G5 20 Series FAQ FOR ADVISOR USE ONLY NOT FOR DISTRIBUTION TO CLIENTS

Transcription

1 G5 20 Series FAQ FOR ADVISOR USE ONLY NOT FOR DISTRIBUTION TO CLIENTS

2 What is the difference between G5 20i funds and G5 20 funds? There are two versions of the fund available, taking into consideration investors cash flow timing requirements. G5 20i is for clients who require cash flow to start immediately. G5 20 is for clients who need cash flow later but want to guarantee the value now. G5 20 s cash flow begins after a five-year Accumulation Period. Each version provides 20 years of guaranteed cash flow through a 20- year Distribution Phase. Cash flow can increase, but never decrease. Is G5 20 Series available for CI s Private Investment Management (PIM)? Yes, G5 20 Series is available in PIM in Class O ($100,000 minimum). To complete a purchase you need to fill out the PIM Account Application Form. What forms or applications do I need to complete a purchase? Similar to other mutual funds, G5 20 Series funds can be purchased electronically via FundSERV or directly using a CI Mutual Fund Application Form (PIM application if you are purchasing Class O) or a letter of direction. They can be co-mingled with other CI Class A and Class F mutual funds within a single account. Are there specific forms for G5 20 Series? The administrative processes for G5 20 Series are similar to those of other mutual funds, with the exception of RRIF payments and reinvestment of excess Guaranteed Distributions. Separate forms have been created for these purposes to cover all fund classes, including Class O (PIM). If you are purchasing the Class O version of G5 20 Series, you will continue to use the PIM forms. Can clients hold multiple issues of G5 20 Series funds and how do payments work? Yes, multiple issues of these funds may be held within one account. Each fund will have its own Issue Period and Distribution Phase. When Guaranteed Distributions begin for a particular fund, clients will have different payment start dates and guaranteed amounts for each fund. All distributions will be made at the same time each month for all the G5 20 Series funds. Can ongoing purchases be made after the launch date of each series? No. Sales close for each series at the end of the Issue Period, when the sales deadline is reached. The Issue Period is a maximum of three months. Each fund will be available for purchases, switches-in and transfers-in during the Issue Period only. All transactions must be placed by the last day of the Issue Period. The fund will be hard capped to any new assets coming into the fund at 4:01 p.m. Eastern Time on the last day of the Issue Period. A new series will be launched at least each quarter. Will DSC fees be carried over when switching from a different fund? DSC will be grandfathered when transferring from one DSC fund to another within the CI family of funds. What is the initial NAV of G5 20 Series? The net asset value will be set at $10 per unit throughout the Issue Period. When the Issue Period ends the fund will be invested and valued daily. During the issue phase, the fund operates like a money market fund so some interest income may be generated. What fund classes are available? G5 20 Series includes Class A (ISC, DSC and LL load options), F and O units. There are separate fund codes for each class, load option and fund issue. The fund is offered in Canadian dollars only.

3 Are there short-term trading fees? The fund is classified as a tactical balanced fund and therefore subject to short-term trading fees. Redemptions/ switches placed within 30 business days of the initial purchase will be subject to short-term trading fees (up to 2%, at CI s discretion). Does G5 20 Series have its own Prospectus, Fund Facts and the Annual Information Form? Similar to traditional mutual funds, each G5 20i fund and G5 20 fund has its own independent Simplified Prospectus, Annual Information Form and Fund Facts. What are my trailing commissions? Trailing commissions will be calculated and paid out after the Issue Period. During the Issue Period, fund assets will be invested in CI Money Market Fund, and, similar to other money market funds, will not pay a trailer fee. Trailer fee rates on assets when a G5 20 Series fund is invested (in the Active Portfolio), are 1.00% and 0.50% on ISC and DSC/LL, respectively. DSC trailer fee rolls up to 1.00% after seven years. If assets of the fund move to the bond or Protection Portfolio, trailer fee rates will be 0.75% and 0.40% for ISC and DSC/LL loads, respectively. For PIM, we will automatically apply a 0% dealer service fee to a G5 20 Series fund upon settlement. To customize this fee, you will need to complete the Dealer Service Fee Agreement Form for Class O Units. How are fees collected on the fee-for-service fund classes (Classes F and O)? It is important to note that fees collected via a redemption of units will affect the future cash flow level (Guaranteed Distributions are unitized and calculated based on the fund s unit balance). For Class F funds held in a dealer sponsored fee-for-service account, your dealer will calculate and collect the applicable fees. If you do not want the fees to be applied to your G5 20 Series fund, you must notify your dealer administration. For Class F funds held in CI s feefor-service accounts and Class O funds held in CI Private Investment Management, program fees are automatically redirected to other funds within the account (prorated). If there are no other funds in the account, the G5 20 Series fund will pay its own fees. Guaranteed cash flow, distributions and tax treatment How is the guaranteed cash flow (Guaranteed Distributions) annually paid out? Clients will receive their Guaranteed Distributions as monthly distributions equal to one-twelfth of the annual amount. Distributions will occur on or around the fourth business day of each month for the duration of the Distribution Phase for all G5 20 Series funds. For G5 20i, how is the Guaranteed Distribution amount established? A Guaranteed Asset Value (GAV) will be established on the last day of the Issue Period (Anniversary Date) equal to $10 per unit. If the fund performs well, a portion of that growth will be added to the Guaranteed Asset Value to increase the amounts of the future guaranteed monthly distributions. This is known as a GAV Increase and is equal to half of the positive difference between the net asset value per unit of that class of units of the fund, if any, calculated on a GAV Increase Date and its Guaranteed Asset Value per unit otherwise then in effect. The GAV Increase Dates are every three years during the Distribution Phase. In the event of a GAV Increase, Guaranteed Distributions will be set at 5% of the new Guaranteed Asset Value and will be paid equally over the remainder of the Distribution Phase. For G5 20, how is the Guaranteed Distribution amount established? A Guaranteed Asset Value (GAV) will be established after the five-year Accumulation Phase equal to the greater of the amount paid for the units or the market value at the end of the Accumulation Phase (plus any GAV Increases). A GAV Increase is half of the positive difference between the net asset value per unit of that class of units of the fund, if any, calculated on a GAV Increase Date and its Guaranteed Asset Value per unit otherwise then in effect. There will be a GAV Increase Date in the middle of the Accumulation Phase and every three years during the Distribution Phase. In the event of a GAV Increase, Guaranteed Distributions will be set at 5% of the new Guaranteed Asset Value and will be paid equally over the remainder of the Distribution Phase.

