Alistair Bean & Assoc’s Financial Services Limited

“Making Decisions for you, so you don’t have to!”Quarterly Newsletter – to

30 September 2018

“So, the All Blacks had a bad day…”

This Newsletter is created specifically for existing Clients of“Alistair Bean & Assoc’s Financial Services Limited”

Please feel free to share with any prospective Clients that you feel may benefit from our services

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Hello

And welcome to the latest Newsletter of “Alistair Bean & Assoc’s Financial Services

Limited”

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In this Issue….

• The Lay and The Technical • Brief Market Summary• G.E.T Investing (Global Economics

Theory Investing) - thoughts and opinion from Alistair Bean. Copyright. Oct. 2018 – “is Modern Portfolio Theory dead and gone??”

• A Day in the life of a Financial Adviser…

• Want to start your own “Bill and Melinda Gates (like) Foundation” – The Gift Trust

• Estate Planning - Prepaid Funeral Trusts/Funeral Cover Insurance/Life Covers/KiwiSaver

• ABAFS 10 • Conclusion – A2 Milk and Turtles

“ Guaranteed No Fee Increases FOR LIFE ! ”*for Investment Portfolio Clients of

ABAFS Limited.*conditions apply

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The Lay and the Technical As always, my intention is that I will use as much of “The Lay” as possible. I’m required for Legislative and Compliance reasons to also use “The Technical.” Please feel free to come to me if you would like a definition of any Technical Term or phrase that I include in any report.

One of my favourite “Einstein” sayings and statements that I strive to apply in the day-to-day running of my business…

Brief Market Summary

So, the All Blacks had a bad day…

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As I write the markets are seeing a lot of panic selling, but majorly excited buying at lower than recent prices. As I’ve mentioned many times before, a sale can only occur when there is a buyer. The Media always report in times of panic, that “everyone is selling out” whereas they should be saying – “Everyone is buying!” What a different dynamic this would then create. Most Kiwis support the All Blacks, but if they lose a game, we let them know and give them a hard time, then when they win the next game, all is forgiven, and they are the best team on earth again! What we don’t do is quit on them, because we have been there for the long-term and for a lot of us, this is all of our lives, we know they have good games and bad games but their record over time has been proven and is very impressive with more good times than bad, but boy do we here about the bad times.The graph below highlights once again that the good times clearly outweigh the bad times – roughly 87 good years and 17 bad years or 17 years of prices on sale!

This quarter, once again The “Trump China Trade Wars” have played the biggest part in what has led the direction of the Market over the June-Sept 18 period and has caused uncertainty for direction over the short-term, playing through to October.

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This continues in the political arena and causes noise in the meantime, until they get back to a mutual playing field so more nuisance value than anything.

The Standouts in your Portfolios this quarter have been Genesis Energy, Port of Tauranga and Aumake International Limited. Genesis and Port of Tauranga are producing significant Total Dividends for the year of 16.9cents per share for Genesis (to be reinvested at a 2.5% discount to market within your Portfolios) and 17.7 cents per share for Port of Tauranga (inclusive of a special dividend).

Aumake has increased from 23 cents per share to 32 cents per share over the quarter and is receiving support from many participants including DHL for delivery of products and being listed on a number of significant Asian Internet sites, offering access to multi-millions of consumers for placing and delivery of orders. The news for Aumake seems to get better each month and this should pay-off in their balance sheets over time. Chinese Singles day on 11 November and then Chinese New Year in February 2019 (which will also be significant for A2 Milk as it has been in previous years) will show how well Aumake will do over the coming year, as a bit of proof in the pudding as to how well this Company will do.

G.E.T. Investing (Global Economics Theory. Investing) - thoughts and opinion from Alistair Bean. Copyright. Oct. 2018 – “is Modern Portfolio Theory dead and gone??”

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Global Economics Theory. Investing is all about investing relative to current economic circumstances around the world.

Harry Markowitz introduced Modern Portfolio Theory in an essay in 1952 and was later awarded a Nobel Prize for Economics for this work. It was backed up by various equations, the below being one of them.

As I promise to use Lay Terms, the simplest definition of the theory (in a nutshell) is that if you match risky investments with less risky investments and diversify with some in-between, you will get an optimum expected rate of return.

