Dear reader

A belated welcome back to office and to what we hope to be a great year for you!

In this newsletter, we provide the Benchtest monthly performance survey for December 2010, commentary on pitfalls for members who participate in foreign funds, considerations for trustees who are pressured by members to accommodate more and more individual needs, good advice for pensioners and those contemplating retirement and more.

Please feel free to comment: tell us what you value and how we can improve the content.

Regards

Tilman Friedrich

Tilman Friedrich's Industry Forum

BENCHTEST MONTHLY 12.2010

In December the average prudential balanced portfolio returned 2.62% (November minus 0.17%). Top performer is Prudential (3.64%), while long-term log leader, Allan Gray (1.58%), takes bottom spot. In very broad terms, Allan Gray had around 9% lower exposure to onshore equities and a 5% lower exposure to bonds, with a compensating 9% higher exposure to offshore assets and a 5% higher exposure to cash, relative to the average manager. This largely explains its underperformance for December.

The heating up of equity markets that we have seen over the past 2 years, particularly in emerging commodity based economies, is likely to fizzle out. We ascribed this to an oversupply of money from developed economies at an institutional level rather than to a healthy diversified demand, and therefore believe that this is unlikely to continue over the course of 2011.

For further analyses and our views, click here...

THE PITFALLS OF PARTICIPATING IN A FOREIGN DOMICILED FUND

Section 16(1)(z) of the Namibian Income Tax Act allows the transfer of money, tax free from an ‘approved’ fund to another ‘approved’ fund. ‘Approved’ means approved by Inland Revenue in Namibia. A Namibian tax number evidences such approval (these are referenced 12/1/12/…). In order for a fund to receive tax approval in Namibia it needs to be registered by Namfisa. A Namfisa registration number evidences such registration (these are referenced 25/7/7/…). Your PAYE 5 certificate or correspondence from your fund should reflect the tax approval and registration numbers. If these have a different look to that format, the fund is not a Namibia domiciled fund.

To allow an administrator to transfer money from a Namibia domiciled fund to another fund without deducting tax, the receiving fund must be approved by the Namibian tax authorities, as evidenced by a tax approval number 12/1/12/…

Under certain circumstances, funds domiciled outside Namibia may apply for registration as foreign fund by Namfisa. Once Namfisa has registered the foreign domiciled fund, it may apply for tax approval by Inland Revenue. Namfisa would lay down certain conditions for registration, essentially in order to protect the interests of the Namibian members of the fund. These conditions relate to reporting and to the investment of assets in Namibia, equivalent to the Namibian liabilities. The advantage of a foreign fund being tax approved in Namibia is that the Namibian tax regime will apply to benefits paid to Namibia members and these members and their Namibian employer may deduct their contributions from their taxable income.

Where a foreign domiciled fund does not have Namibian tax approval, contributions by member and employer are not tax deductible, while Namibian members will be taxed in accordance with the Namibian as well as the foreign tax regime. This could result in benefits being taxed by both regimes, at best with double taxation relief. This, however, always means that the regime producing the higher tax will apply to the Namibian member.

Where a foreign fund has been registered and tax approved in Namibia, it is generally quite onerous for these foreign funds to have Namibian members, in terms of investments, where the equivalent value of these members’ liability should be invested in Namibia, reporting to two statutory authorities and administering tax for two different tax regimes.

If your fund is a foreign domiciled fund with Namibian members, we can assist in finding appropriate solutions.

SHOULD YOUR FUND FOCUS ON WHAT’S BEST FOR THE GROUP OR FOR THE MEMBER?

In a defined contribution fund, the member carries the investment risk. Based on this argument members sometimes demand investment choice. Experience has shown however, that most members do not exercise an investment choice due to a lack of knowledge, understanding and conviction and still leave it to the trustees to invest their capital in their best interest.

Very often product and service providers see a business opportunity in raising the level of sophistication and complexity and in promoting member demands for greater flexibility and choice.

Trustees are thus required to take a balanced view. In this article, we provide an overview of a few key considerations for trustees when contemplating how to structure their fund, in this context.

FROM THE MARKETPLACE

Are you interested in receiving economic and financial news from right across the globe in a highly condensed and digestible manner? Liston Meintjes, former co-owner of award winning investment house Foord & Meintjes and chief investment officer of Metropolitan produces a daily newsletter that allows you to get an overview of developments across the globe. The daily newsletter is complemented by a weekly summary and charts of various key indices with brief commentary. Find a sample of the newsletter, here...

Liston is offering an individual subscription for N$ 125 per month and a corporate subscription starting at N$ 300 per month for 3 persons. You will receive one month’s free subscription.

Should you be interested in this service please send a short note to This email address is being protected from spambots. You need JavaScript enabled to view it.

INTERESTING MEDIA SNIPPETS

15 point checklist for the best possible life in retirement

The role of the individual taking more responsibility for their financial life planning is critical. With a defined contribution system in place, the responsibility shifts to the individual to ensure that they have the necessary skills to not only manage their finances but also to ensure that they manage their life. This checklist will assist trustees and companies to understand how important it is for individuals to understand their life journey. If you are heading for retirement, this article by Lynda Smith in December 2010 Pensions World provides some valuable guidance for you too.

Retiring with Dignity

The risk of capital loss is a concept that is, without a doubt, well-known and feared by virtually every investor. It continues to dominate investment decisions and investors seem to be blissfully unaware of other, equally important, risks involved in making decisions surrounding their retirement. Another equally important risk is the danger of not having enough for retirement. The outcome is that, today, the majority of retirees unfortunately need to deal with this harsh reality on a daily basis, when their monthly income just doesn’t meet their lifestyle requirements. If you are heading for retirement, this article by Maarize Pieters in December 2010 Pensions World provides some valuable guidance for you too.