Dear Private Banking Client

Welcome to this edition of Private Connect.

As your Private Banking partner, we are committed to providing banking solutions that go beyond traditional banking. We pride ourselves on offering banking that is relationship-driven with priority services available to you at your convenience, specialised and customised to meet your needs. So, talk to your Private Banker today, and let's make it better where it really matters.

This year has once again proven to be very eventful. The news of South Africa sliding into a recession

means that we are all trying to make better financial decisions. Trying to come to grips with the volatile currency is as challenging as ever. In our article 'The puzzling rand' we explore how the currency impacts us.

With our pockets getting undeniably emptier, we should never compromise on spending money on the things that really matter, such as saving. With the volatile rand, you may be looking elsewhere for investment opportunities. In our article 'Are you saving in foreign currency?' Chris Gilmour, an investment analyst with Absa Wealth and Investment Management, explains the factors behind a currency's rise and fall. And Daniel Buntman, Absa's head of International Banking, explains how you

can use foreign currencies as a tool for saving.

Securing the future of your loved ones after you are gone is the ultimate gift of love. It is important for all of us to ensure that the assets we have accumulated over a lifetime are left for the benefit of those we wish to support, and left in the way that is most beneficial to them. The article 'What does your legacy mean to you?' explains the importance of leaving a lasting legacy.

In closing, as a valued Private Banking client, our range of special experience offers is always available to you. Whether it's a scenic coastline cruise for two or a unique beauty spa in a tranquil, soothing and

comforting environment, you are guaranteed a first-class experience that will leave you feeling rejuvenated, relaxed and ready to face the world.

Warm regards

Gavin LombergManaging Executive: Private and Wealth Banking

Are you saving in foreign currency?

Fluctuations in a currency's value can have an effect on your finances and ultimately

impact the economy.

Chris Gilmour, an investment analyst with Absa Wealth and Investment Management, explains the factors behind a currency’s rise and fall.

What determines currency movements?There are a number of factors that determine currency movements, including the following:

• The trade balance (difference between a country’s imports and exports). When imports exceed exports, it is called a trade deficit. When the opposite happens, it is known as a trade surplus. The trade balance indicates the strength of a country’s economy in relation to that of other countries.

• The political climate of a country. Political stability is very important, especially in an emerging economy. Developed economies can, however, also be influenced by political uncertainty, as illustrated by the impact of Brexit on the value of the pound.

• Inflation. High inflation has an eroding effect on the value of a currency, which is one of the reasons why the US dollar is stronger than the rand.

Why do some currencies fluctuate while others do not?The majority of countries have no exchange control regulations, which is why their currencies fluctuate in relation to the dollar. Countries like South Africa operate a flexible exchange rate system, which means the value of the rand is determined by the market forces of supply and demand. The demand for a currency relative to the supply will determine its value in relation to another currency.

Certain countries, like the United Arab Emirates (UAE), have fixed exchange rates. The UAE dirham is

fixed to the dollar. Such countries have very stable and predictable economies.

How does the strength or weakness of a currency affect citizens?The strength of a currency reflects on the prices of goods. If a country’s currency is weak and it imports more products into the manufacturing process, the cost of the finished goods becomes significantly higher than it otherwise would have been. If a country is able to manufacture more of its inputs locally, it has a better chance of keeping prices stable and inflation low. If a country’s currency is stronger than that of other countries, finished goods become cheaper.

With the volatility of the rand, many are looking elsewhere for investment opportunities. Daniel Buntman, Absa’s head of international banking, explains how you can use foreign currencies as a tool for saving.

What does saving in foreign currency offer?Allocating some of your savings to offshore investments can help protect your assets and wealth against the effects of currency depreciation. International savings gives you the chance to insulate yourself from some of the impacts of currency fluctuations, especially those who travel or send money to family overseas.