The above has been used for investment portfolios for many years, however the criticism is that it uses historical events and maths with a guessed number and also large time frames. For example, if I use a hoped for 7% return and a 100 year time frame, I am likely to get exactly the 7% I am looking for.

I haven’t agreed with the above since the date I learned of this theory because I could simply use 6% or 12% or any number I choose and then build this rate around a time frame until I get the number I am looking for.

Many analysts use 100 year time frames or 30 , 60, or 40 of those years, like the graph above (or just pick one) to demonstrate the figures and results they are looking for – “Clever Accounting” However not many of us live for 100 years, even though we are living longer, but most of us only work for 40 years and of those 40 years we may have a mortgage for 25 years, so our true wealth growing years of significance may only be for a period of 15-20 years (start saving when you start earning). Also, Economists are professionals in telling us what happened yesterday.

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So, I beg to differ from the “Nobel Economics Prize” winner and offer…

“G.E.T. Investing” – Global Economics Theory. Investing!

In the simplest of terms (without a mathematic equation) Investing relative to what’s going on now in the world economies with your current lifetime earning investment time frame, using price ranges as a guide to purchasing and then adjusting as appropriate over time.

Simply, buy low – sell high in every investment class.

For the last ten years we have seen record worldwide low interest rates. As these interest rates came down from 2008, it was an excellent time to hold some bonds in your portfolio. As markets had crashed due to the GFC (Global Financial Crisis) shares were on sale and it was a great time to also buy some quality investments at low prices. Interest rates have appeared to have bottomed out around the world and therefore (in my opinion) it is not really a good time to hold bonds as interest rates start to increase again.

In my opinion a highly convicted, well researched Portfolio position should be taken (so as not to dilute performance from over-diversification at any risk level) with a mixture of;

a. quality Value shares that offer an attractive dividend, which should be held as your safer investments (instead of bonds unless interest rates have peaked closer to the 7-10% mark) provided those shares are not at current record prices.

b. Also, Growth shares including some emerging market and technology shares that offer opportunities relative to world demands should be at your riskier end.

c. Balanced Investments, such as well-researched Managed

Funds should be included for your medium-term needs,

d. then minimal cash, (and an emergency fund of at least three months’ worth of normal expenses) along with your regular

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income should be held to meet your shorter-term needs - The ideal portfolio.

Property as an Investment Class has never been attractive to me (apart from the lifestyle choice of owning your own home) primarily because Shares have outperformed Property over time so why invest in a lesser earnings class. You will also get Property by default as many of the Company Shares you own will also own buildings which are reflected in the value of their assets and share price. The same also applies to Bonds, as Companies may also own these as well and therefore Balanced Managed Funds may offer a better choice here.

Your portfolio will need to adjust once Global trends evolve and always be aware of tax and inflation – There will be noise along the way which your Adviser will do their best to optimise for you.

“History does often repeat, but things are barely ever the same. You’ve got to adapt to the circumstances as you go to best achieve the outcomes you are looking for…”

So G.E.T. Investing!

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A Day in the life of a Financial Adviser…

I have often been asked to describe my day, mainly out of positive interest. Here is a typical breakdown also including weekly, quarterly and annual events.

Enjoy…

A normal day

1. Provided I haven’t woken through the night to check the American, UK and German Sharemarkets (around 2.30am – put that light out Liane says…). I typically awake around 6am to check the US, UK and German Markets, while rechecking the NZ, Australian, Hong Kong and Indian Markets.

2. I read the comments from the overnight markets and check individual Companys and Managed Funds that I have an interest in on behalf of my Clients and some others as well.

3. I listen to the 6am news and then keep the TV on the news channel (channel surfing if necessary) to keep abreast of the morning developments.

4. I then start reading the morning reports as they come in from various sources including FNZC, Morningstar, NZ, ASX, Good Returns, Stuff, Risk Adviser, Heathcote Investment Partners, Sharetrader, Sharechat, ANZ Economics, BNZ Economics and so on…

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5. 8.30am I have a regular business meeting with a colleague where we typically discuss the previous days and overnights events and also solve the problems of the world.

6. 8.30am My Associate arrives for the day and we discuss markets and planned activities for the day, Victoria typically handles all Insurance and KiwiSaver Business with all decisions being reviewed with oversight and authorised by me (Victoria is only limited by FMA regulations, her qualifications, knowledge and experience is of an extremely high and capable standard.)

