ADVISOR USE ONLY. A closer look at how Sun Life Milestone Funds work

Transcription

1 ADVISOR USE ONLY A closer look at how Sun Life Milestone Funds work

2 Sun Life Milestone Funds are designed to offer growth potential with a guaranteed maturity value. These target date funds aim to provide peace of mind for the investor, regardless of what happens in the markets.

3 SUN LIFE GLOBAL INVESTMENTS SUN LIFE MILESTONE FUNDS SUN LIFE MILESTONE FUNDS FOLLOW A THREE-STEP INVESTMENT PROCESS: STEP ONE On a daily basis, strip bonds are purchased with maturity dates that closely match each Sun Life Milestone Fund s respective maturity date. To put this into context*, if $100,000 is invested in a Sun Life Milestone Fund, a $100,000 strip bond is purchased with a maturity date that aligns to the fund s maturity date. Since the bond is purchased at a discount, the market value (price) of the bond will be less than $100,000 today. At maturity, the bond pays out the $100,000 face value. The maturity value of the strip bond alone is anticipated to be sufficient to fully cover an amount equal to the fund s guaranteed maturity value. To mitigate credit risk, the fund invests only in high quality strip bonds issued by the federal and provincial governments of Canada. *The example in this document assumes the Sun Life Milestone Fund s net asset value is the same as the guaranteed maturity value. If the guaranteed maturity value is more/less than the current net asset value, then the fund would purchase more/less than $100,000 face value of bonds. Key Term A strip bond is a bond that does not make interest payments and is sold at a discount to its maturity value. When the strip bond reaches its maturity date, the investor receives the maturity value of the bond. Investment dealers create strip bonds by taking regular bonds and separating (stripping) interest and principal amounts. MILESTONE MECHANICS ADVISOR USE ONLY

4 SUN LIFE GLOBAL INVESTMENTS SUN LIFE MILESTONE FUNDS STEP TWO The remaining assets are invested in Sun Life Milestone Global Equity Fund (GEF) for global equity exposure. Since the $100,000 strip bond was bought at a discount, the remaining money can be used to obtain global equity exposure. This is achieved by investing the remainder of the $100,000 investment in units of Sun Life Milestone Global Equity Fund (GEF) a mutual fund managed by Sun Life Global Investments. The GEF seeks long-term capital appreciation by obtaining enhanced exposure to the global equity market, as represented by the MSCI All Country World Index, by investing primarily in derivatives such as futures contracts. EXPOSURE GUIDELINES: United States +/- 10% Canada +/- 10% United Kingdom +/- 10% Europe (ex-united Kingdom ) +/- 10% Asia +/- 10% Australasia +/- 10% Emerging Markets +/- 10% The GEF enters into long positions in highly liquid exchange-traded futures contracts, which are linked to the performance of the following broad global equity indices: S&P 500 (U.S.), FTSE 100 (U.K.), Euro STOXX 50 (Europe/ EMU), Nikkei 225 (Japan), S&P/ASX 200 (Australia), S&P/TSX 60 (Canada) and MSCI Emerging Markets. Effective equity exposure in the GEF from the futures contracts can be 1.0 to 1.4 times the fund s net asset value. This enhanced equity exposure is a key benefit of using futures contracts, and can be achieved because the amount of margin required on futures contracts is less than the amount needed to buy the underlying investment. Options are held to reduce downside risk. At a minimum, the level of protection held by owning options will exceed the amount of enhanced exposure obtained by holding the futures contracts. Cash and/or Canadian T-bills are held as margin on the futures contracts. This means the fund itself has minimal currency exposure. There is exposure to currency fluctuations on the returns of the futures contracts, but not on the principal itself. There is minimal currency exposure on the options held. Key Terms A futures contract is a legal agreement to buy or sell a financial instrument at a later date at a price agreed to at the initiation of the contract. The MSCI All Country World Index is a market cap weighted index designed to measure performance of developed equity markets including but not limited to Australia, Canada, France, Germany, Hong Kong, Japan, the U.K, U.S. and Emerging Markets. An option is the right, not an obligation, to buy or sell a financial instrument at a specified price within a specified time period. Options held are exchange-traded based on the same broad global equity indices as the futures contracts. MILESTONE MECHANICS ADVISOR USE ONLY

