Mr.

Sashin Maharaj

Maximus Financial Advisors (PTY) Ltd

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Contents Page
Introduction Risk planning

Investment planning

Business Assurance

Tax planning

Retirement planning

Estate planning

Conclusion
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Mr. Sashin Maharaj

Financial Plan
Prepared for:
Mr. Sashin Maharaj

Prepared by:
Maximus Financial Advisors (PTY) Ltd

South Africa Johannesburg Sandton 121 Fredman Drive 2021

Tel: 011 876 5432 Fax: 011 234 5678

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Mr. Sashin Maharaj

invest@maximusplanningadvisorsplanning.co.za

October 2011

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INTRODUCTION

Dear Mr Maharaj

The team, which will advise you and implement, our recommendations consist of:

Delano Conradie Faheem Suffla Lwazi Nkuhlu

Bcom Financial Managemet Honours (UJ) Bcom Financial Planning Honours (UJ) Bcom Investment Honours (UJ)

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Statutory Requirements At Maximus Financial Advisors (PTY) Ltd we strive as advisors to give our clients the best possible portfolios revolving around the following requirements.

Establish a professional relationship with the client Gathering of information relation to goals Determine financial postion Present recommendations and alternatives Implementation of recommendations Monitoring and recommendation updating

Maximus Financial Advisors (PTY) Ltd is part of the Financial Planning Institute and it is therefore our duty to follow strict and regulated code of ethics and professional responsibility. We follow the statutory requirements

FAIS Act 37 of 2002

FICA Act 38 of 2001

PROCDATARA Act 33 of 2004

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Professional Relationship It is the responsibility of the advisor and client to determine at what speed decisions regarding the handling of the clients need must be implemented. All decisions and intentions of both parties should be documented and saved on both hard and electronic copy. Information All relevant information must be collected and compiled and presented to the client. All anomalies must be taken into consideration including the clients own wants and expected needs. Decisions should be made revolving the goals and financial position. Financial Position All current investments, cash in/out flows, tax position, current insurance and other relevant aspects need to be heavily evaluated in order to get the greatest benefit from all benefits for the long and short term. Recommendations and Alternatives Based on the information compiled and received, decisions should be made. Recommendations should be discussed with the client so that he can make informed decisions as well as give his input. From that all recommendations should be revised. Implementation The client is able to implement his own course of action from what was discussed and agreed upon and use the advisor as a mentor or leader. He may also let the advisor do everything on his behalf at a pace decided by the two of them. Monitoring and Revision It should be discussed between client and advisor how often a revision of the current recommendations should take place. It should happen periodically in order to maintain a clear vision of where the client is going and continues to expect to go.

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Code of Ethics

Confidentiality Professionalism Competence and Diligence Objectivity Integrity Fair and Honest Disclosure Prospects for the Future

As a team of analysts we have done an in depth analysis of you as an individual and your financial position taking your views in the short and long term horizon into consideration.

We have taken your current standing and position and based upon that we provided you with information on where we expect you to be. We have measured your ability to take risk and incorporated it with your willingness to incur risk, and from that recommended your financial path from this point on.

We take into consideration all income, assets, equity, expenses, liabilities and other sources of income and expenses to attain a picture for the future. Any divergences from the prescribed recommendations or problems incurred in the future will be reassessed and rectified according the to your current position.

All services are charged at a percentage of annual income, which will be discussed and negotiated between the client and the company.
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Company Profiling and Expectations

Maximus Financial Advisors (PTY) Ltd is a company, which has strived towards creating a name for itself where by it puts the client and his needs above all. To create a real world, achievable outcome based on every individuals individual needs and goals. It has been of out most importance for us to create and environment where all our analysts work together to achieve the best possible outcome. Continually allowing them to grow and contribute to a great firm creating great results. Each client is dealt with as an individual and the number one goal is to create a simplified solution so that there is one less stressful factor in our clients lives. The current working climate is one of a fast paced nature, which demands the highest degree of self discipline from our advisors which is why we only hire the best. This naturally allows our employees to grow and learn within themselves indirectly forcing them to uphold the ethics and principals of our high strenuous and competitive industry. All factors mentioned above are the foundations to a great company who puts the people they exist for as their number one priority. Only the best can be promised which is why we are the only choice when it comes to financial planners.

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Financial Planners Ombundsman

Each FSP is assigned a compliance officer who has certain responsibilities which include Regular audits Creating a culture of honesty Attending monthly meetings Training to new staff Implementing and monitoring systems and procedures In order for the requirements of the act to be followed by the business, a compliance officer is important. All discretions or disputes between the client and advisors will be handled through the FAIS and Ombud. FAIS complaints procedure Formal written letter All information relating to specific dispute Response term is also granted to the FAIS

The complaint will thereafter be thoroughly investigated and if the Financial Service Provider is found to have transgressed in terms of Financial loss or damage incurred due to deviation or failure to comply to FAIS provisions Financial loss or damage due to irresponsible handling of the client

The FAiS Ombud may decide on the following outcomes based on their decision Dismissal of complaint Continuation of contract Court order

Dismissal can be order if Insufficient proof

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Outside of court deal It is already under trial in court 1. Background Mr Maharaj approached us (Maximus Financial Advisors (Pty) Ltd) for assistance with his financial planning. Mr Maharaj is married to Mrs Maharaj for 25 years by ante nuptial contract (A.N.C.) subject to the accrual system. The A.N.C. provides for: A life policy to the value of R1 000 000 to be taken out on Mr Maharajas life for the benefit of each child that may be born from the marriage. A holiday home to the value of R1 500 000 to be donated by Mrs Maharaj to Anne. Any assets inherited or donated to Mr Maharaj or Anne not to be subject to marital power. Assets introduced into the marriage to be adjusted for inflation at time that marriage is dissolved. The commencement value of Mr Maharajs estate at the time of the marriage was R500 000 and that of Mrs Maharaj was R600 000, the CPI at the time of the marriage was 120 and stands at 615 today. They have two children, Roshini and Romano. Dates of birth are as follows: Sashin was born on the 10th of January 1965. Jerusha was born on the 11th of March 1966. Roshini was born on the 22nd of February 1993. Romano was born on the 20th of March 1995. Both Mr Maharaj and Mrs Maharaj have been very successful in their careers with Mr Maharaj being a senior executive at Didata Holdings Limited and Mrs Maharaj being an account executive with the Advertising firm Ogilvy Thompson.

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2. The statement of financial position of Sashin Maharaj and Jerusha Maharaj as at 31 December 2010 reflected the following: SASHIN JERUSHA

Assets House in Bryanston Holiday home in Belvedere Bare dominium Mooizicht Furniture Vehicles 3 500 ABSA shares 50% Spectrum Paints (Pty) Ltd Loan Spectrum Paints (Pty)Ltd Absa Money market Life Assurance: Policy Estate as beneficiary Policy Roshini as beneficiary Policy Romano as beneficiary Retirement Benefits: Pension fund value Liabilities HP on vehicles Credit card Bond on Bryanston Property Bond on Holiday home

R 3 000 000 1 500 000 600 000 800 000 378 525

Assets Paintings & Antique Furniture Old Mutual Resources fund Jewellery Vehicle Cash in the bank 500 000 600 000 3 500 000 Life Assurance: Policy on Sashins Life 1 000 000 1 000 000 Retirement Benefits: Provident fund value Liabilities HP on vehicle Credit Card Edgars TruWorths Woolworths