How can I invest in foreign currency?The Foreign Currency Investment Account is a tool that gives you the freedom to quickly, easily and conveniently switch your savings to a foreign currency – it is connected to Absa’s online banking and is quick and simple to use. You can choose from 17 different currencies, including the dollar, pound and euro. Absa is the only major bank offering an African currency savings account (Botswana’s pula).

How accessible is your funds?You have easy access to your money (there are certain fees applicable depending on how you access it)

and can manage your balance sheet from your online banking profile.

SARS and SARB regulationsThe SA Reserve Bank allows any adult in South Africa R1 million to be invested or spent in offshore currency each year, without the need to provide additional documents. You do need a tax clearance certificate from SARS to take advantage of the foreign investment allowance that allows you to invest up to R10 million per calendar year. Please contact your banker with any queries about exchange control regulations.

Apply for your Foreign Currency Investment Account here.

The puzzling rand

Many of us investors and analysts are struggling to find a fundametal reason for the rand's

persistent strength.

The original Nenegate saga that played out in late 2015 and early 2016 saw the rand weaken sharply to almost R17,00/USD. During the course of 2016 the rand steadily appreciated with short boughts of

weakness around Brexit, the US presidential election results and concerns around our sovereign credit rating.

Our currency finished 2016 at R13,74/USD and continued appreciating into 2017, trading well below R13,00/USD. The midnight firing of both finance ministers, however, saw the rand spike back up closer to R14,00/USD and at the time of writing this artice, it was back to just over R13,00 to the US dollar.

Rand/US dollar: 2015 – 2017

We eventually turned to the charts to look for technical reasons for such strength, and found a possible clue. In the short-term chart of the ZAR/USD it appears that the rand’s recent bouts of strength have come through primarily in our afternoon trading sessions. This would typically mean that US-based investors are buying the rand, or rather more likely, are buying exposure to emerging markets in

general.

If our hunch is indeed correct, we then have to ask why US investors would be buying EM exposure? With the US bull market in equities now entering its 9th year, it is worth considering Sir John Templeton’s famous quote: "Bull markets are born on pessisism, grow on skepticism, mature on optimism and die on euphoria," and with that we find ourselves constantatly looking for signs of a shift in sentiment from optimism to euphoria.

Are US investors becoming euphoric? There are a number of indicators that suggest not by any means,

yet it is noteworthy to consider that after the first three months of last year, inflows into ETFs totaled $29.6 billion in the US, and over the same period this year, $134.7 billion entered the space, more than four times the inflows in Q1 2016. We acknowledge that there is an industry trend away from active fund management towards passive management (ETFs), yet in the first quarter of 2017, US active managers lost about $45bln in assets, and not all of these assets would have moved to passive managers. Even so, that leaves at least $89.7 billion of new inflows into ETFs in the first quarter of 2017. Comparing this figure to last year’s and given the length of the current bull market, and more importantly the stretched valuations, only in hindsight will we know if this was a sign of euphoria. Should it be the case that market sentiment is shifting and we are moving into the final stage of a bull

market, investors should not be alarmed or change their investment plans, given that this euphoric period can be lengthly and produce spectacular returns.

Emerging markets will be caught up in this euphoria, and this we may be seeing in the rand’s afternoon rallies. Emerging markets are a geared or high-beta play on any synchronised global recovery, while at the same time offering attractive yields. After years of underperformance, emerging market valuations are at levels that justify the risk taken should global GDP not move materially above 4%.

MSCI EM / S&P500

The chart of the MSCI Emerging Markets Index relative to the US market indicates that emerging markets have underperformed that of the US, by a sizeable 45% in US dollar over the past 5 years. President Trump has stated that he prefers a weaker dollar, and after many years of strength in USD, investors may be looking to diversify away from the dollar and US markets.

So what does this mean to us South African investors? We believe this would present another opportunity for investors to take advantage of the rand’s strenth to diversify offshore, and, should this

euphoria indeed be the end game for the current US bull market, SA investors with offshore exposure are likely to be protected in rand terms, through rand weakness that will result as risk comes off the table and the hot money leaves.