7. 8.30am The NSX announcements for the day are released and then throughout the day telling me, among other things, which shares are paying dividends, are announcing annual results and all other timely disclosures to the market.

8. 8am to 9am I check all client portfolio account balances and individual holdings and ensure all regular deposits and withdrawals will go through as planned. I also check for rebalancing of portfolios if appropriate to do so.

9. 8am-10am Check and respond to Client and business e-mails.

10. 10am The New Zealand Sharemarket opens, I consider any shares that need to be purchased or sold on behalf of clients and regularly check for Company announcements as they occur to see whether any actions should be taken throughout the day while keeping an ear out for the hourly news summaries from NZ media and International reports.

11. 10.30am I typically have prepared for any Client face to face meetings. Meetings are normally at either 11am or 2pm, willingly travelling to Clients residences as required. Client interviews will typically take up to one and a half hours as required by the Client and my guidance dependant on new advice for a new Client and/or review and maintenance of current client’s needs.

12. 12ish a working lunch, the Australian Sharemarket has now opened, react as appropriate to any significant events.

13. 12pm to 2pm write diary notes to Client files. Create new accounts. Consider any new and on-going regulations by the FMA (Financial Markets Authority – The Government!) transact orders, respond to e-mails and phone calls.

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14. 2pm Arranged appointments with Clients for the afternoon.

15. 2pm-5.30pm repeat morning activities, respond to market events, continue research.

16. 5.30pm-8pm Markets start to close around the world. Read daily announcements, react as appropriate – take action, take no action, patiently assess best options.

Weekly events

Run Business administration, tax, wages, GST. Check technology and equipment. Review Client Insurances – consider whether exclusions may

be removed, consider optimal cover relative to personal Client needs.

Review Client KiwiSaver Holdings. Discuss Markets with Business Development Managers –

Investment and Insurance. Review Compliance and Regulations from Authorities.

Quarterly

Produce Quarterly Monitoring reports and deliver to clients with covering letter.

Produce Quarterly Newsletter and deliver. Produce Quarterly DIMS reports and deliver.

Annually

Produce annual DIMS reports and deliver. Perform annual Client reviews throughout the year. Produce and deliver annual tax reports.

On-going

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Attend Monthly Christchurch Branch Financial Advice New Zealand (as a committee member) committee and branch meetings.

Attain a minimum of 30 continuing professional development credits (CPDs) per year – last two years over 100 gained.

Attend Investment, Insurance and KiwiSaver roadshows throughout the year.

Attend professional development days, both in New Zealand and overseas.

Attend Professional learning Conferences both in New Zealand and overseas.

Visit Fund Managers face to face. Attend Company Shareholder AGMS. Complete Adviser returns for FMA. Complete AML/CFT (Anti-Money laundering and countering

foreign terrorist) audits for regulator. Update disclosure documents and Adviser Business

Statements regularly .

It’s quite a list, but don’t worry it is all very manageable and I also get to travel, play golf and have long lunches so there’s plenty of time for new Clients.

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Want to start your own “ Bill and Melinda Gates (like) Foundation” – The Gift Trust “Giving while your living!”

“Many people consider leaving a legacy as part of their estate and would dearly like to do so…”

Some of the reasons they don’t is that it is just too hard to organise – you may have to see a Lawyer, an Accountant or various other Specialists. There’s paperwork, tax, gifting, documents, documents, documents and also wouldn’t you rather see your donations in action while you are still alive!

The Gift Trust is an Organisation with an independent Trustee and Custodian, that provides a service where you can donate a Lump sum to be held in your name which you can then label as your own Charitable Foundation to provide funding to Charitable organisations of your own personal choice, from humanitarian causes to school and sports teams as you decide, provided they have a charitable intention (conditions apply)

It must be for charitable purposes but as mentioned, does not have to be a registered charitable trust. So, you could provide funding in your name to any one of NZ’s 27,000+ Charitable Trusts.

You can also have this fund held as part of your portfolio and included in your quarterly monitoring reports.

So, for example;

You could decide that you would like to provide $200,000 and donate $10,000 per year for the next 20 years (while remaining funds attempt to grow).