R 1 250 000 730 000 300 000 350 000 78 000

2 600 000

1 500 000

3 800 000 445 100 22 000 1 700 000 1 000 000

600 000 300 000 42 000 15 000 24 000 28 000

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3. Notes to the statement of financial position 3.1 Investment in Spectrum Paints (Pty) Ltd. : The company operates as a retailer selling domestic paints and accessories to the residential market on the West Rand. Sashin provided the start-up capital and his fellow shareholder (50%) Christopher Birdstein (60 yrs. a.n.b.) operates the business. Sashin is concerned that the business will suffer in case of Christopher Birdstein retiring or even worse in case of his untimely death as neither of them have relatives that are interested in joining the business. They have employed Peter Cox (28 yrs. a.n.b.) as a backup for Christopher Birdstein and he definitely has the potential to take over from John. To ensure his commitment they believe he should get a 20% interest in the business should he be required to take over but as he has no assets of any significance Sashin has asked you for advice on how they should handle the situation. The value of the Company is expected to grow by 8% per annum. Shareholder loans are not subject to interest and no repayment arrangements have been agreed upon. The company meets the qualifying criteria for a small business. 3.2 Hire Purchase on vehicles Sashin has financed his vehicle costing R500 000 on the 1/3/2010 over 60 months at 9% n.a.c.m. with a residual value of R100 000. Jerusha has financed her vehicle costing R400 000 on the 1/3/2010 over 60 months at 9% n.a.c.m. with a residual value of R50 000. 3.3 Bare Dominium Mooizicht When Sashins father died exactly five years ago he bequeathed the farm Mooizicht in the district of Bela Bela to Sashin subject to a lifelong usufruct in favour of Sashins brother Tom who was 60 at the time of his fathers death. No estate duty was paid by the estate of Sashins father and the farm was valued as a bona fide farming operation at R1 500 000. Tom has indicated that he wants to retire at the age of 70 and will then be prepared to agree to the cancelation of the usufruct in his favour, provided Sashin provides him with a monthly annuity equal to 12% of the bona fide value of the farm (which it is estimated will grow to approximately R2 842 257 by that time). Sashin has agreed to it and wants to start an investment plan now so that he will have the required cash available when it is required in order to provide for the monthly income. The farm is currently worth R2 064 797.

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3.4 Absa Money market The account attracts interest at an average interest rate of 6.25% n.a.c.m. For calculation purposes, the net after tax return will remain the same as for the current year. 3.5 Gold coins Sashin sold his gold coins in March 2011 for R350 000. He bought the coins in March 1999 for R50 000. The market value of the gold coins on 1 October 2001 was R88 000. 3.6 Pension fund Sashins pension fund is invested in 50% money market, 20% bonds and 30% shares. 4.MonthlyStatement of comprehensive income: Maharaj family Income SalarySashin (Includes Non-pensionable travel allowance of 20%) SalaryJerusha (Includes Non-pensionable travel allowance of 20%) Interest on Money market funds for Jerusha Total Expenses Bond on Bryanston house Bond on Belvedere property HP on vehicle(Sashin) HP on vehicle (Jerusha) Payment of credit card (Sashin) Payment of credit card (Jerusha) Municipal bills Household Expenses Traveling expenses: Sachins vehicle Jerushas vehicle Policy on Sashins Life by Jerusha (taken out5 years ago) Insurance (see below) MedicalAid contribution (Discovery) Holiday and entertainment provision Cell phones Sashins Pension fund contribution Jerushas Provident fund contribution Monthly donation to S.P.C.A for which 18A certificate is issued P.A.Y.E. Sashin P.A.Y.E. Jerusha Total
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R 78000 52000 18900 148900 15900 9360 9050 7640 14800 12000 3900 7000 2460 2200 1200 2750 4800 6000 3000 4200 3000 1000 18000 12000 140260

Mr. Sashin Maharaj

4.1 Monthly premiums on Insurance Vehicle Sashin Vehicle Jerusha Bryanston property (Fire policy) Holiday home (Fire policy) Content Bryanston home Content Holiday home R 700 R 500 R 400 R 350 R 400 R 400

4.2 Vehicles The following table is a summary of detailed logbooks kept by Sashin and Jerusha in terms of kilometres travelled and expenses incurred in respect of their vehicles for the period 1March 2011 to 28 February 2012. Vehicle Sashin Jerusha Business Km 16500 17000 Private Km 18000 15100 Total Km 34500 32100 Fuel 27600 24650 Maintenance 1950 1750

4.3 Medical expenses During the current tax year Sashin had to pay R26 000 additional to the R20 000 paid by Discovery for a hearing aid for his wife Jerusha. The risk contribution of medical aid is made up as follows: Principal member: R1 400 p.m. Spouse: R1 100 p.m. Per child dependant: R 550 p.m.

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5. Investment Requirements 5.1 Overseas holiday In 5 years Sashin wants to take the family on an overseas holiday. The cost of the trip currently is R125 000 and will increase by 8% per annum. 5.2 University studies Sashin would like to start investing now to provide for the childrens education. They will study from age 19 for 4 years. Study cost at present is R25 000 per annum with education inflation at 8%. 5.3 Acquiring usufruct over farm Mooizicht in the Bela Bela district. The capital sum that will be required to provide a monthly annuity based on 12% of the market value for life to his brother Tom as per note above. 6. Retirement Needs Sashin wants to retire in 15 years and he has asked you to calculate whether he and his wife will be adequately provided for under the following conditions: Sashins current contribution to his pension fund will increase by 7%p.a. Living expenses to increase by 5%per annum. Living expenses to reduce by 20% when children have completed their studies. Jerusha to retire in 10years time. The after tax proceeds of her provident fund will be used to pay debt. This will result in a further reduction of the living expensesby10% at that time. When Sashin retires, living expenses is to reduce by another 10% and the monthly pension required is to be calculated based on Jerushas life expectancy plus a safety factor of 10 years. Return on all investments except money market, ABSA shares and Spectrum Paints to be taken at 9%per annum. Sashin would like you to calculate the expected value of his ABSA shares investment which is to grow by 7% as well as the value of the Spectrum Paints investment as per the guidelines from the auditor. However both these investments must not be considered in his retirement plan. He regards them as a safety buffer.

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7.MaharajFamily trust Seven years ago Sashin established a discretionary family trust for the benefit of his spouse Jerusha, himself and any children born from their marriage. Jerushas father Chris Ball donated a block of flats to the trust. Sashin and Jerusha together with a representative from a Trust company are the trustees of the trust. The trustees remuneration is paid in equal shares between them. To date all income after expenses has been paid to Sashin and Jerusha on a 50 : 50 basis. The trusts abridged statement of comprehensive income for the period 1 March 2011 to 28 February 2012: Rent earned from block of flats Maintenance flats Trustees remuneration (to be paid before any distribution) Rates and taxes Insurance 8. Personal Risk Sashin is concerned that in case of his sudden death there will be insufficient funds to provide adequately for Jerusha and the children and gives you the following wish list. In the case of his death: He wants all liabilities (cars and bonds) to be repaid from life insurance in his name. He estimates that the current living expenses should reduce to R61 850 Jerusha will live from her income until she retires in 10 years time. Her income and contribution to her Provident fund should increase by 7% p.a. The fund should get a return on average of 9%p.a. He asked you to calculate the capital required in case of his death today bearing in mind the needs indicated in the Retirement section (5 above) and assuming that Jerusha will use two thirds of her Provident fund value at retirement to invest in a living annuity with a withdrawal rate of 8% and return of 9%. The current value in Sashins defined contribution pension fund will be available as a living annuity and 380 000 36 000 48 000 64 000 20 000

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Sashin wants you to use 8% as a withdrawal rate as the fund should also achieve a return of 9%.

9. Estate requirements 9.1 Last will and testament In terms of Sashins will he bequeath the primary residence to his spouse, R500 000 to each child and the residue to his spouse. From your discussions with them it transpires that they prefer a joint will providing for: - Surviving spouse to inherit residential property, furniture, paintings and vehicles. - It is their dream that the holiday home and farm is to remain in the family for generations to come. - The S.P.C.A. to receive a cash legacy of R500 000. - The balance of the estate is to be divided equally between the surviving spouse and children.