5 SUN LIFE GLOBAL INVESTMENTS SUN LIFE MILESTONE FUNDS STEP THREE When a new guaranteed maturity value is achieved at month end, the fund s asset mix is adjusted to secure the new guaranteed amount. At month end, if a new guaranteed maturity value is attained, additional strip bonds are purchased to protect the higher guarantee. The strip bond purchase is financed by selling units of the GEF held by the applicable Sun Life Milestone Fund. When held to maturity, Sun Life Milestone Funds will pay the highest of the following three values, subject to applicable fees: $10 PER UNIT (the net asset value per unit at the inception of the fund) OR THE HIGHEST MONTH-END UNIT VALUE during the period between the fund s inception and the fund s maturity date OR THE VALUE AT MATURITY The maturity date for each of Sun Life Milestone Funds is June 30 of the year in the fund s name. MONTH-END UNIT VALUE FINAL MATURITY VALUE $15 INTERIM MATURITY VALUE $12 The investor may buy units at $11, but is guaranteed at least $12 at maturity Although the highest month-end unit value drops below $15, the investor will receive $15 for every unit held to maturity $10 LAUNCH DATE Month-end unit value Highest month-end unit value achieved over the life of the fund MATURITY DATE SUN LIFE MILESTONE FUNDS only from Sun Life Global Investments MILESTONE MECHANICS ADVISOR USE ONLY

6 Speak to your Sun Life Wealth Sales Director about how Sun Life Milestone Funds can protect investors capital while offering the growth potential of equities. ILLUMINATING A BRIGHTER WORLD OF INVESTMENTS Sun Life Global Investments offers Canadians a diverse lineup of mutual funds and innovative portfolio solutions, empowering them to pursue their financial goals at every life stage. We bring together the strength of one of Canada s most trusted names in financial services with some of the best asset managers from around the world to deliver a truly global investment platform. Sun Life Global Investments manages more than $13 billion on behalf of institutional and retail investors from coast to coast and is a member of the Sun Life Financial group of companies Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual fund values change frequently and past performance may not be repeated. Mutual funds are not generally guaranteed, although the Sun Life Milestone Funds benefit from the guarantee described below. We have structured each Sun Life Milestone Fund so that it will have sufficient assets to pay the Guaranteed Value per unit on its respective maturity date. If the net asset value per unit on the maturity date of a Sun Life Milestone Fund is less than the Guaranteed Value per unit, then Sun Life Assurance Company of Canada, as subadvisor to the Sun Life Milestone Funds, ( Sun Life, or the guarantor ) has agreed to pay the shortfall to the Sun Life Milestone Fund. Any shortfall payment is subject to the financial health and creditworthiness of Sun Life. The respective maturity dates for the Sun Life Milestone Funds is June 30 of the year in the corresponding fund s name. The maturity date for a Sun Life Milestone Fund may be accelerated in certain circumstances, in which case an accelerated Guaranteed Value will be calculated. In such a case, the applicable Sun Life Milestone Fund will pay the greater of the net asset value per unit on the accelerated maturity date and the net present value per unit of the Guaranteed Value. If you redeem your securities of the Sun Life Milestone Funds prior to their respective maturity dates, your redemption will be processed at the current net asset value per security, less any applicable redemption fees, and you will not benefit from the Guaranteed Value at maturity. Additional information, including specific risks associated with the Sun Life Milestone Funds, can be found in the prospectus. ADVISOR USE ONLY Sun Life Global Investments (Canada) Inc., Sun Life Global Investments (Canada) Inc. is a member of the Sun Life Financial group of companies