WHY OFFSHORE BONDS FOR TRUSTEE INVESTORS Gavin Jobson-Wood Investment Development Manager

1. WHY OFFSHORE BONDS FOR TRUSTEE INVESTORSGavin Jobson-WoodInvestment Development Manager For financial adviser use only

2. Agenda Who’d be a trustee in 2009? How can offshore investment bonds help? How can we help?

3. Increase in taxation • From 6th April 2010, trust income tax rates will increase from: 32.5% to 42.5% for dividend income 40% to 50% for all other income Affected trusts will not benefit from the £150,000 income limit applying to individuals. (But £1000 basic rate band remains)

4. The trustee investor faces unique challenges Increase in taxation Market Greater accountability Falling interest rates volatility

5. Trustee Act 2000 • Trustee duties • Wide investment power • Standard investment criteria • Investment advice

6. Standard investment criteria • Suitability to the trust • The need for diversification • Review trust investments from time to time and consider if they should be varied.

7. Consider ‘proper’ investment advice • Proper advice is advice of a person who is reasonably believed by the trustee to be qualified to give it by ability and practical experience of financial and other matters relating to the proposed investment.

8. Who’d be a trustee in 2009? Every trust with an appointed adviser must have a written investment policy statement Overall level of return and yield Income and capital requirements Ability to distribute capital in place of income Nature and timing of liabilities Liquidity requirements Time horizons of the trust Base currency

9. Who’d be a trustee in 2009? Every trust with an appointed adviser must have a written investment policy statement Time horizon of performance Residency and tax status of the trust Residency and tax status of the beneficiaries Social responsibilities Tax and/or legal restraints

10. Trustee Investment – Benefits of bonds as trust investments Trust Tax deferral possible Offshore Bond Limited tax administration Inv Trusts OEICS Bank A/C No CGT on switching assets

11. Trustee investment Beneficiary encashes at their tax rate Trust Bond Segment Segment Segment Segment Segment Segment Beneficiary

12. CMI Global Investor Discretionary Management Open architecture SIPP & SSAS Institutional terms Superior service Discounted fund terms Online quotes & valuations Gross interest payments

13. Gross returns – the benefit Source: Lipper Hindsight, Returns: sterling returns; Tax basis - net for IP Corporate Bond Acc and sector, gross for IP Corporate Bond Gross Acc; Total return, no initial charges. The value of an investment can go up and down as a result of market movements. You may get back less than you invested. Past performance is not a reliable indicator of future performance.

14. Marketing support • Guide to trustee investment • Standard investment criteria guide • Statement of investment principles guide • Portfolio Architect • Offshore bonds v OEICs calculator

15. Offshore bonds v OEICs calculator

16. Offshore bonds v OEICs (example figures) £500,000 investment,100% into fixed interest Assumptions Charges have been set to be equal so this is a direct comparison for tax. In reality, the total charges will vary from product to product. All products have 1% AMC (plus 0.02% assumed dealing costs) only. Investor's tax status remains the same throughout. For OEIC only one assumed CGT allowance is used at the end of the term. OEIC Charges are paid from income. Higher rate tax payments on the income from the OEIC are taken from the fund. CGT allowance grows with inflation of 2.5%.

17. Technical support • Email enquiry service*: financialplanning@scottishwidows.co.uk • Fax: 0117 376 4005 * *PIN number required.

18. CMI www.clericalmedical.co.uk CMI Insurance Company Limited, Clerical Medical House, Victoria Road, Douglas, Isle of Man IM99 1LT, British Isles. Registered No. 33520, Isle of Man. Telephone: +44 (0)1624 638888. Fax: +44 (0)1624 625900. Approved by Clerical Medical Financial Services Limited, 33 Old Broad Street, London EC2N 1HZ. Registered No. 2114901, England. Clerical Medical Financial Services Limited is authorised and regulated by the Financial Services Authority. Financial Services Authority rules are made under the Financial Services and Markets Act 2000 for the protection of investors and apply to investment business conducted in or from the UK. Holders of policies issued by the company will not be protected by the Financial Services Compensation Scheme if the company becomes unable to meet its liabilities to them. CMI Insurance Company Limited is supervised by the Isle of Man Insurance and Pensions Authority and its policyholders receive the protection of the Life Assurance (Compensation of Policyholders) Regulations 1991. This presentation is aimed at financial adviser only. If you reproduce any part of this information to use with retail clients, you must ensure it conforms to the Financial Promotions rules. In addition, if used to advise retail clients, you are subject to the advising and selling rules. This information is based on our understanding of current legislation and Revenue practice, which is subject to change. Full details are available from CMI Insurance Company Ltd on request. Sept 2009