9.2 The following table reflects relevant data regarding assets of a capital nature. Asset House in Bryanston Holiday home Paintings & Antiques ABSA Shares 60% Spectrum Paints (Pty)Ltd. Old Mutual Resources Fund Absa Money market Date Purchased and price 1/6/96 R500 000 1/8/00 R400 000 1999 R700 000 June 98 1/3/2001 R300 000 Investment A/C Value 1/10/2001 R1 200 000 R600 000 R800 000 1/06/97 R100 000 R520 000 Continuous Improvements R500 000 Nov99 NIL NIL NIL NONE Fluctuating

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Spectrum Paints (Pty) Ltd Notes Balance Sheet as at 31st December 2010 Assets Non-Current Assets 2 Property, plant and equipment Vehicles R 2 000 000 R 2 000 000 2010 2009

R 800 000

R 850 000

Current Assets Accounts receivable Stock consisting of finished goods Cash and cash equivalents Total Assets Equity and Liabilities Equity attributable to owners Share Capital 4 Retained earnings Non-Current Liabilities Long term liabilities Members loans Current Liabilities Creditors Current portion of long-term borrowings Current tax payable
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R 500 000 R 1 400 000 R 100 000 R 4 800 000

R 250 000 R 850 000 R 200 000 R 4 150 000

R 1 000 R 199 000

R 1000 R 90 000

5 5

R 1 440 000 R 1 800 000

R 1 600 000 R 1 800 000

R 950 000 R 260 000 R 150 000

R 399 000 R 260 000 NIL

Mr. Sashin Maharaj

Total equity and liabilities

R 4 800 000

R 4 150 000

Spectrum Paints (Pty) Ltd 2010 Income statement as at 31 December 2010 Notes Income Cost of sales Operating (Loss) / Profit Financing costs Other expenses Net Profit S.A. Normal tax @ 28% Profit after tax R 5 450 000 (R 2 800 000) R 2 650 000 ( R 62 000) 6 R 200 000 (R 56 000) R 144 000 (R 2 388 000) R 78 858 (R 22 058) R 56 800 (R 2 201 242) R 4 825 000 (R 2 475 000) R 2 350 000 (R 69 900) 2009

Share Capital Authorised 2010 2009 - 100 ordinary shares @ R 10 each R 1 000 R 1 000

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Issued - 50 ordinary shares @ R 10 each to S Maharaj R 500 R 500 - 50 ordinary shares @ R 10 each to C Birdstein R 500 R 500

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Long term liabilities Absa Loan over Property, Secured by Mortgage Bond for 10 years, interest @ 10%.Annual terms of payment R 260 000.Suretyship from shareholders in proportion to shareholding. Sashin Maharaj. Unsecured, interest free with no fixed terms of repayment. Christopher Birdstein. Unsecured, interest free with no fixed terms of repayment.

2010 R 1 440 000

2009 R 1 600 000

R 600 000

R 600 000

R 1 200 000

R 1 200 000

R 3 240 000

R 3 400 000

Schedule of expenses Salaries and wages Water and electricity Telephone Depreciation Stationary Advertising Insurance Vehicle Expenses Total expenses

2010 R1 565 000 R 50 000 R 49 500 R 50 000 R 2 000 R 351 500 R 30 000 R 290 000 R 2 388 000

2009

R 1 457 500 R 40 000 R 46 000 R 50 000 R 3 000 R 309 742 R 30 000 R 265 000
R 2 201 242

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Spectrum Paints (Pty) Ltd

Registration Number 1992 / 037396 / 23 Annual Financial StatementsFor the year ending 31st December 2010

Spectrum Paints (Pty) Ltd

Annual Financial StatementsFor the year ending 31st December 2010 The reports and statements set out below comprise the annual financial statements presented to members: Index Page Report of independent auditors 27 Report of the directors 28 Balance sheet 29 Income Statement 29 30 - 31The financial statements were approved by the directors on 10 February 2011.

Mr. Sashin Mahara

Report of the Independent Auditors to the shareholders of Spectrum Paints (Pty) Ltd.
We have audited the annual financial statements of Spectrum Paints (Pty) Ltd. for the year ended 31st December 2010. These financial statements are the responsibility of the companys director. Our responsibility is to express an opinion on these financial statements based on our audit.

Audit opinion
In our opinion, the financial statements fairly present, in all material respects, the financial position of the company at 28 February 2010 and the results of its operations and cash flows for the year then ended in accordance with South African Statements of Generally Accepted Accounting Practice, and in the manner required by the Companies Act in South Africa. The company trade in a profitable position for the financial year ending 31st December 2010, seeing that its assets exceed its liabilities.

Spectrum Paints (Pty) Ltd

Report of the directorsFor the year ending 31st December 2010 The director presents his report for the year ended 31st December 2010. This report forms part of the audited financial statements.

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Sashin Maharaj 50% Christopher Birdstein - 50%

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The DirectorsSpectrum Paints (Pty) Ltd. West RandDear Sirs, APPENDIX D30th December 2010 Valuation of CompanyRegarding your enquiry regarding the valuation of the shares to support a Buy and Sell Agreement we advise that we are of the opinion that Super Profit valuation method should be used to determine a value for goodwill which together with value of assets less liabilities will give a value for equity . This amount divided by the number of issued shares will provide a value per share. In the retail paint business it is normal to use the following when determining value of goodwill.Expected return on equity = 12%. In the case of a private company with a shareholder loan and capital structure as yours then equity = capital plus shareholder loans. Super profit = Actual profit expected profit. Actual profit is the average after tax profit for the last 3 years. The super profit is then discounted at 15% for 5 years to a Present value. This is the value of goodwill to be added to asset value and then subtract liabilities to get value of business.The percentages indicated above are obviously dependent on market conditions and investor expectations. SIGNED FURTER and CARSTENS

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Introduction and Aspects of Risk Planning Risk is the condition in which there is a possibility of an adverse deviation from a desired outcome that is hoped for. Risk is a phenomenon that confronts us all in different ways, both as individuals and within businesses. The types of personal risk that can affect Mr. Maharaj: Risks associated with his family e.g illness of a family member Risks associated with business e.g death of a key person in the business Property risks e.g loss of property due to fire Liability risk e.g being held legally responsible for damages Investment risk e.g devaluation of shares

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Insurance Insurance is an agreement where, for an agreed payment, called the premium one party the insurer) agrees to pay to the other (the policyholder or their beneficiary a defined amount upon the occurrence of a specific loss or event. Insurance is ultimately a pooling of risks, because many people with similar risks contribute their premiums to an insurance company and hopefully only a few of them will suffer loss at a particular time.

Parties to the insurance contract Insurer The insurer is the one who accepts the risk of the insurance policy and promises to pay a sum of money when an insured event such as death, disability or theft occurs, as stated in the insurance contract Policy holder/ owner The policyholder is the owner of the policy. The owner can deal with the policy in any way including cancelling, ceding or nominating a beneficiary surrendering the policy. Beneficiary This is the person who is nominated by the policy owner to receive the proceeds, for example in the event of the life insureds death.

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Indemnity and non-indemnity insurance Indemnity insurance is insurance where the insurer will cover the amount of the actual loss that has been suffered. It usually covers against an uncertain event. Non-indemnity insurance (also called capital insurance) is insurance where the insurer undertakes to pay a specified amount upon the happening of an event, the timing of which is uncertain. Duty of good faith An insurance contract, for all types of insurance, can be said to be a contract of good faith. This good faith exists between the insurer and the insured that the prospective insured will disclose all material facts that would affect acceptance of risk in terms on which the risk is accepted, for example the premium. Average The principle of average is a provision that has the effect of reducing a claim payment where under-insurance exists. Underinsurance can be defined as where a person takes out insurance for a sum insured less than the value at risk. Contribution The principle of contribution is also known as the doctrine of proportionate contribution, which is applicable to indemnity insurance.

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Short term insurance The main function is to protect you from unforeseen events, normally involving patrimonial loss. The aim is to put in the same financial position as though the loss did not happen, you should not profit from the loss. Long term insurance Life policy is a contract in terms of which a person, in return for a premium, undertakes to provide policy benefits upon, and exclusively as a result of, a life event or pay an annuity for a period and includes a reinsurance policy in respect of such a contract. Health policies In case of a health policy, the insurer undertakes, in return for a premium, to provide policy benefits on the occurrence of a health event. A health event is an event relating to the health of the mind or body of a person born or unborn. Disability policies A disability policy is defined as a contract in terms of which the insurer undertakes to provide policy benefits upon a disability event. Disability event means the impairment of the functional ability of a person or an unborn. A sinking fund policy A sinking fund policy is defines as a contract, other than a life policy, in terms of which a person, in return for a premium, undertakes or provide one or more sums of money, on a fixed or determinable future date, as policy