For those investors still looking to invest offshore there are numerous ways; locally listed ETFs, directly through a stockbroking platform or via a managed offshore portfolio. Absa Stockbrokers and Portfolio Management can assist investors seeking to increase their offshore allocation, either through our stockbroking offering or through managed products such as the Absa Global Equity Portfolio. This portfolio has recently celebrated its one-year anniversary after having been launched in January 2016.

Last year’s performance for the fund was steady if not spectacular, with the fund achieving a 7.65% return in US dollar versus the MSCI World Index return of 7.51%. Building on last year’s solid performance the fund has got off to a strong start to the year, and is currently up 10.1% vs the benchmark of 6.5% year to date. The fund offers South African investors direct exposure to global mega-caps with Visa, Apple, Amazon, Google and Boeing being among the fund’s largest holdings.

If you require further information or assistance with investing offshore, please:

• visit www.absastockbrokers.co.za

• Email: RMS@absa.co.za

• Telephone: 0860 05 04 03

Reference/further reading:

• http://blogs.barrons.com/emergingmarketsdaily/2017/03/31/emerging-markets-today-bonds-brazil-india-favored-s-africa-sinks/

• http://www.etf.com/sections/monthly-etf-flows/etf-monthly-fund-flows-march-2017

• https://www.bloomberg.com/news/articles/2017-02-21/investors-ignore-trump-tweets-charge-into-emerging-market-etfs

What does your legacy mean to you?

"What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others" - Pericles

Legacy speaks to our human need to leave a footprint in the world after we are gone. For most people,

legacy is what we leave behind for our heirs, and what we are remembered for.

Your abstract legacyThere is an old custom of writing an ethical will. Parents would write a letter to their children, in which they would summarise what they have learned in their lifetime, and what they wanted most for and from their children and loved ones. Generally, it would be a living document that they would modify or add to over time.

In your life so far, what have you learned that you would want to pass on to your children? Considering these matters while you’re in good health is one way of connecting with your sense of purpose, and how closely your daily life is aligned to it.

Your material legacyYour material legacy refers to the assets and wealth you build up and pass on to your heirs.

These two legacies merge in the conversations you have with your heirs. It’s important to have

conversations in which you are able to say: “For you to be given the responsibility of this inheritance, you need to make sure you’re equipped for it.” What that means will vary from person to person – the skill sets that need to be acquired; the values that need to be embraced.

You might well choose to direct your material legacy not to your children, but into something else. Typically, the next generation will not be totally cut off, though their inheritance might be delayed. It might be put into a trust, to be released in their 20s and 30s for things such as education, buying a home, medical costs or starting a business.

If those close to you are not included in your thinking, this kind of planning could cause considerable distress and have unintended consequences. When intentions aren’t made clear, arbitration could take years to conclude.

Estate planning is highly technical. Laws change and jurisdictions vary and it’s therefore wise to treat your will as a living document. Global best practice suggests you revisit it at least every three years. It’s advisable to seek support from your Financial Adviser who, in conjunction with an Absa Estate Planning Specialist, will be able to provide the appropriate guidance within the parameters of local and

international frameworks.

These experts could also facilitate the family discussions about your thinking and planning. In the event of your death, your family would then have an existing connection with someone they know was entrusted with your thinking and your wishes.

Legacy planning is a time of thoughtfulness and cool-headedness that can bring the family closer together in a shared understanding of what is important, and set the next generation up for a prosperous future.

To get you started on the journey of leaving a legacy, contact your Financial Adviser. If you do not have one, email Virtual Adviser on virtualadvisor@absa.co.za to be connected to a dedicated specialist.

Fly-fishing

There is no better escape from today's fast-paced world than enjoying the relaxing and tranquil sport of fly-fishing.