This $10,000 could go to the Best Rugby Player of the year at say, The Christchurch Rugby Club for player development.

Or

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$10,000 to the best Maths Student at Papanui High School as a University Scholarship.

Or

$10,000 to Big Brothers and Big Sisters of Christchurch to help with annual mentoring costs.

Or

$10,000 to Riccarton Players to help with community production costs.

Or

$10,000 to Cystic Fibrosis NZ for further research.

You could start with as little as $25,000 and draw say $2,500 per year for the next 10 years for allocation and also add to this with regular deposit from yourself as time goes on.

All funds are arranged and administered on your behalf including due diligence, arranging financial reports from the organisations to ensure continuity for amounts donated over $10,000 or at your request.

There are also immediate tax benefits.**(all tax benefits are subject to legislation and best dealt with by a specialist as

necessary)

Funds held are tax free under the Charity Status.

You may claim the full amount of donation in the first year against your tax or have this spread across future years. Any refunds you get as a result, you may wish to redeposit as a donation and then claim that donation the following year and so on.

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So, for example, you donate $100,000 in your name, you claim your tax rate, say 33% being $33,333.33 in the first year, if you wish, you may then donate that $33,333.33 and then claim $11,111.11 the next year and so on.

The above is just a brief overview, if you would like to discuss all conditions further, please contact me and we can make arrangements to have these funds held in your name and reported as part of your portfolio as soon as you desire.

For further details of The Gift Trust, please see the following linkhttps://www.thegifttrust.org.nz/

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Estate Planning Prepaid Funeral Trusts/Funeral Cover Insurance/Life Covers.

How much can you put aside for a prepaid funeral if you were to go into a rest home? – currently $10,000 per person! (if income tested).Either prepaid or in a Funeral Trust – Let me know if you would like to do this and I will arrange for you. This is like having your own Funeral paid, before you pass on. So, your family doesn’t have to organise funds from your estate after you have gone. This is something you should seriously consider, in my opinion, it also means you have a say at your final party…

Funeral Insurance/Life Covers

Should you prefer not to invest for a prepaid funeral then you may wish to take Funeral Insurance Cover.

I’m only a fan of Funeral cover for Clients at least age 55+.

If you’re only 18 to early 50’s then you could be paying premiums for well over “30 years!” which may far exceed the benefit paid so this is just silly, unless you die in your early 20’s.

So, if you under 55, then you should take life cover because someone in their early 50’s may get at least $100,000 cover for the same premium that would only pay for $20,000 funeral cover – please feel free to talk to me more about these options.

For Funeral Cover - Guaranteed Acceptance at age 55 to 85 – no underwriting.

Enduring Powers of Attorneys/Wills and Trusts

A timely reminder to review all of these. I can assist with arranging new ones for you or reviewing existing ones that you already have – this is essential at least every two years.

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KiwiSaver

Eligible, but didn’t claim your $521 free money this year – Simply start a $20/week direct credit to your’ fund and you won’t miss out next year.

Talk to me further if necessary.

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ABAFS Limited Index

The ABAFS Limited Index represents the total of the individual current values of the top 10 holdings of all investments that I manage for Clients

and their percentage asset allocations as charted below to 30 September 2018.

(The Investment names held, are commercially sensitive and the information is available to Clients of ABAFS Limited.)

The current cumulative net value as at 30 September

2018 $31.93 30 June 2018 - $33.70

(down 5.25% net - after fees for the quarter. This is the first negative quarter since December 2016 - past performance is no guarantee of future performance.)

Agriculture73%

Balanced Growth

11%

Technology6%

Retail3%

Infrastructure4% Utilities

3%

Top Ten Holdings By Asset Class

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Conclusion

I have attended two Conferences in the last two weeks.

The first was in Rotorua, the Financial Advice New Zealand annual conference and the Fiducian Financial Services annual Conference in Hawaii.

Both of these conferences are at my own expense.The Fiducian conference was excellent. I got to meet 12 other fund managers who manage funds on behalf of Fiducian where I have your Indian and Technology funds invested. Their in-house Adviser of the year was an Australian based Kiwi who is a Maori from Whangarei but runs their operation in Perth. Well done the Kiwis! Fiducians’ People culture gives me great faith in their company’s values. Children and family were asked to attend the Conference and always have been able to and encouraged to do so. I’m very pleased to have your funds invested with this Fund Manager and witness their operation face to face.