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benefits; and includes a reinsurance policy in respect of such a contract. Personal risk plan Living expenses Bond on Bryanston house Bond on Belvedere property HP on vehicle (Sashin) HP on vehicle (Jerusha) Payment on credit card (Sashin) Payment on credit card (Jerusha) Municipal bills Household expenses Travelling expenses: Sashins vehicle Jerushas vehicle Policy on sashins life by Jerusha Insurance Medical Aid contribution Holiday and entertainment provision Cell phones Sashins pension fund contribution Jerushas Provident fund contribution Monthly donation to S.P.C.A P.A.Y.E Sashin P.A.Y.E Jerusha eliminated eliminated eliminated 7640 eliminated 12 000 3900 7000 eliminated 2200 eliminated 500 3400 6000 3000 eliminated 3000 1000 eliminated 12000 61 640

Total

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Living expense for the next 15 years= 61640*80%= 49 312 49312- 7000(household expenses)=42 312 PV for first year P/Y=12 C/Y=1 END N=12 I/Y= 13 FV= 0 PMT= 42312 CPT PV= 475 512.96 Resultant rate= (1+i/1+e) -1 * 100 =(1+0.13/1+0.07) -1 *100 = 5.6075% P/Y= 1 C/Y=1 BGN N=15 I/Y=5.6075 PMT= 475 512.96 FV= 0 CPT PV= 5 004 828.27 living expenses for the first 15 years

Living expenses are expected to be R61 850 per month. 61 850*80%= 49 480

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49 480 in 15 years @ 7% P/Y=1 C/Y=1 BGN/END N=15 I/Y=7 (inflation rate) PV= 49 480 CPT FV= 136 516.88 136 516.88*50%= 68 258.44 per month after 15 years 68 258.44 for (33.316-15) = 18.316 years P/Y=12 C/Y=1 END N=12 I/Y= 13 PMT= 68 258.44 FV=0 CPT PV= 767 105.62 Resultant rate= 5.6075% P/Y=1 C/Y=1 BGN N=18.316 I/Y= 5.6075 PMT= 767 105.62 FV= 0 CPT PV= 9 128 620.62

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Discount to today from 15 years P/Y=12 C/Y=1 BGN/END N=180 months (15*12) I/Y= 13 PMT= 0 FV= 9 128 620.62 CPT PV= -1 459 582.03 (living expenses for Mrs. Maharaj for the rest of her life) Total living expenses required is R6 465 410.30 (R5 004 828.27+ R1 459 582.03)

Mr. Maharaj has the following debt that has to paid off in the event of his sudden death: Liabilities Living expenses Total needed at death Shortfall = 3700 000- 9631510.30 = 5 931 510.30 A policy of R5 931 510.30 should be taken out to account for the shortfall should Mr. Maharaj pass away. 3 167 100 6 465 410.30 9 631 510.30

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R9 631 510.30 is what Mr. Maharaj needs in order for his family to pay off his debts and for his wife and children to maintain the life that they have now.

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Risk inventory Type of risk Personal risk: Loss of income due to death Loss of income due to disability Loss of financial assets due to cost of illness Property risk: Damage to home/property Level of risk Critical Critical Critical Risk handling method Transfer risk by means of life insurance Transfer the risk by means of disability insurance Transfer risk by means of becoming a member of a medical scheme Transfer risk by means of insurance policies on all property Transfer risk by means of motor insurance Transfer the risk by means of short-term insurance

Important

Damage to vehicles Damage to personal property Liability risk: Due to home/property Due to vehicles Due to credits

Important Important

Unimportant Important Unimportant

Retain the risk Transfer the risk by mans of short term insurance Retain the risk

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Recommendation Mr. Maharaj should also provide for disability in case of unexpected death. Mr. Maharaj wants all his liabilities (cars and bonds) to be repaid from a life insurance in his name, we recommend that either he or his wife should take out a Life Insurance policy on his life as soon as possible in the event of his unexpected death, with an amount that will cover all his liabilities. He will also need Insurance for his business. Business risk can have an impact on personal risk and should be mentioned in any risk plan. In the event of the death or disability of his partner Christopher Birdstein, he will have to take over the running of the business alone, collect from debtors and pay creditors. As this be viewed as his personal assets he must create a trust so a to protect his personal assets in case of the business going insolvent or being liquidated. Also his investments are at risk in case of investment devaluation. So Mr. Maharaj should take out a trust mortis causa, so that his assets can be protected from devaluation and his wife and children can received the benefits from his assets event in the event of devaluation. They can also be his trustees. He should be careful when constructing his retirement plan because this can either lead to a peaceful retirement or worrisome one where he constantly will have to worry about shortfalls. Mr. Maharaj also needs to provide for his childrens education. So, he must investment properly so as to be able to provide for his childrens educational needs. His investments must then be protected by means of taking out an inter vivos trust, with his children as benefactors. Also he should take care with the amount any way that he insures his properties so as not to disadvantage his family when his estate duty has to be paid. Mr. Maharaj should also take out a trust to protect his assets (property, cars), in case his business should fall on hard times and become insolvent or be liquidated. To insured that his family doesnt suffer if his business should fail.

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Mr. Sashin Mahara

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Mr. Sashin Mahara

INVESTMENT PLANNING The main objective to investment planning is the need to generate as much income and wealth on an initial investment. The proceeds generated from this initial investment are referred to as the rate of return of an investment, which ideally is expressed as a percentage of the original initial value of the investment. However, there is a simple counteract to only just receiving a return and this is known as risk. Risk is the analysis of uncertainty that arises when an investor purchases or invests in a specific financial asset. Buyers of financial assets or non current assets, (property, shares, policies, gold bonds, etc.), are usually concerned with purchasing these instruments at a low rate of return in essence to produce a higher remuneration of an escalated sales price, maximum possible dividends and or a substantial interest and rent income. Lenders or traders of financial instruments sell or borrow out such instruments usually at a higher rate to enhance opportunities of receiving a greater rate of return that is also referred to as the yield on the investment. The purpose of this section, with reference to Mr. Maharaj, is to create a portfolio investment for the effective future planning of his necessary goals and needs. Mr. Maharajs investment plan requires enough return on his capital to compensate for the well being of his family, to go for overseas vacation, to pay the obligation of his childrens tertiary education as well as to provide a monthly annuity for his brother upon the usufruct right he has acquired before and after his demise. Investment management is structure into many fundamental classes which each have their own procedures, underlying assumptions as well as rules, rights and principles. Mr. Maharajs portfolio will thus contain the following fundamental classes: 50% shareholder in Spectrum Paints (Pty) Ltd The ABSA Money Market Properties Bonds and Gilts

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Mr. Sashin Mahara

INVESTMENT REQUIREMENTS: Shares in Companies Mr Sashin Maharaj owns 3 500 shares in ABSA Bank Limited which is valued at R 378 525 at the current financial period ended on 31 December 2010. ABSA Bank Limited is a listed company on the Johannesburg Stock Exchange (JSE) and is one of the leading financial service providers in the country as well as the continent. ABSA provides consolidated group statements which show that many successful and profitable companies who are in operation are maintained by ABSA Bank Limited.

The information produced is the graph above, proves to the investor that ABSA will and cannot be easily liquidated. The earnings and dividends per share are continuously and constantly increasing and stabilizes well after the recession that the world faced a year or two ago. With the information given above and the portfolio of Mr Sashin, he effectively needs to cater for his childrens, Roshini and Romano, tertiary education as calculated below:

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Capital Required for his childrens tertiary education: James age: 1995 to 2011 = 16 years of age Alices age: 1993 to 2011 = 18 years of age Resultant Rate = 1.09 1.08 = 0.92593%

James Education

Alices Education

PV = 25 000 I/Y = 8 % N = 3 YEARS PMT = 0 CPT FV = R 31 493 PMT = (31 492.80) I/Y = 0.92593% N = 4 years FV = 0 Cpt PV = R 124 248

PV = 25 000 I/Y = 8 % N = 1 YEAR PMT = 0 CPT FV = R 27 000 PMT = (27 000) I/Y = 0.92593% N = 4 years FV = 0 Cpt PV = R 106 523

Thus the total capital required to cater for his childrens future tertiary education is equal to R 230 771 (106 523 + 124 248)

