Fed Fund rate
                                                   that is starting to bite.                        discuss this matter more fully with a BJM
         Wealth Column                                                                              Wealth Manager.
                                                   Transfer duty
                                                   Likewise there was no change to the transfer     Expenditure allowance
Listening to the silences in Budget 2008           duty rates and bands in respect of fixed         An interesting development was announced
                                                   property. Estate agents were hoping for          regarding Exchange Control. The annual
This is not an attempt to rehash the facts and     some relief in order to stimulate a sagging      foreign travel, gift and study allowances
figures of the 2008 Budget Speech. What is         residential housing market.                      had been done away with and are replaced
interesting is what lies beneath the surface                                                        with an all-encompassing annual foreign
of Minister Manuel’s recent speeches:              Donations tax                                    expenditure allowance of R500,000. This
                                                   Donations tax was left at 20% - it has always    allowance runs per calendar year and is not
ƒ   The devil is often in the detail: Trevor       been kept in sync with the estate duty           related to the tax year. It is the intention of
    Manuel often goes long on rhetoric and         rate. The annual donations tax exemption         the South African Reserve Bank that the funds
    short on specific details in his speeches.     was also left unchanged at R100,000. This        remitted from South Africa for the purposes
    The sting in the tail of many new tax          exemption applies per donor, per tax year.       of this allowance need to be expended and
    provisions often only manifest themselves      Clients should ensure that they fully utilise    not utilised for foreign investment purposes,
    in the draft regulations that appear           this exemption each year but should also         i.e. it is not an extension of the R2m foreign
    sometime after the budget speech.              ensure that they do not fall foul of CGT         investment allowance.
ƒ   What was not said: Commentators tend to        legislation in terms of the waiver of a debt.
    focus on what the Minister of Finance says     Merely writing R100,000 off a loan account       Protecting wealth
    and ignore the omissions in the Budget         will give rise to a CGT event that could prove
    Speech.                                        extremely costly.                                Last but by no means least, it is always
                                                                                                    useful to remember that in terms of dealing
At this point in time we cannot comment on         Trusts                                           with SARS, taxpayer’s are presumed to be
what is likely to appear in the detail and will    The Minister made no reference to trusts,        guilty and need to prove their innocence and
rather leave that to future commentary, as         either onshore or offshore. For a number         ignorance is not a valid excuse.
and when the legislation is available. Suffice     of years the rumour mongers have been
to say that the detail in question is normally     speculating that trusts would come under         Managing and protecting one’s wealth is
extremely technical in nature.                     further scrutiny by SARS. Recent court case      often more important than creating the
                                                   rulings concerning interest free loans have      wealth in the first place and client’s should
Between the lines                                  tended to fuel these rumours.                    ensure that they are not penny wise and
                                                                                                    pound foolish when it comes to these
Estate duty                                                                                         matters. BJM Wealth would like to encourage
                                                   Trusts have long been accepted as part and
There was no change to the estate duty                                                              clients to make
                                                   parcel of South African law and there is
rate of 20% and the exemption of R3,5m.                                                             contact and avail
                                                   currently plenty of anti-avoidance tax law
This was largely to be expected as this has                                                         themselves of the
                                                   which, if correctly applied, ensures that
decreased dramatically in recent years. The                                                         services we have
                                                   trusts do not receive any unfair advantage
annual CGT exclusion on death also remains                                                          to offer.
                                                   over individual taxpayers. At BJM PCS we still
unchanged at R120,000. The CGT effect              view the use of trusts as a valuable tool in
on death is often overlooked during estate         terms of generational and estate planning.       Contact Tony Barrett,
planning exercises and with CGT now having         The benefits of having a trust are many and      Head of Wealth
                                                                                                    Management,
been in place since October 2001, it is a tax      varied and we would encourage clients to         on tonyb@bjm.co.za.




        Alternative strategies have proved beneficial to Global Funds

Other ways of skinning the cat                     Long Asian volatility and long credit default
                                                   positions proved to be particularly rewarding
There’s more than one way to skin a cat, or        over this period. Alternative strategies
so the adage goes. The BJM Global Growth,          remain attractive in our view in the current
Balanced and Secure funds have been                volatile environment and the funds are likely
using alternative market strategies to good        to retain material exposure in this area.
advantage during these turbulent times.
Nine out of ten alternative strategies were        Offshore diversification continues to have
positive over the December quarter with            strong investment merit.
the best being statistical/volatility arbitrage.
                                                performances       are   numerous.   Significant      divide the result by 100.
          NewGold                               drops in production, escalating production
                                                costs, an element of hedging that has                 This final price has a cost imbedded in the
Looking for the pot of gold                     precluded the realisation of the benefits of a        product of a 0,40% management fee charged
                                                far higher gold price, and most recently the          by the NewGold Issuer. As far as trading and
If you have been pondering an investment        Eskom debacle has put the consistent supply           liquidity are concerned, ABSA Capital has
in gold, but have been put off by the recent    of power to these large consumers in doubt.           been appointed as a market maker, providing
spate of bad news surrounding JSE’s gold                                                              the “other side” to every trade.
producing companies, then NewGold Gold          In contrast to these disappointments the
Bullion Debentures might be an interesting      Rand/Gold price has been a stellar performer,         If you are looking for a direct way to invest in
alternative (JSE Code: GLD).                    returning 52% for the same period.                    gold, and believe in the continuation of the
                                                                                                      gold bull run, as well as wanting a solid rand
With the recent run in the gold price and       NewGold                                               hedge without all the corporate wrangling
the concurrent depreciation of the rand,                                                              of the South African gold producers - then
one would be forgiven for thinking that an      Essentially NewGold Gold Bullion Debentures           NewGold Gold Bullion Debentures provides a
investment in any of the major, and even        are securities 100% backed by physical gold-          compelling proposition.
junior and more geared, gold plays on the       bullion (held by the NewGold Custodian, Rand
JSE would have yielded a handsome return        Refinery Limited). These debentures are listed     8000                                                                          3500