The Financial Advice NZ conference allowed me to interact with colleagues from all around the country and this is always invaluable to our benefit.

Some of you may remember the turtle that I unwound the fishing gut from its flipper when I was in Hawaii some time ago, well he dropped by to say hi…

A2 Milk

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Its been interesting times over the last few days. A2 Milk is back up 82 cents on the NZ Sharemarket as I write after fun and games from previous days – this has been a do nothing is the right move period, as the falls haven’t made sense.

These are my views below.

All of the reasons for A2 to be valued (by Morningstar at $14.60) have not changed, in fact they appear to be improving by the day with their increasing market share. It’s one of those times where there is a lot of noise going on.  US 10 year bond rates are at a 7 year high of 3.26% pa which is now higher than NZ at 2.75% so there is a lot of money leaving NZ as a result, but these rates are still very unattractive for return in my opinion.  The Dow Jones fell 831 points over night but is still 675 points higher than it was 3 months ago and 1115 than it was 6 months ago, 2786 a year ago. The US mid-term elections occur in November so there is a lot of politics going on. The positives coming up for A2 Milk are:

Likely good September quarter results for A2 we’ll find out around November.

Chinese singles day is on 11 November when last year total sales for the day in China was over $25.3billion on the Ali Baba website alone, typically A2 sales are massive on this day.

Chinese January Licences issued to successful Dairy applicants which A2 is expected to achieve once again.

December quarter results for A2 Milk likely released around February.

 There are more positives than negatives, so I am still very positive on A2 and strongly believe values will recover with the 4 major events above over the coming months. In the meantime, we will hear a lot from Donald Trump and I certainly won’t be selling clients funds at these prices to devalue

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portfolios unless Clients urgently need significant lump sums for projects.

As always warmest Regards, AL.

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A copy of my Personal Disclosure Statement is available on Request Disclaimer:

Important information To the maximum extent permitted by law Alistair Bean & Assoc's Financial Services Limited Disclaim any liability or responsibility to any person for any direct or indirect loss or damage that may result from any act or omission by any person in relation to, or in reliance on, the information supplied in this document (“Document”). Neither Alistair Bean & Assoc's Financial Services Limited

Nor any of their respective directors, or any other person guarantees, either partially or fully, the capital value or performance of any Investments mentioned in the above document. Inclusions are already available via public access and may be sourced or viewed using widespread media through the public domain.This Document is not intended to constitute, does not constitute, and should not be construed as constituting, investment advice nor is it a substitute for commercial judgment or other professional advice. Investors, or potential investors, in the Funds should: (i) conduct independent due diligence on any of the Funds; and (ii) obtain independent investment and professional advice, prior to acting in reliance on this Document. This Document has been provided for information purposes only and is subject to change. The content of this Document is intended to be of a general nature and does not take into account an investor’s, or potential investor’s, financial situation, investment objectives, or risk tolerance. Past performance is not indicative of future performance. The actual performance realised by any given investor: (i) will depend on many things; (ii) is not guaranteed; and (iii) may be negative as well as positive. Unless otherwise indicated, returns are shown after Fund expenses and before tax. This is represented by the change in unit price plus any applicable tax credits. No representation or warranty is given as to the accuracy or completeness of any of the information provided in this Document. Investments in any of the Funds referred to in this Document are subject to many investment risks including possible delays in repayment, loss of income, or the total loss of the principal invested. This Document is not intended as, and is not to be taken as, an offer or solicitation with respect to the purchase or sale of any interest in the Funds. This Document is intended for investors who understand the investment risks associated. Some, or all, of the Investments mentioned in this Document may not be suitable for certain investors. Investors, or potential investors, should consider whether: (i) an investment is appropriate for their risk profile; and (ii) they will meet the suitability requirements relating to such investments. The information contained in this Document is intended only for the person or entity to which it is addressed. If you have received this Document in error, please contact Alistair Bean & Assoc's Financial Services Limited. No part of this Document may be reproduced, provided or distributed without the prior written consent of Alistair Bean & Assoc's Financial Services Limited.

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Christchurch

The Technical…

No technical this quarter, just a bit too technical up above this time.

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