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The money market ABSA Money Market The money market is a well recognised financial instrument dealing with short term investments, less than a year, and reaching maturity dates of shorter time periods. Due to the fact that Sashin and his wife, Jerusha, are highly qualified individuals, Sashin being a senior executive of Didata Holdings Limited and Jerusha being an accountant of Ogilvy Thompson, it can be assumed that as high positions of business status are attributed towards the couple who receives a steady monthly guaranteed incomes. It can also ne stated that such high executive positions normally relies on financial soundness, punctuality, determination to succeed and thus relates majority of people being risk-seekers as they are financially backed. Mr Sashin, as an individual, has already invested R3 500 000 in the ABSA Money Market as at 31 December 2010 and thus enjoys an average interest rate of 6.25% nacm. 2nd Function Date Date 1 = 01.1065 Date 2 = 12.3110 DBD = 16 791 days 16 791/365 = 46 years As calculated above, Sashin is currently 46 years of age and wants to retire in 15 years time at the age of 61 but has many investment needs to satisfy before he retires. Thus the calculation for the current Money Market Investment until he retires is as follows: P/Y= 12 C/Y= 12 PV= (3 500 000) N= 180 months (15x12) I/Y= 6.25 FV= 0 Cpt PMT = 30 009.80 END MODE

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This calculation states that he will be able to withdraw R 30 009.80 each year until he retires. Sashin is, however, required to pay out a monthly annuity to his brother Tom for the remainder of his life equal to 12% of the market value as he inherited the usufruct right of a farm Mooizicht in the Bela-Bela district. The Capital required for this Annuity is calculated as follows: Annuity Rate: MV: THUS = = (341071/12) 12% R 2 842 257 R 341 071 per annum R 28 423 per month

Resultant Rate =

[(1+i)/ (1+e) 1] x 100 Interest= 6.25% Inflation= 6.6% RR= 0.2347%

Tom was 60years old when his father had past away and thus the life expectancy after his next birthday worked out to be 9.37 years. Pmt = N= I/Y = FV = Cpt PV = R 341 071 9.37 years 0.2347% R 3 227 000 R 486 000

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Investment in Several Properties Mr Sashin has invested in bonds on two of his properties. This investment can thus result in capital appreciation as well as rental income. The initial investment on his primary residence is worth R 3 000 000 and a further R 1 500 000 on his holiday home in Belvedere. This is subjected to change yearly due to fair value remeasurements and thus with the current market conditions, property prices are growing continuously and will slowly steady in future years.

With reference to the holiday home in Belvedere, the situation of this property is prime as its in the well recognised and renowned beauty of the Garden Route of South Africa. WE suggest that full advantage can be taken of this holiday home and could be rented out to holiday makers during peak seasons as well as roughly throughout the year. The Holiday Home in Belvedere is approximately 280m2, three bedrooms, six sleeper and has two bathrooms. Prices of property in the coastal regions of South Africa are valued at a premium compared to inland properties in the country. The current value of the Belvedere property is approximately R 5 500 per square meter and should increase annually by at least 4 %. With reference to the holiday seasons of South Africa, 10 weeks of Holidays can be allocated to the year and by subtracting the weeks Sashin has put away for his family, a minimum of 6 peak weeks and 5 off-peak weeks can be subjected to rental income during Sashins financial year. The calculation of this rental income is as follows:

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Mr. Sashin Mahara

SEASON Peak Off-Peak

TOTAL INCOME R 45 000 R 25 000 R 70 000 With reference to the calculation above, a MINIMUM of R 70 000 can be received as rental income which can be used to pay off the bond liabilities quicker as well as an easier way of settling his investment needs. Bonds and Gilts A bond is a formal contract in which a borrower receives money from a lender and this money is paid back to the lender at intervals with interest. It is also a debt security which requires formalities such as terms of the contract, exact maturity dates as well as coupon rates and maturity levels. Mr Sashin, as an individual, has two bond contracts taken out on his name as at 31 December 2010, the first one being a priority on his primary residence in Bryanston which is in debit of R1 700 000. The second bond is on a holiday home in Belvedere at which the bond is currently valued at R 1 000 000. Prime Interest Rates South African Home Loans Interest Rates, since Jan 4 1999. 25 Mar 10 10.00% 14 Aug 09 10.50% 28 May 09 11.00% 04 May 09 12.00% 24 Mar 09 13.00% 06 Feb 09 14.00% 12 Dec 08 15.00% 13 Jun 08 15.50% 11 Apr 08 15.00% 07 Dec 07 14.50% 15 Oct 07 14.00% 20 Aug 07 13.50% 11 Jun 07 13.00% 11 Dec 06 12.50% 13 Oct 06 12.00% 03 Aug 06 11.50% 12 Jun 06 11.00% 18 Apr 05 10.50% 16 Aug 04 11.00% 15 Dec 03 11.50% 20 Oct 03 12.00% 15 Sept 03 13.50% 15 Aug 03 14.50% 13 Jun 03 15.50% 13 Sep 02 17.00% 14 Jun 02 16.00% 18 Mar 02 15.00% 16 Jan 02 14.00% 01 Oct 01 13.00% 16 Jul 01 13.50% 16 Aug 99 16.50% 14 Jul 99 02 Jul 99 17.50% 18.00%

WEEKS 6x5days = 30 5x5days = 25

PRICE PER DAY R 1 500 R 1 000

03 May 99 19.00% 02 Apr 99 20.00% 02 Mar 99 21.00% 02 Feb 99 22.00% 04 Jan 99 22.75%

18 Jun 01 13.75% 01 Feb 00 14.50% 04 Oct 99 15.50%

The current prime interest rate on home loans and property bonds are 9.0 % respectively.
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Mr. Sashin Mahara

Due to the fact that Mr Sashin is planning a holiday for his family in 5 years time, the results of paying his debt off will allow him to cater for such a luxury. The total trip would cost R 125 000 today but will increase by 8% per annum and thus can be calculated as follows:

Capital required for Overseas Vacation:

A total amount of R 183 666 will be required in 5 years time to pay for the vacation for his family.

P/Y=1 PV= I/Y= N= PMT= CPT FV=

C/Y=1

END MODE R 125 000 8% 5 YEARS 0 R -183 666

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Summary of Sashins Investment portfolio Holiday Home in Belvedere This asset is currently worth R 1500 000 and consists of 21 % in the investment portfolio. Since it is a noncurrent asset of Property it is illiquid and cannot be transferred to cash overnight. The risk on the asset can be calculated as an average point depending majority on the market and economy of the country. Property does not generate income unless it is rented out. However, it can reap profits on the sale of the asset which is subjected to Capital Gains Tax on the asset. ABSA Shares These share produce 5% 0f the investment portfolio of Mr Sashin with respectable market value of R 378 525. Markets a very volatile and thus is very risky which effectively create higher returns which are known as dividends. These shares and dividends are liquid can be cashed out at anytime but upon sale are subjected to Dividend Tax as well as Capital Gains Tax. 50% Shareholder of Spectrum Paints (Pty) Ltd Since Sashin is the joint partner in the company which is currently worth R 500 000 at market value, it completes 7% of his investment portfolio. He also receives remuneration in the form of a salary and therefore in subjected to income tax. The company is illiquid and is subjected to Capital Gains Tax upon the sale of the business. Loan from Spectrum Paints (Pty) Ltd Sashin, as the partner of the company, has taken out a loan from the company to the value of R 600 000 which has to be income taxed as it is in his hands. It comprise of 8% of his investment portfolio and does not reap any benefits in terms of remuneration. ABSA Money Market The Money Market is a conservative fund with a reasonable return which consist of the majority of Sashins investment portfolio of 48% and a market value of R3 500 000. Its liquidity is almost none and consists and is the least risky. It generates a monthly income known as interest and is subjected to pay income tax. No other taxes are required for the instrument. Pension Fund Money Market Mr Sashin has invest R 400 000 in a pension fund money market to complete 5% of his investment portfolio. It can only be used upon reaching 65 years of age and thus is not very liquid but endures the same characteristics of the ABSA money Market. Any pension Fund instrument entails no real good return. Pension Fund Bonds These are bonds taken out to cater for needs upon retirement at a value of R 160 000 which is only 2% of Sashins investment portfolio. Its risk is considered to be at an average rate which produces a monthly remuneration called coupons. Pension bonds are not subjected to any kind of taxes. Pension Fund Shares This asset completes the last 3% of Sashins investment portfolio at a market value of R 240 000. Its very risky and volatile to market conditions but share the same implications of pension fund bonds but in essence receive dividends.

