mackenziefinancial.com How to Use Segregated Funds

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1 mackenziefinancial.com How to Use Segregated Funds M a c k e n z i e S e g r e g a t e d F u n d s A V a l u a b l e S e t o f B e n e f i t s

2 The Segregated Fund Basics A segregated fund is an investment fund that you hold within an insurance contract. The term segregated refers to the fact that your investment is separated from the assets of the company. Your insurance contract dictates the insurance protection you receive. So segregated funds are an insurance contract that provides you investment management plus protection. Segregated funds are similar to mutual funds in many respects but provide a number of additional features and benefits. Similarities To Mutual Funds Professional Money Management Like mutual funds, segregated funds are managed by professional money managers who have the experience and skills necessary to effectively manage your money. They also have access to economic data, company research reports and technology that may not generally be available to you. With Mackenzie Segregated Funds you have access to toptier Mackenzie investment managers. Diversification Like mutual funds, segregated funds provide you with access to diversified investment portfolios. Diversification or spreading your assets among a variety of different investments, is an investment strategy designed to lower a portfolio s overall risk while enhancing returns over time. Benefits Beyond Mutual Funds Maturity and Death Guarantees Depending on the contract, an investor can choose from a number of options that guarantee a minimum of 75% of the total amount you paid to the contract upon death or contract maturity*. Mackenzie Segregated Funds offer you two choices of guarantee levels so that you only pay for the protection that you need. Potential Creditor Protection This feature is of primary concern for business owners or professionals as their assets may be exposed to creditors. Estate Planning Made Easy Proceeds of your contract are paid directly to your beneficiary, avoiding the time and expense of probate. Consumer Protection Segregated funds are eligible for coverage by The Canadian Life and Health Insurance Compensation Corporation (CompCorp). This plan generally protects Canadian policyholders, up to a maximum of $60,000 of guaranteed payments, from loss of benefits in the event of the insolvency of the company. Less Worry For You Mackenzie Financial Corporation wants to make your investment grow without worry, through ease of planning, flexibility and investment choice. Managed by some of the top money managers in Canada, and the world, Mackenzie Segregated Funds offer you true investment peace of mind.

3 How To Use Segregated Funds in Estate Planning Peace of mind for you and your heirs should be top of mind when planning your estate. Segregated funds may not only maximize the value of your estate, they may preserve its value for those you care about. Segregated funds can help you and your heirs by transferring your wealth quickly and by providing growth potential coupled with risk protection through guarantees ranging from 75% to 100% of your investments. It Is Never To Early To Start Planning Your Estate Segregated funds are commonly thought of as a mutual fund with the protection of an insurance policy. In fact, segregated funds are actually individual variable annuity contracts issued by a life insurance company. Because of this they are not subject to the public probate process, provided you name a beneficiary other than the estate. This allows the proceeds to quickly pass directly to your chosen beneficiary. Probate can be a costly, time-consuming process, through which the executor of an estate must seek court certification that a will is legally valid. Until the will is probated, nobody including your heirs can obtain access to any of your assets, including bank accounts, real estate and investment funds. Segregated Funds Offer The Following Advantages: 1. Minimize Costs There are costs associated with settling an estate including probate fees, legal fees and accounting/trustee fees. This chart outlines the costs associated with settling an estate involving other investment products and compares them to segregated funds. Costs Stocks, Bonds, Mutual Funds. GICs Segregated Funds Probate Fees Up to 1.5% Nil Legal Fees 3 6% Nil Accounting/Trustee Fees 2 5% Nil Potential Estate Costs Up to 12.5% Nil By choosing segregated funds you can eliminate these fees and ensure that the full value of your investment is passed to your beneficiaries. 2. Eliminate Lengthy Delays In Distributing Your Assets By avoiding probate, your beneficiaries can access your assets without delays. Instead of waiting for the settlement of the estate your chosen beneficiaries will receive the proceeds immediately. 3. A Death Benefit Guarantee Preserves The Value Of Your Estate Upon death, not only do your beneficiaries receive the proceeds immediately, they are guaranteed to receive a minimum of 75%, and up to 100%, of your investments regardless of their current value. The amount of the guarantee depends on which level of protection your choose. 4. Protect Your Privacy Probate is a public process and information associated with it is accessible to the public. By avoiding probate, segregated funds can ensure that your personal decisions and information remain the way they were meant to be personal.