The Roman Claudius Aelianus, who lived in the second century AD, was apparently the first enthusiast

to write about fly-fishing. In 1496 Dame Juliana Berners, an English nun, wrote The Treatyse of fysshynge wyth flyes. In it she described the use of artificial flies and fishing with lines made from horsehair.

South Africa has a number of excellent fly-fishing areas. Some of the most popular spots can be found in Dullstroom, Machadodorp and Waterval Boven in Mpumalanga. In the Western Cape, fly-fishing enthusiasts know that beautiful fish are to be found in the upper reaches of the Breede River, and in

KwaZulu-Natal the Pongola and Drakensberg regions offer great angling.

Anglers use an artificial fly to imitate the insects that some fish prey on. Some flies float on the water, and others are partially or fully submerged. Although flies can be bought ready made, dedicated fishermen spend hours making their own from feathers, fur, hair and thread bound to a hook.

Fly-fishing is a gentle art. The aim is to land the line on the water as smoothly as possible with the least possible disturbance. The rod is much lighter than that used for other types of fishing, and the line is

heavier to ensure smooth casting, which is done in a gentle forward and backward movement to ensure a properly unfurled line.

Popular fly-fishing species include trout, bass, salmon, pike, yellow fish and carp. South Africa boasts a number of farms where man-made or natural dams are stocked for fly-fishing. Most of these farms also offer luxury accommodation to cater for local and foreign tourists.

“Most fly-fishers release their catch,” says Jonathan Boulton, a well-known conservationist, writer and owner of Mavungana Fly-fishing Consultants. “Fly-fishers have a strong conservationist ethic and fish

are mostly caught for consumption only if it comes from a stocked dam.”

In South Africa, the Federation of Fly-fishers (FFSA) helps to rehabilitate rivers, and educates its members about how to engage ethically with other anglers and with the environment. “We have to respect the land, plants, water, fish and other components that form part of the ecosystem,” says Garth Brook, founder member of the FFSA and author of a number of books on fly-fishing.

Ethical behaviour includes limiting the catch to prevent some species becoming endangered, avoiding the introduction of alien fish species that might upset the ecological balance in fishing waters and

releasing overharvested and underweight fish.

Although the term fly-fishing conjures up images of calm, placid lakes and rivers, Brook says that interest in saltwater fishing is increasing worldwide. “Saltwater fishing poses different challenges to fishing in fresh water. Because of sea swells, more heavyweight equipment is needed. The rods and the fishing lines are heavier and the flies are much bigger and bulkier than those used for freshwater angling.”

Should you have gap cover?

While medical aids pay up to 200% of their own medical scheme tariffs, medical practitioners can charge up to 500% of these amounts.

This is where gap cover comes into play. Due to the fact that medical specialists’ fees are not regulated in South Africa, medical schemes have placed an upper limit on the amount that they are willing to cover. Gap cover is a short-term insurance product, available to medical aid members, that cover mainly in-hospital shortfalls in the difference between what hospitals, doctors or specialists charge, and the rate that a medical aid is willing to pay.

Gap cover is different from top-up cover, which covers payments after medical aid benefits have been exhausted, and hospital cash plans, which pays out a set amount for each day of hospitalisation of the insured. Costs applicable to gap cover ranges from as little as R100 per month to as much as R1 000 per month, depending on the nature of the cover required.

The Department of Health and National Treasury published final demarcation regulations defining the

roles of medical schemes and insurance products in December 2016. These regulations prescribe a three-month general waiting period, and a 12-month condition-specific waiting period with pre-existing conditions, and the maximum age of 60 years for coverage by insurers who offer gap cover has been scrapped.

Following the new regulations, medical aid members who had gap cover before 1 April 2017 have unlimited benefits until 1 January 2018. From April 1 2017, new policies are subject to a R150 000 annual limit per person.

Under the new regulations medical aid members who move between medical aids will not be subject to waiting periods for gap cover benefits, on the condition that the service provider is notified of the change. Members can also change their gap cover to align with the benefits provided by the new medical aid.