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Advantages and Disadvantages of the Investment Fundamental classes FUNDAMENTAL CLASS MONEY MARKET ADVANTAGES Diversification The money market fund considerably reduces the risk of companies by investing in several institutions which holds securities for the bulk of investors. This way a huge monetary loss is saved. Affordability An investment opportunity always arises from relatively small investments. Thus the money market encourages investing more due to a low risk. Liquidity Money market instruments are traded continuously throughout the business week which entitles the investor to cash out at anytime if the need to use that specific money arises. Bonds And Gilts Security Bonds are debt securities which suggest that the issuer of the bond is legally entitled to the remuneration of interest upon the obligation signed by the purchaser. DISADVANTAGES Uncontrollable The market volatility is independent of the investor and thus depends strictly on the skill of the banker the money market investment is taken out with.

Fund Managers Fund managers are the bankers of the money market and thus are all not completely successful so research is required before investing. Costs Many fund manager fees, administrative fees, sales costs, redemption fees as well as sales commissions could impact the substantial return on the investment. Research is required once again.

Unsteady Purchase prices constantly change and a significant loss could occur as the market volatility increases.

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Manageable Bonds are traded like securities by the government, businesses and private financial individuals. Recommendations We, Paladin Financial Planners, comment that Mr Sashins investment portfolio consist of relatively high risk assets and this should somewhat change to prevent major losses from market fluctuations. This can be achieved by diversification of his current investment portfolio. Diversification is the process of where investments are not all invested in the same thing but also to invest in several different financial instruments of different organisations. A less risky approach should be taken as Mr Maharaj is a middle aged man, who runs a family of three dependents and requires a significant amount of capital to account for future needs and desires. The current investment portfolio consists mainly of shares and property which are risky and in essence do not receive much of a return. We suggest that Mr Sashin should start saving and invest in government bonds as well as some equities. The below description will help Mr Sashin to understand: Cash 20% Cash is a risk free asset although the purchasing power may differ to economic instability. It is already in liquid form. It can gain interest if the money is saved and increased monthly upon savings which will then generate interest. Bonds 30% Governments bonds are a risk free asset but bond also entail a low risk volatility which is indirectly proportional to interest rates and generally exposed to default risk. He should invest for longer periods of time only then will he be rewarded generously for his investment. Gold 10% Gold is a commodity that is a Limited resource. Prices are effectively always increasing due to the fact that no more gold will be found in the near future. Thus collectable Mandela, Kruger coins should be invested into and not sold early as a higher price can be obtained as the need arises. Equity 40% A capital growth is required to finance investment needs in the near future. Thus, securities in local, markets that are easily accessible should be considered.The main idea of the diversification model is to create a positive and reputable collective investment scheme. Proper research needs to done to ensure that higher dividend, interest and income yields are achieved in direct securities not forgetting the current market conditions of the South African economy as well as the stability of the Rand against foreign currencies.
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Business Assurance
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Mr. Sashin Mahara

BUSINESS ASSURANCE Buy-and Sell Agreement Proposals One has to always take into consideration the amount of investment put into his business. Where you expect to see it go in the future as well as what will be done if the unexpected happens. Buy-and-Sell agreements are implemented in the event of the death or disability of a partner and help protect the assets if the company. A Buy-and-Sell agreement is one where the partners/shareholders/members of a practice commit to the obligation of selling their share of the practice to their partners/shareholders/members upon the event of death or disability. Life assurance is the only way in which a guarantee can be made to receive the capital needed to either wind-up the company or purchase the partners share in the practice. This is needed due to the fact that most personal assets of partners/shareholders/members are tied up in the business. The members of the Buy-and-Sell agreement in effect assure one anothers lives and need to pay the premiums in order to reap the tax benefits. If there is credit loan account the members may also may a provision in the agreement to cover this amount. The agreement protects the company from many drawbacks, they include: Immediate cash availability The owners receive immediate ownership of the practice The heirs receive their interest in the practice at fair value The need to pay 100c in the rand plus interest is quelled due to the fact that a life policy is cheaper Capital resources of the business are left untouched Mr. Maharaj and Mr. Birdstein own Spectrum Paints (Pty) Ltd and are equal and joint owners at 50% each. In this case they will both take out Buy-and-Sell agreements on one anothers lives in the event of possible death or disability. With the hiring of Mr Cox, he will receive 20% (100%-20%=80%/2=40%) interest in the business. Upon the death of either Mr. Maharaj (40%) or Mr. Birdstein (40%) the remaining interest in the practice will need to be purchased in order for Mr Cox to continue as a partner. This too will need to be covered buy the Buy-and-Sell agreement in the form of a credit loan account. The remaining interest, after Mr. Maharaj has purchased 50% of the interest will go to Mr. Birdsteins heirs. With the initiation of the Buy-and-Sell agreement all pitfalls surrounding any uncertainties that the practice could experience upon any unforeseen events will be covered. Leaving the business with enough capital to stay faithful to all long term contracts, such as: The employees of the practice may apply for severance pay The landlord may wish to recover the rental for the full rental agreement period All long term agreements (like technology rental agreements) will remain payable even after the practice closes All hire purchase agreements will remain enforceable and payable even if the practice closes down
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Key-Man Insurance Proposal Life assurance taken out by the employer on his employees who are considered vital to the operation of the business: Managing director Accountant Sales manager Technical staff o Engineer o Scientist o Chemist In the event of the illness, disability, or death. It is important to manage the risks attached to the owners and the key persons in the practice. If these risks are left unchecked, the implications for the estate of the affected owner, the remaining owners and the practice could be devastating. It threatens the future existence of the practice and the wealth of the owners. The Key-man policy would be initiated to: Should there be any loss of business profits, the proceeds of the policy will compensate for this Cash is available to finalize uncompleted projects A new employee may be recruited and trained The other employees are not affected because they perceive that the business is equipped and has a contingency plan to cater for setbacks The credit standing of the business is not affected The death of Mr. Maharaj, Mr. Birdstein or Mr Cox could be highly detrimental to the continuation of Spectrum Paints (Pty) Ltd. It is because of this fact that Mr. Maharaj will need to take out life assurance on Mr. Cox since Mr. Maharaj has invested in Mr Cox to take over the position of Mr. Birdstein upon his retirement or unexpected death or disability. Mr. Maharaj has also taken out life assurance on his life in which case his children are the beneficiaries. Mr. Maharajs wife has initiated life assurance on his life too, in the event of him passing away. This will create a safety net for the family and help cushion any financial burden. In order for Mr. Maharajs business to qualify for the SARS tax deductions certain requirements need to be met, namely: The insured event for employers is restricted to key employees job terminations stemming solely from an employees death, disability or severe illness. Deductible premiums will be limited to term policies that solely cover the employer against insured risks. Policies with investment elements will not be permitted. The employer must be the sole owner and sole beneficiary of the policy throughout the year of assessment in which the premium is paid.
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Deferred Compensation Possible Proposals Deferred compensation is a written agreement between an employer and an employee where the employee voluntarily agrees to have part of their compensation withheld by the company, invested on their behalf, and given to them at some pre-specified point in the future. This scheme is usually implemented for key-persons or executive directors. It does however have a reputation as being called golden cuffs since the employee doesnt have a vested right till maturity How it works: The employer invests in an endowment policy, which earns interest during employment and matures on or close to the employees retirement. Employer and employee sign an agreement where-by the employee has no vested right to the endowment policy till maturity/retirement/disability. At maturity/retirement/disability the employer has a duty to pay out the policy. Currently SARS allows a tax deduction of R30000 and the remaining amount taxed normally. It has not been revised in over 20 years and due to inflation its value has greatly depreciated. This type of scheme is usually aimed at high-income earners, tax bracket of 40%. Mr. Maharaj should implement the scheme by taking out an endowment for Mr Cox. He is a very important employee in the business and expected to continue the survival of the practice in the coming years. He will receive the payout upon maturity, retiring or disability and the Mr Maharaj is entitled to pay out the policy. This will also create an incentive for Mr Cox to stay on and fulfill his duties. Restraint of Trade An amount is paid to either an executive or employee with the condition that he may not become involved with a similar type of trade in a pre-agreed time limit. Mr. Maharaj may receive a tax deduction in the event that he enforces the restraint of trade upon Mr Cox if he leaves the company with the intention of starting his own company. The amount is calculated as follows: Amount/N; N = number of years for which the restraint of trade is in forced 1/3 of the amount May be deducted if Declared as income in the hands of the receiver The portion of the payment that qualifies will be divided in three equal amounts over three tax years or divided by the number of years for which the restraint is in force