4 How Business Owners and Professionals Can Use Segregated Funds You may not realize the extent to which your assets are exposed to potential creditors if you own your own business, are a professional or are an officer or director of a corporation. In the event legal action is taken against the business or against you personally your assets could be subject to personal liability. A sound asset protection strategy is critical in managing this risk segregated funds may help. Since segregated funds are individual variable annuity contracts the interests of some beneficiaries override the rights of creditors Provincial laws generally provide that life insurance purchased to benefit a beneficiary in the preferred class should be paid to the beneficiary, rather than to creditors. A preferred beneficiary is a spouse, child, grandchild or parent of the life insured. For irrevocable beneficiaries, the law generally considers that the beneficiary has fixed rights in the contract, which cannot be changed by the owner without the permission of the beneficiary. Consequently, creditors of the owner may not be able to seize the policy because to do so would change the beneficiary s rights without their permission. An irrevocable beneficiary generally may not be revoked without their consent. All transactions within the contract generally require the consent of the beneficiary. Therefore if you have segregated funds and name a preferred or irrevocable beneficiary your investment may be protected from creditors making claims against you or your business Exceptions: Creditors may be able to access assets of segregated funds contracts if: There are taxes payable on an RRSP or RRIF from an empty estate. The contract was set up to avoid creditors at a time when insolvency was foreseeable, fraudulent conveyance legislation will defeat the exemption. A rule of thumb in most provinces is that a contract should be in existence a minimum of 2 5 years in advance of any insolvent or litigious situation. The Risk Is Real Business Bankruptcies and Resulting Liabilities Liabilities Number of Bankruptcies Liabilities in Billions No. of Bankruptcies Note: This discussion of creditor protection does not apply to the province of Quebec

5 Mackenzie Segregated Funds A Valuable Set of Benefits Flexibility and choice: A wide range of funds offering Basic and Enhanced protection to meet and protect different needs. Security: The financial strength of two leading Canadian financial services companies Mackenzie and Great-West Life. Brand names you know and trust: Superior growth and income potential via the strengths of Mackenzie s Fund Families. Mackenzie Segregated Funds Choose Your Options Basic Maximum Issue Age 89 (69 for RRSP/LIRA) 69 Enhanced Contract Maturity Date Dec. 31 in the year the annuitant turns 100 Dec. 31 in the year the annuitant turns 100 Maturity Guarantee 75% 100% guarantee of principal every 10 years (after 10 years) Death Guarantee 100% after 5 years (increases 5% per DSC not payable at death 75% year from 75% to 100%) Resets An automatic reset at Dec. 31 of the year the An automatic reset every 10 years to age 70 No client initiated reset annuitant turns 69, if purchases by 59 (if purchased by age 59)

6 Mackenzie Founded in 1967, Mackenzie Financial Corporation is a multi-faceted investment management and financial services corporation. Mackenzie s core business is the management of mutual funds on behalf of Canadian investors. The company manages and administers approximately $40.4 billion for more than one million investors through its family of mutual, segregated and pension funds. Mackenzie funds are sold through more than 40,000 independent financial advisors across Canada. Great-West Life Founded in 1891, Great-West Life is a market leader in group insurance and individual segregated funds in Canada. Together with its subsidiaries, London Life and Canada Life, Great-West serves the financial security needs of more than 11 million people across Canada. Great-West Life and the key design are trademarks of the Great-West Life Assurance Company It is recommended that you seek advice on using segregated funds as part of your financial plan. *All guarantees are less proportionate withdrawals. SUBJECT TO ANY APPLICABLE DEATH AND MATURITY GUARANTEE, AMOUNTS ALLOCATED TO A SEGREGATED FUND ARE INVESTED AT THE RISK OF THE OWNER, AND MAY INCREASE OR DECREASE IN VALUE ACCORDING TO THE FLUCTUATIONS IN THE MARKET VALUE OF THE ASSETS OF THE SEGREGATED FUND Choose Wisely. SF1255 6/04