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Bloxham Wealth Management Snippets Friday, 13 May 2011

Quotes of the Week

“We find Ireland much more interesting, and have begun to buy
some Irish debt. Unlike Greece and Portugal, Ireland’s
economy is functioning and, in our view, is a play on the world

Paul McNamara, Investment Director with large international fund

manager GAM.

“Please, not this Italian. Mamma mia, with Italians, inflation is a

way of life, like tomato sauce with spaghetti.”

Influential German newspaper Bild, in February, on the potential

appointment of Mario Draghi, currently governor of the Italian Central
Bank, as the next president of the ECB.

“The new ECB chief is so German.”

Bild, again on Mario Draghi, this time a couple of

weeks ago, following two months of strong lobbying for
Sr Draghi from high levels within the German

April's Performance Performance Sheets

To view April's fund sheets click here.

8th Consecutive Year of Dividend Increases for the Bloxham High Yield Fund

Thank you very much for the nice dividend, it goes a long way towards my pension. Shareholder
at the recent FBD AGM.

The philosophy of the Bloxham High Yield Fund is simple : invest in financially-strong, high
quality companies with above-average dividend yields, at a good price, and wait for the dividend
and dividend growth to do all the hard work for you.

With the 2010 earnings season out of the way, we can now publish how our High Yield holdings
grew their dividends over the past 12 months – not unsurprisingly, given the global recovery in
2010, pretty good.


Fyffes 6% Total Produce 5%

DCC 10% Donegal Creameries 0%


BATS 13% HSBC 6%

Bloxham Wealth Management Snippets Fri 13 May 2011 Page 1

Imperial Tobacco 17% Unilever 11%

Diageo 6% RD Shell 0%

BHP Billiton 10%


United Technologies 12% ITW 10%

Exxon Mobil 5% Reynolds American 17%

Coca-Cola 7% Altria 8%

Pepsi 6% P&G 9%

J&J 7% Walmart 20%

Microsoft 23% Norfolk Southern 11%

Intel 15%


BNP Paribas 40% Nestle 16%

Allianz 10% Novartis 5%

Bayer 7% Zurich Financial 6%

Vinci 3% Air Liquide 11%

Total 0%


Canon 9% Bank of China 9%

China Mobile 7% Metcash 4%

No stock we held had a dividend cut.

Putting these dividend growth figures together with the stocks’ approximate portfolio weightings
gives an estimated overall portfolio dividend growth of about 8%. This is the eighth consecutive
year of dividend growth for High Yield; an investor in the High Yield Fund since inception in
October 2002 will now have seen their dividend flows more than double- pretty good since this
encompasses one of the worst ever periods for equity markets.

As companies present their Q1 2011 results and updated outlooks, it looks increasingly likely we
will be reporting a ninth consecutive year of dividend growth.

Secure and highly probable Dividend Growth remains the strongest reason for taking one’s
monies off deposit or out of low-yielding AAA-rated bonds and investing in High Yield – even
without any share price appreciation, cumulative income and income growth after even just a few
years racks up nicely giving you a ‘sleep easy at night’ investment. If one assumes a dividend
yield of 4% and dividend growth of 7% p.a., then gross income grows as follows (assuming a
€100,000 initial investment):

Bloxham Wealth Management Snippets Fri 13 May 2011 Page 2

Year Income

1 € 4,000

2 € 4,280

3 € 4,580

4 € 4,901

5 € 5,244

Cumulative Income €23,005

Private Pension Levy

Written by James Forbes, Director – Investment Solutions, Bloxham

The Government announced on Tuesday that it is

planning to impose a 0.6% tax on the value of private
pensions (occupational pension schemes, retirement
annuities and PRSAs). The Government hopes to raise
around €470m a year from this levy over the next four
years (although the history of financial levies in Ireland
suggest that not only do they last longer than initially
anticipated but that the initial rate can also increase).

This is in effect a retrospective tax on the personal

property of individuals with private pension
arrangements. Over the last few days many of our
corporate and personal pension clients have outlined
their issues regarding the pension levy proposal. I have
summarized the three main issues:

“All animals are equal but some animals are more equal than others”. I wonder what the
Old Major (remember the old boar) would have thought of just taxing private pensions whilst
excluding other types of pension entitlements?

“When opinions and rules of life are taken away, the loss cannot possibly be estimated.
From that moment, we have no compass to govern us, nor can we know distinctly to what
port to steer” – Edmund Burke. Government strategy over the last few decades has been to try
to increase pension coverage within the working population. It is very difficult in the current
environment to encourage long term pension provisions when the rules keep changing.

“Arbitrary acts of expropriation by government are grave. The right to private property is
enshrined in our Constitution.” – The Irish Times 12th May 2011. Pensions are effectively
savings for old age (albeit with the deferment of taxation on income until drawdown). In the
current environment, we need to work towards increasing confidence within our financial services

The Compromise

It is very difficult for Governments to undertake policy reversals. However, I would suggest that
the Minister might consider making the levy more palatable to those of us that will be feeling its
full impact.

Firstly, the Government could offer some form of tax credits on the pension levy. These would be
added to the tax free lump sum at normal retirement age (these tax credits would need to be
index linked of course!). So essentially, paying tax today and getting the benefit at retirement,
unlike the current pension system whereby individuals defer tax today and pay it at retirement.

Secondly, the Government could consider giving individuals an option to make investments in
small Irish companies instead of paying the levy. For example, it would be relatively easy to set
up quoted trusts on the Irish Stock Market that offer investments similar to BES schemes. This
would not only provide capital to local companies it would also encourage job creation. It would
therefore put the onus on job creation on the private sector whilst offering pension investors an
opportunity to make a profitable investment.

Bloxham Wealth Management Snippets Fri 13 May 2011 Page 3

2/3 Exchange Place 86 South Mall 100 O'Connell Street
IFSC, Dublin 1, Ireland Cork, Ireland Limerick, Ireland
DX no: 64 DX no: 2008 DX no: 3046
Tel: +353 (0)1 611 9200 Tel: +353 (0)21 490 6500 Tel: +353 (0)61 414 065
Fax: +353 (0)1 829 1877 Fax: +353 (0)21 427 6036 Fax: +353 (0)61 419 750

Copyright © 2011 Bloxham. All rights reserved. Written by Pramit Ghose.

This publication is solely for information purposes and cannot be construed as a representation by Bloxham. The
views in this report are expressions of opinion and are given in good faith, but are not guaranteed. These are
subject to change without notice. Bloxham is a member of the Irish Stock Exchange and the London Stock
Exchange. Bloxham is regulated by the Central Bank of Ireland.

Bloxham Wealth Management Snippets Fri 13 May 2011 Page 4