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TAX PLANNING The primary interest for both individuals and companies with regards to income tax planning is to reduce the amount of income tax payable in the tax year period by following the current tax laws. This section of financial planning is the process where by individuals and companies will pay the taxes imposed upon their income in the given period. For individuals this may include income or revenue in the form of interest, investment portfolios, salaries, wages bonuses and other sources of income clearly defined by the law. Paladin (PTY) Ltd intends in offering the greatest possible service and advice to our clients when it comes to planning the payment and keeping up to tax demands. We find that many of todays individuals and companies have the greatest intentions to pay their taxes. Time after time we reach the point in the year where are delivered with the news of a large tax bill which is the cause of poor planning, whether it was by mistake or not. It is important to keep a continual record of what is received and paid for the duration of the tax year. Effective Tax Planning Program
Simple to use and understand Beginning and end point with steps in between Can be updated Has a worse case scenario Uses current income and expenses Understanding financial goals Knowing how to capitailse available resources

A simple yet effective tax plan following the above points will help any individual or company advantageously. Tax burdens can be greatly decreased by delaying certain income till a later year. All purchases have tax effects and by timing your purchases you can decrease these. Taking into consideration all your income. Identifying how fluctuations in your income will influence your tax expenses. A good tax plans intention is to decrease tax payable, reduce direct taxable income and to increase and take advantage of all deductions.

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Reducing Taxable Income There are many institutions, which an individual may invest in, in order to decrease or avoid being taxed fully or on a portion of their income. A perfectly legal and excepted investment tool is bonds. Interest paid by the government is not taxable. Equity investments are also good sources of tax deductions (R22500) on interest, however interest exceeding the deduction is taxed according to an individuals tax bracket. All South African dividends are not taxed by SARS due to the idea that it will encourage investors to continue investing into the domestic market. The use of a retirement annuity (Pension or Provident Fund) can greatly decrease your income and in turn decrease your tax liability. This can be done either through your company or by investing in a investment institution. The contributions to these funds are not taxable and therefore reduce tax expenses. Almost everyone can claim a tax rebate deduction, depending on your age, it can be higher than the average individual. On all capital gains an individual may receive a deduction of R20000 on any gains that they will receive in the year. In terms of Mr. Maharaj we recommend that he continues to reinvest his dividends from his investments into his shares and money market. With regards to his income it would be a good idea to continue investing into his retirement annuity funds. This would in return reduce his total income and tax expenses.

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Mr. Sashin Mahara

Gross income Salary (RFI) SA Interest Trustee remuneration Income from Trust Exemptions Interest Income Less deductions Generaldeduction Pension RA 1 Add Capital gains tax 2 Add travel allowance Donations Medical Medical Taxable income Tax rate Less primary rebate Tax payable Less PAYETax outstanding Tax outstanding

R 1 149 550 R 748 800 R 218 750 R 16 000 R 166 000 -R 22 800 -R 22 800 R1126750 -R 150 240 -R 60 000 -R 50 400 R0 R 60 500 R 101 109 -R 12 000 -R 27 840 R1138119 R 391 497 -R 10 755 R 380 742 -R 216 000 R 164 742

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Gross Income Less exemptions Less RFI Less general deductions NRFI 15% of NRFI

R 1 149 550 -R 22 800 -R 748 800 -R 60 000 R 317 950 R 47 692.50 pa R 3 974.38 pm

By implementing what has been recommended above, Mr. Maharaj will be able to take full advantage of his tax position, including tax deductions, tax exemptions and tax exclusions. It will decrease his tax obligations and increase his cash flow allowing him to either invest in other tax-free dividend yielding investments or back into his company increasing its value solidifying its continuation. Making his tax returns and obligations simple will help him ease any unwanted or extra pressure allowing him to concentrate on what is important.

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RETIREMENT PLANNING Required

Sashins retirements plan will be based on the following specifications: 1. Sashin wants to retire in 15 years and: Hes current contribution to his pension fund will increase by 7% p.a. Living expenses to increase by 5% per annum. Living expenses to reduce by 20% when children have completed their studies. Hes wife (Jerusha) to retire in 10 years time. The after tax proceeds of her provident fund will be used to pay debt. This will result in a further reduction of the living expenses by 10% at that time. When Sashin retires, living expenses is to reduce by another 10% and the monthly pension required is to be calculated based on his wifes life expectancy plus a safety factor of 10 years. Return on all investments except money market, ABSA shares and Spectrum Paints to be taken at 9% per annum. Sashin would like to know the expected value of his ABSA shares investment which is to grow by 7% as well as the value of the Spectrum Paints investment as per the guidelines from the auditor. However both these investments must not be considered in his retirement plan. He regards them as a safety buffer.

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General Many people overlook the importance of planning for retirement. Many of us would love to live our dream lifestyle after we retire but not everyone takes the necessary steps to make this dream a reality. When deciding on planning for the future we need to consider our options very carefully. Since retirement is all long term goal one would look to save/invest a part of their income in more steady and less risky investment which will yield a sufficient growth to be able to meet future objectives. As attractive as higher returns on certain shares are it may be not in your best interest to expose yourself to high risk when planning for the long term. There are many ways to invest your money but you must also consider a number of other variables. Retirement annuities, investment in bonds, pension plans and fixed investment, etc. are all different ways to grow your money but it is also important for you to consult qualified financial advisors to help you get the most out of your investment and retirement planning and help with critical decision about your retirement. Life cover is also important so as to make sure your loved ones are well taken care of after if anything may happen. Fixed deposits and alluring investment opportunities may appear as high return instruments but may not always be as promising as they seem thats why it is important to seek advice from financial advisors and stock brokers. By starting early on planning your goals on and after retirement it will make your road to financial freedom that much clearer. Knowing how you would be spending your retirement years will also helping in knowing the amount of disposable income you would need to put away and what age you could work until because living of a government grant might not be enough later on in life. This all depends on when u start saving so saving as soon as possible is highly recommended. Managing disposable income in a more responsible way by using budgeting is always a good starting point for a moving towards a comfortable retirement. Even though there is no real guarantee It is also recommended that you consider life expectancy when planning and any other important variables like inflation and any material economic conditions happening. Knowing what life you want to lead after retirement is at the core of your retirement plan and no one can define that but you. So having a clear understanding of what you want out of your retirement is a key. So saving as soon as possible and asking the necessary questions about your future while pave the road for a comfortable retirement.

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Calculations Calculating capital required FV of living expenses James' age:

2011-1995

16

years old

Dependant: 23-16 7 years Living expenses while children is studying and before Anne retires PV 1683120 140260x12 N 7 I 5% FV R -2 368 319 Living expenses after children have completed their studies before Anne retires PV R -1 894 655 80% N 3 I 5% FV R 2 193 300 Living expenses after children have completed studies and after Anne has retired PV R 1 973 970 90% n 5 i 5% FV R -2 519 342 Capital required for living expenses over life expectancy plus 10 years Jack 2011-1965 46 years old 47 Jerusha 18,04 28.04 Resultant rate 3.80952% Begin mode pmt n i pv Future value of pension fund FV of Pension fund Resultant rate 1.86916%
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ANB ANB

2011-1966

45

years old

61

life expectancy of Jerusha Plus 10 years 9%-5%

R -2 267 407 R 40 129 518

28.04 3.80952%

90% Capital required at retirement

9%-7%

Mr. Sashin Mahara

R 50 400.00 begin mode pmt n i pv begin mode pv n i fv

annual value of recurrent contributions R 50 400.00 15 1.86916% R -666 pv of pension fund 211.30

R 4 466 211 (699599+800000) 15 9% R -16 268 fv of pension fund 095 FV ABSA Money Market pv R 3 500 000 i 6.43% n 15 fv R -8 915 868 FV Old Mutual Resources Fund pv 730 000 i 9% n 15 fv R -2 659 012 Available R 27 842 976 Required R 40 129 518 Shortfall R -12 286 543 FV Spectrum Paints pv 500 000 i 8% The value of the Company is expected to grow by 8% per annum. n fv 15 R -1 586 085

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Recommendation The provision that is currently used will not be enough to satisfy the capital required at retirement. In order to counter this I recommend that Mr Maharaj invests retirement annuities. It is a way to make additional retirement savings outside of an occupational scheme(pension fund) The contribution is deductible from taxable income minimizing tax expense A third of the contribution can be taken as a lump sum The remaining contribution is invested in a scheme that will provide a monthly pension It is protected against creditors cannot access funds until 55 years old which is fine because Mr. Maharaj is planning on retiring after that age. The two thirds left over of the contribution(after retirement)is free of tax This option should be considered along with a comprehensive investment strategy.