over the past 12 months. The reality of the     on, and traded through, the JSE Securities         7000
                                                                                                                                                                                 2500
situation is quite different. Gold Fields is    Exchange, in the same way as any other listed
                                                                                                   6000
down 12.78%, Harmony Gold down 6.58%            security. Each NewGold Debenture is initially
                                                                                                                                                                                 1500
and AngloGold Ashanti down 16.27% for the       valued at 1/100 of one fine troy ounce of          5000


one year period ending 22 February 2008.        Gold. This makes it a very easy investment
                                                                                                   4000                                                                          500
                                                to price. Simply take the product of the US$/        Nov-06    Jan-07    Mar-07 May-07   Jul-07   Sep-07   Nov-07   Jan-08

                                                                                                              New Gold                       FTSE/JSE Africa Gold Mining Index
The    reasons    behind       these   dismal   Gold price and the R/US$ exchange rate and




                                                  Act) scheme of arrangement sanctioned by           (Witwatersrand Local Division). A certified
      Ask the Pros                                the court;                                         copy of the Order of Court sanctioning the
                                                b. And that shareholder acquires within 90           Scheme will be lodged with the Registrar of
                                                  days;                                              Companies for registration.
      Send us your questions                    c. Shares of the same kind and of the equiva-
                                                  lent quantity;
       Email:ask@bjm.co.za                                                                           2) Effective date of the scheme: Monday 3
                                                d. The base cost for CGT purposes can be
                                                                                                     March 2008
          Fax: 086 615 5753                       rolled over from the old share to the new
                                                                                                     The commencement of trading on the JSE on
                                                  share.
                                                                                                     the scheme consideration is expected to be
Question:
                                                                                                     Monday, 3 March 2008. New share certificates
                                                An illustration of the application of this
                                                                                                     are expected to be posted, to certificated
Will I incur CGT costs when I am forced to      section would be the recent corporate activity
                                                                                                     scheme participants whose documents of
sell the SBK shares in terms of the corporate   surrounding Standard Bank and the Industrial
                                                                                                     title are received by the transfer secretaries on
action?                                         and Commercial Bank of China.
                                                                                                     or before the record date within five business
                                                                                                     days of receipt thereof.
Answer:                                         1) The SENS announcement highlighted the
                                                fact that the scheme was sanctioned in terms
With effect from 1 March 2007 new legisla-      of section 311 of the Companies Act.                 3) Investors in SBK have been forced to
tion has been effected in terms of the Income   Standard Bank Group ordinary shareholders            dispose of a certain portion of their shares.
Tax Act of South Africa, as pertaining to       are advised that the scheme of arrangement           They will therefore be allowed to, within 90
shares: scheme of arrangement.                  in terms of section 311 of the Companies Act,        days (Friday 30 May 2008), buy an equivalent
                                                1973, as amended, proposed by Industrial             quantity of SBK shares that were disposed of,
In terms of the new legislation, paragraph      and Commercial Bank of China Limited,                and they will be allowed to retain their origi-
42A of the 8th Schedule:                        between Standard Bank Group and its or-              nal base cost for CGT purposes i.e. there will
a. Where a shareholder has had to sell shares   dinary shareholders (“the Scheme”), was              no CGT event in respect of this transaction
  in terms of a section 311 (of the Companies   sanctioned by the High Court of South Africa         but merely a rollover.
                                                                                                                                   plus 5%. This portfolio has an active asset
       BJM Range of Income Producing Investment                                                                                    allocation mandate and can use up to 150%
                                                                                                                                   leverage to enhance income. Asset allocation
Many investors are holding cash during the           other asset classes like property, bonds and                                  can best be compared to that of a prudential
current market uncertainty, either to preserve       offshore cash to enhance its income.                                          low equity fund and therefore distinguishes
capital or as an interim vehicle before                                                                                            itself from other BJM Income solutions via
investing in the market again. BJM offers the        With attractive yields on long dated NCDs                                     a conservative exposure to equities. This
following solutions to clients looking for cash      the fund has more than 80% of its NCDs with                                   structure carries more risk that any of the
or near cash alternatives.                           maturity dates of three months and longer.                                    other BJM Income solutions but aims to
                                                     Euro cash and USD cash are used as alternative                                provide higher returns over the long-term.
                                                     investments and have already delivered an                                     The compound annual return since inception
BJM Corporate Cash Management
                                                     11% yield over a one-month period. It is clear                                (June 2006 to December 2007) has been 11%
The BJM Corporate Cash Management
                                                     that the Income Fund can produce an annual                                    per annum before tax.
solution provides Investec NCDs to clients at
the rate of the four major banks (Nedbank,           yield well in excess of money market with
                                                     limited additional risk.                                                      BJM Money Market
ABSA, Standard Bank and FirstRand).
                                                                                                                                   The BJM Money Market Fund spreads its
Corporate Cash Manager provides fixed
                                                                                                                                   investment between six or more banks. In
deposits, and clients, are bound by the term.      102
                                                                                                                                   addition, the average expiry of the money
Investec doesn’t have the same credit rating      101.5
                                                   101                                                                             market instruments cannot exceed 90 days.
as the four major banks and should pay an
                                                  100.5                                                                            The current seven day rolling effective yield
additional 15 to 20 basis points premium           100
                                                                                                                                   on the BJM Money Market Fund is 11.31%.
over the other banks’ NCD yields. This is an       99.5
                                                    99                                                                             Interest income distribution is paid monthly.
attractive investment for clients who are          98.5                                                                            The BJM Money Market fund is ideal for clients
looking to invest money for a fixed period          98
                                                                                                                                   looking for an alternative to an overnight
and at a fixed rate. A four month or longer           Jan-08     Jan-08        Jan-08    Jan-08   Jan-08     Feb-08       Feb-08