Day-to-day and chronic medication shortfalls, ward and theatre fees (hospital account), appliances, disposables or day-to-day GP and specialist visits, are not covered by gap cover products. Cover for mental health treatment is limited and cosmetic procedures are excluded from gap cover.

Gap cover is suitable for all medical aid members who do not want to risk having to cover a partial payment of the amounts charged by medical service providers.

For more information on this and other insurance-related products, please contact your banker.

Special experience offer

Enjoy a scenic coastline cruise for four around the Durban harbour or treat a loved one with a float capsule and massage in JHB.

Scenic coastline cruise for four, Durban harbourJoin us for a spectacular scenic boat cruise on a 58-foot catamaran off the Durban coastline. Your deep-sea cruise will start at the harbour channel. Enjoy the sights, sounds and smells that are so unique to Durban AKA Funsunzi – as it's lovingly referred to by locals – from your perch on the regularly serviced, seaworthy and well-equipped boat. From the harbour views to uShaka Marine World, the Golden Mile

and Moses Mabhida Stadium in the north, you will get to experience Durban from a unique new perspective.

The cruise operator has been providing countless seafarers with memorable experiences out to sea, whether it’s been for corporate events, weddings, birthday parties, school outings, sunset cruises or fishing charters. Enjoy this experience with your significant other, work colleagues, friends or your whole family.

Absa Private Banking clients pay only R590* for this enjoyable experience. To book, please

send an email to info@celestialgifts.co.za

Need to know

• *Special rate applies to EFT payments only

• Offer ends 30 September 2017

• Booking is essential

• All cruises are weather-dependent

• Beverages and/or snacks are not included, you are allowed to take your own

• This is a group charter

• Cruises take place every Saturday and Sunday as well as all public holidays departing @ 14:30

Float capsule and massage for two, JHBExperience this truly unique beauty spa. After spending time in this tranquil, soothing and comforting environment you are guaranteed to leave feeling rejuvenated, relaxed and ready to face the world.

You and your treatment partner will enjoy a floatation experience each, followed by a double deluxe

massage, with two therapists working together in perfect synchronisation.

Absa Private Banking clients pay only R1 910* for this enjoyable experience. To book, please send an email to info@celestialgifts.co.za

Need to know

• *Special rate applies to EFT payments only

• Offer ends 30 September 2017

• Location: Craighall Park, Johannesburg

• Availability: This experience is subject to availability. Always book further in advance if you want to have your treatment on the weekend

• Who: Pamper yourself or a friend, partner, parent, sibling, colleague or client. Suitable for those over the age of 18 only

• Numbers: This experience is for 2 people only. Others will be enjoying the spa facilities at the same time as yourself

• What to take: Please take comfortable open shoes (in particular for pedicures) and a bathing costume if you are having a hydro treatment or using spa facilities. Most spas provide slippers, a gown and also a locker

• Duration: Allow approximately 2-3 hours for this experience

• Spa terms and conditions apply

• Always arrive 15-20 minutes prior to your booked appointment

Are you saving in foreign currency?

Fluctuations in a currency's value can have an effect on your finances and ultimately impact the economy.

Read More

The puzzling rand

Many of us investors and analysts are struggling to find a fundametal reason for the rand's persistent strength.

Read More

What does your legacy mean to you?

"What you leave behind is not what is engraved in stone monuments, but what is woven into the lives of others" - Pericles

Read More

Fly-fishing

There is no better escape from today's fast-paced world than enjoying the relaxing and tranquil sport of fly-fishing.

Read More

Should you have gap cover?

While medical aids pay up to 200% of their own medical scheme tariffs, medical practitioners can charge up to 500% of these amounts.

Read More

Special experience offer

Enjoy a scenic coastline cruise for four around the Durban harbour or treat a loved one with a float capsule and massage in JHB.

Read More

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