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Estate Duty Planning Estate Planning The arrangement, management, securement and disposition of a person's estate so that he, his family and other beneficiaries may enjoy and continue to enjoy the maximum from his estate and his assets during his lifetime and after his death, no matter when the death may occur. Importance of Estate Planning The purpose of succession planning is to ensure that the wishes of the client are carried out. A client's chosen beneficiaries should benefit from the death of that client in accordance to his last will. An estate plan also has the following objectives: 1.Commercial soundness The plan must include a strategy to ensure the growth and protection of a client's assets. The use of a trust, for example, can provide asset protection.

2.Liquidity The plan must identify, and provide for the income requirements of the client and those of the client's dependants and beneficiaries. Appropriate insurance policies and other investments products can provide the necessary liquidity.

3.Good governance The plan should provide for the efficient administration of the estate ( both during the lifetime and after death) and for the preservation of documentation.

4.Flexibility A plan must be adapting to changed circumstances. The needs , assets, liabilities, marital status, dependants and other circumstances of a client are continuously changing.

5.Minimisation of all costs including taxes Plan must ensure that all costs including taxes are minimised.

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Mr Maharajs Estate Total Assets House in Bryanston Holiday house Bare dominium Furniture Vehicles Absa shares Spectrum paints Absa money market Policy payable to estate Policy payable to Roshini Policy payable to Romano Total assets Accrual 3000 000 1500 000 403 441 600 000 800 000 378 525 500 000 3500 000 2600 000 1000 000 1000 000 1528 1966 Accrual 3000 000 1500 000 403 441 600 000 800 000 378 525 500 000 3500 000 2600 000 1000 000 1000 000 1328 1966

Total assets Liabilities: Credit card Hire purchase vehicle Bond on the house Bond on holiday home Capital gains tax Total liabilities Specific assets excluded: Holiday home Policy proceeds End value Adjusted begin value 500 000*615/120 600 000*615/120
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Sashin 1528 1966 22 000 445 100 1700 000 1000 000 59 464 (3226 564) (1500 000) (403 441) 1015 1961 (2562 500)

Jerusha 4208 000

(409 000)

3799 000

(3075 000)

Mr. Sashin Mahara

Accrual

7589 461

724 000

Difference Half

6865 461 3432 731

Executor's fee Property House Holiday house Bare dominium Furniture Vehicles Absa shares Spectrum paints Loan Absa money market Deemed property Policy payable to estate Total assets

3000 000 1500 000 403 441 600 000 800 000 378 525 500 000 600 000 3500 000 2600 000 1388 1966

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Capital gains tax Market value 3000 000 1500 000 403 441 Base cost (1500 000) (600 0000 (214 607) Exemption Roll over R0ll over Personal asset Personal asset Gain 0 0 188 834

House in Bryanston Holiday house Bare dominium Mooizicht Furniture Vehicle Absa shares Spectrum paints Total gain Annual exclusion Net gain Inclusion rate @ 25% Tax rate @ 40%

378 525 500 000

(129 500) (143 214)

249 025 356 786 794 644 (200 000) 594 644 148 661 59 464

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Residue Assets Cash legacies Holiday house Primary residence Deductions before sec 4q Residue Estate duty Property House in Bryanston Holiday house Bare dominium Furniture Vehicles Absa shares Spectrum paints Absa money market Deemed property Policy payable to children Policy payable to estate Policy payable to Jerusha Buy and sell policy Gross estate Deductions Funeral costs Capital gains tax Master's fee Liabilities Accrual claim Executor's fee Sec 4q legacy Sec 4q policy
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1388 1966 (1000 000) (1500 000) (3000 000) (6548 786) 1833 181

1128 966 3000 000 1500 000 403 441 600 000 800 000 500 000 600 000 3500 000 4100 000 2600 000 1500 000 1538 1966 (1508 1966) 35 000 59 464 600 3167 100 3432 731 3432 731 3000 000 1500 000

Mr. Sashin Mahara

Sec 4q residue Sec 4q donation Dutiable estate Abatement Net estate

1833 181 1500 000 300 000 (3500 000) 0

Liquidity Cash in Absa shares Absa money market Policy payable to estate Buy and sell policy Cash out Cash legacies Liabilities Estate duty Cash surplus 7478 525 378 525 3500 000 2600 000 1000 000 (4816 055) 1000 000 3816 055 0 2662 470

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Recommendations to Mr Maharaj Last will and testament In terms of his will Sashin has bequeathed some of his estate to his wife and children. Therefore I would advise him to ensure that none of them are witnesses during the signing of the will, as it may disqualify them from inheriting. Dependents ages As I observed the ages of the children I have noticed that they are not yet older than 18 years, which renders them to be minors. Therefore I advise Mr. Maharaj to protect them against the guardian fund in case of the death of both the spouses, because the returns from the guardian fund are relatively low and it is corrupt. Executor's fees Mr. Maharajs executor's fee calculation is relatively higher as they include vat. I urge Mr. Maharajs to check whether the appointed executor is a vat vendor and negotiate to pay 3.5% instead of 3.99% fee charges. Conclusion Mr. Maharaj has made an excellent choice of drafting a will and planning for his estate, as these would ensure that his family would be taken care of even when he is no longer there to take care of them.

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Conclusion
The information contained in this presentation represents the importance we have placed on your present and future financial needs Financial Plan: A financial plan is of greatest importance. It must be reviewed consistently and implemented with great care. Budget: With the use of a budget all spent funds can be reliably traced creating a opportunity to save and spend smartly. The wealthy are where they are today because they dont spend money on anything they dont need as well as not living beyond their needs. It will help with retirement and other investments Pay off Debt: Debts should be payed off as soon as possible as it may lead to unexpected expenses. Create a savings plan: As mentioned allocate sufficiently for savings for purchases, retirement and investing. Minimize Tax Expense: This could be achieved in a number of ways, including trusts and companies and should always be a consideration when making any business or investment decision. Saving can be significant when all tax savings are correctly implemented. Review your insurance coverage: Sufficient personal and business insurance is crucial. Under insuring yourself could land you in very hot water with regards to your cashflow, both in your personal estate and business. Update your will: Ensure that your dependants are taken care of and that upon death, the taxes and other expenses are minimised. All information above is not to be considered as legal advice

Maximus Financial Advisors (PTY) Ltd

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Bibliography
Investment Planning www.corporateinformation.com www.housepricesouthafrica.com http://capitalminds.co.za/2011/05/24/the-long-term-outlook-for-the-bond-market-in-sa/ http://propertyloans.co.za/interest-rate-history/

Business Assurance http://southafrica.smetoolkit.org/sa/en/content/en/5051/Buy-and-Sell-agreements-secure-your-company-sfuture http://southafrica.smetoolkit.org/sa/en/content/en/5050/Key-Person-Insurance http://www.ey.com/ZA/en/Services/Tax/Special-Tax-Alert---Tax-proposals http://www.darwinsfinance.com/deferred-compensation-plan/ http://www.news.totallyexpat.com/south-africa-unveils-20102011-budget/ Tax Planning http://www.deloitte.com/view/en_US/us/Services/tax/Private-Client-Advisors-Tax-WealthPlanning/Individual-Income-Tax-Planning-and-Compliance-Wealth-Advisors/2011-tax-wealth-planning-guide/ http://www.caclubindia.com/forum/tax-planning-guide-2011-128159.asp http://www.taxrates.cc/html/south-africa-tax-rates.html Fundamentals of Financial Planning. South Africa: LexisNexis Botha, M. du Preez, L. Geach, W. Goodall, B. Palframan, J. & Rossini, L. (2001)

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