Investing Offshore. There are usually cited a number of common reasons to invest offshore;

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2 Investing Offshore The array of investment options available to South Africans today can be daunting; finding a good tax structure and the most appropriate vehicle is usually the best starting point. There are usually cited a number of common reasons to invest offshore; Diversification within your portfolio The JSE has a very limited number of companies and sectors in which you can invest and is very mining-heavy. A client wanting exposure to specific sectors such as the Pharmaceutical or I.T. industries would struggle to gain adequate diversification. Limiting risk Geographic diversification is also highly recommended within the arena of investment. South Africa represents only c0.43% of world GDP and this share is estimated to decline slightly over the next five years. It is also considered an Emerging Market, which are by definition more volatile and risky than more developed economies Enhancing exposure Investing through a variety of investment managers, who specialize in the markets in which they operate can often provide an investor with knowledge and expertise to markets which would otherwise require a significant time investment in order to understand and take advantage of opportunities Currency hedging The Rand is a fickle beast and shows a great deal of volatility against harder currencies the long-term trend of the Rand against the Dollar, Euro and Sterling has been decline. Even with excellent investment returns on the JSE the decline in the value of the Rand erodes that performance in a Real comparison against offshore investments. 2

3 Social and Political Risk There is a very real concern about political stability, corruption and the rise of emerging militant sentiment. This risk is another reason to consider offshore investment. Housing ones assets in a safe, regulated jurisdiction such as the Isle of Man, Gibraltar or Guernsey assures you of stability in the event of any events that might place your assets at risk. The rise of the affluent Emerging Market consumer - Over the next 12 years, it is estimated that emerging markets will see the greatest increase in consumer demand in history, a rise in consumption of $18-trillion to $30-trillion a year. This remarkable growth is attributable to a convergence of living standards, as billions of consumers experience a change in lifestyle comparable to that experienced by Europeans and Americans in the 19th and 20th centuries. The emerging consumer is today s big global investment theme. Banking in Emerging Markets is a sector which cannot be ignored as consumer credit is just beginning to reach these markets, and the idea of having a bank account is coming to the fore. Matching Future expenses to investments - if you want to retire overseas or travel extensively, you may need to have investments to meet these future liabilities. This would also apply to children or grandchildren who might require an overseas education. There is also a rise in a number of developing frontier markets growing rapidly behind the well-known BRICS grouping of Brazil, Russia, India, China and SA. Countries such as Nigeria, Thailand, Indonesia, Romania and the Ukraine. However, there is another increasingly important reason to invest offshore: you can save a lot of tax! With government now promising to attack the tax deductibility on pension savings of high-income earners, the advantages to saving offshore are becoming more and more compelling. 3

4 There are a few options investors should consider when taking money abroad. The first is to consider using an offshore pension scheme, as there are distinct benefits to doing so, these schemes are often technically structured as trusts, but can be significantly less costly to set up and administer. Employer participation is also not an essential feature individuals can establish one in their own name, and they can take different forms that we would be happy to guide you through to find the appropriate solution to your needs. These pension arrangements can also be set up by employers in the form of a cost-efficient umbrella scheme, containing many underlying participants, associated investment programs, or they can be stand-alone, self-invested schemes where the responsibility rests with the member. The advantage to using an offshore pension scheme is that there is no donations tax when contributing. Normally, when establishing a trust, getting the assets into a trust requires that the donor pay a donations tax, which equates to 20% on amounts above R With an international pension scheme there is no donations tax (even though the assets are no longer in the estate of the scheme member) and the settlor-charging provisions do not apply. Once in the pension scheme, the funds are effectively in trust so they do not form part of the estate of the member. Accordingly should the member die before he/she has received all the funds of the scheme as retirement benefits, the assets remaining in the scheme are available for the member s family, free of estate and death duties. At Ivory Wealth we can assist you in the selection of which jurisdiction will be best to create your pension. For example, setting up an offshore pension in an offshore jurisdiction allows you to benefit from favourable tax dispensations. Any income and gains within these schemes are free of taxation allowing funds to grow tax free, the compound effects of which can be significant at retirement. 4

5 While it has now become easier to administer the vehicle and make plans for an orderly and tax-efficient transfer of offshore assets in the event of a person s death, the sheer range of investments to consider can be daunting. Confronted with literally thousands of choices, investors also have to look at their motivation to take money offshore when SA has been such a phenomenal place to be invested over the past decade. South African investors have had a great run locally with fantastic stockmarket growth. However recently, offshore investments are outperforming their local counterparts and the devaluation of the rand vis-avis the Dollar, Sterling and Euro has made offshore investing more and more attractive. This combined with massive performance in stock market valuations since the Global Financial Crisis of 2008 makes investing offshore much more compelling. The difficulty a client often faces is what to invest in from the multitude of Investments available internationally, with which they are more then likely unfamiliar. At Ivory Wealth we are not only familiar with the offshore environment but we are experienced and qualified Wealth Mangers and can guide you through the myriad of investment options available internationally. We are also FSB regulated and are domiciled in South Africa. Individuals can take an annual allowance of R10m offshore which requires a tax clearance certificate. The Finance of Minister also recently allowed a discretionary allowance of R1m per person per year, (previously called the travel allowance) which needs to be declared, but does not require a tax clearance certificate. So in essence, couples can take as much as R22m abroad a year, which for most people means the end of exchange control. At Ivory Wealth we work with a number of strategic partners to assist you to procure SARB approvals an also provide you with the bset Forex rates available on the market. 5

6 Learning from pains of the past South African investors have never had it better in terms of choice: they have the best chance in a generation of investing legitimately and successfully offshore. The painful lessons experienced in the early days of democracy when people rushed money offshore in the face of a currency seemingly on a one-way street of getting ever-weaker against the dollar, only to see the rand strengthen and decimate their offshore holdings are a thing of the past. Lessons learned from that experience should be taken and used to build a portfolio that can be financially rewarding and carefully structured. The biggest enemy is always the human instinct to change their outlook when circumstances change. Like any sound investment profile, avoid chopping and changing advisers or your investment profile. Stick with the program. Markets always recover and taking advantage of declines in value is just as important as riding out the periods when your portfolio witnesses a decline in value. If you are interested in an obligation free conversation with one of our qualified Investment Managers about our unique investment methodology please contact us on; Investment and Pension Help Line: +27 (0) (international) Or; (South Africa) for Assistance: info@ivory-wealth.com 6