                                                           Investec Opportunity Income                Coronation Strategic Inome   call without sacrificing too much in terms of
investment period is recommended.                          Stanlib Bond Fund                          SIM Active Income            availability.
                                                           Old Mutual Enhanced Income                 BJM Income


BJM Income Fund                                                                                                                    Considering the uncertainty in the market and
The BJM Income Fund has no limit on the              BJM Inflation Plus Fund                                                       the different risk profiles of the BJM income
average expiry date of the instrument it holds.      The BJM Inflation Plus objective is to deliver a                              offerings it is critical that clients carefully
The income fund is also not limited to holding       rolling one year return in excess of the South                                consider the various investment options
money market instruments only, and can use           African Consumer Price Inflation (‘CPI’),                                     before investing




                                                                                                                                   this environment
       Interview with Tim Jillings, KZN Regional Manager                                                                           suits me down to
                                                                                                                                   the ground.

Tell us more about the Durban team.                  products and services.
The Durban office staff compliment consists
of myself, Tony Barrett who is responsible for       Describe your role as a client relationship
wealth management and three administra-              manager.
                                                                                                                                   Contact Tim Jillings,
tors; Dee and Faiza who are part of the fixed        My time is spent interacting with clients,                                    KZN Regional
assets and administration team and Carli,            keeping them abreast of market develop-                                       Manager on,
                                                                                                                                   tjillings@bjm.co.za
who administers the wealth management                ments and helping them make decisions
business. In addition we have Mark Appleton,         about their investments, both on a general                                     Share-call number for your local BJM office:
our chief investment officer, and his assistant      and specific basis.                                                            0860 001 652
Niscaya from our asset management depart-
                                                                                                                                    BJM Trade Execution Services:
ment who share the office with us.                   What do you do in your free time?
                                                                                                                                    0800 256 256
                                                     I spend most of my free time with my family. I
We have embarked on a programme of ex-               enjoy a round of golf when I get around to it,                                 www.bjmdirect.com
pansion and we anticipate another three              and during the week I play league squash.                                      The information and opinions contained in this document are
to four people joining us in the next few                                                                                           recorded and expressed in good faith and in reliance on sources
                                                                                                                                    believed to be credible. However no representation, warranty,
months. They will take up positions in the           What do you enjoy most about your position                                     undertaking or guarantee of whatever nature is made or given con-
                                                                                                                                    cerning the accuracy and/or completeness of such information and/
areas of stock broking, derivative trading and       and working at BJMPCS?                                                         or the correctness of such opinions. Neither BJMH nor BJM PCS will
                                                                                                                                    accept any responsibility for any investment decisions based on the
wealth management.                                   BJM provides me with the ability to shape                                      information and opinions contained in this document.
                                                     and grow the business. What’s particularly                                     Barnard Jacobs Mellet Securities (Pty) Ltd (Reg no: 1987/000175/07)
                                                                                                                                    and Barnard Jacobs Mellet Private Client Services (Pty) Ltd (Reg no:
What are your responsibilities as regional           satisfying is that we’re in a constantly chang-                                1996/011732/07) are both licensed Financial Services Providers.
manager?                                             ing environment which is always competitive
As regional head, other than being respon-           - one is constantly challenged to seek oppor-
sible for the day to day functioning of the          tunities to further enhance the business. KZN
office, I’m involved in raising the profile of       is an interesting region in that a lot depends
the BJM group within the wider KZN region,           upon relationships and the ability to inter-
with specific focus on BJM PCS and our               act with people. Being a social animal I find

				
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