4 What are the tax implications for the Guaranteed Distributions? The annual Guaranteed Distributions (paid monthly as onetwelfth of the Guaranteed Asset Value) are tax efficient for non-registered accounts as they are characterized substantially as return of capital. When the adjusted cost base reaches zero, payments continue as capital gains. In the case of the G5 20 fund, could there be distributions of any kind during the Accumulation Phase? There would be no Guaranteed Distributions during G5 20 s five-year Accumulation Phase since its Guaranteed Distributions start after five years. However, similar to other mutual fund trusts, at year-end, the fund would distribute its taxable income amount to investors. Any annual distributions would be characterized as capital gains, Canadian dividends or other income. The breakdown of such distributions would be reported on the client s T3 slip. Year-end distributions are consolidated but what does this mean? All year-end distributions of the fund will automatically be reinvested in additional units of the fund in the normal course. Following the reinvestment of additional units, the number of outstanding units will be immediately consolidated so that the number of outstanding units after the distribution is the same as it was before the distribution. The reinvestment and consolidation of units will not result in a disposition of an investor s units. The market value and number of units will not change in the end, but the ACB per unit will increase. The additional consolidation step is necessary in the G5 20 Series funds in order for the Protection Manager to accurately track the value of the fund s assets and fully protect the Guaranteed Asset Value. RRIF accounts How will G5 20 Series Guaranteed Distributions affect the MAP in a RRIF account? Guaranteed Distributions are considered payments from clients RRIF accounts and will count towards their minimum annual payment (MAP) amount. Guaranteed Distributions paid out in excess of MAP will have withholding taxes applied to them. For years in which G5 20 Series pays Guaranteed Distributions, and in the absence of any payment instructions, the default is for this amount to be paid in cash. If RRIF payment instructions have been received by CI Investments, with a specific dollar amount requested, the initial instructions will continue and Guaranteed Distributions will be included in the amount specified. Note, in order to calculate your specified payment accurately, Guaranteed Distributions will first be directed towards CI Money Market Fund (in the case of Class A, ISC) and a subsequent redemption(s) of units will comprise the remainder of the payment. A separate form, CI Guaranteed Retirement Cash Flow Series RRIF Plan Payment Form, has been created to facilitate this request. What about Locked-in RRSP, Locked-in RRIF, and RESP plans? The fund cannot be held in client-held Locked-in RRSP plans or Locked-in RRIF plans due to the minimum and maximum withdrawal amounts and because cash distributions cannot be reinvested back into the fund after the Issue Period. Also, RESP plans are ineligible due to issues with processing the grants. G5 20 Series can be held within nominee accounts if your dealer can administer them. Can Guaranteed Distributions be reinvested? Investors have the option of reinvesting a specified percentage into a non-capped fund within the same account. Should a client wish to reinvest their distributions into units of another account, this can be accommodated manually with special instructions using a specific form. continued

5 Redeeming units When can units be redeemed, and at what price? At any time at the current NAV (less any DSC charges, if applicable). If units are redeemed, how does that affect the guarantee? Redemptions would reduce the investor s guaranteed cash flow since the guarantee 20 years of annual distributions equal to 5% of the Guaranteed Asset Value is based on the units the investor continues to own. Here s an example: A client invests $100,000 to buy 10,000 units of G5 20i or G5 20, and the Guaranteed Asset Value on the sixth anniversary is $130,000 or $13.00 per unit. If the client redeems 50% of the units, the client s cash flow would be reduced by half. In this case, the client s guaranteed annual cash flow would be $3,250 ($13.00 x 5,000 x 5%). Market gains on subsequent GAV Increase Dates could result in the GAV per unit rising periodically to $14.00, $16.00, $18.00 and $20.00, respectively. As a result, the client s guaranteed cash flow rises to $3,500 ($14.00 x 5,000 x 5%), to $4,000 ($16.00 x 5,000 x 5%), to $4,500 ($18.00 x 5,000 x 5%), and to $5,000 ($20.00 x 5,000 x 5%). For more detailed examples of how GAV Increases are calculated, please refer to GAV Increase: Locking in gains. Client reporting When will statements be issued? Client and advisor statements will be issued semi-annually, as of June and December. Statements will be branded separately from other CI funds. Statements will provide Guaranteed Distributions details, payment and personalized rate of return. One statement will be generated per account. Because accounts can hold these funds and other Class A/F CI mutual funds, the statement will report all assets within the account. All semi-annual statements will be posted to eciss, in the Document Centre section for advisor access. Clients can elect to receive their semi-annual statements through Investor Online. What type of trade confirmations will be issued? Transactions (purchases, redemptions, switches and transfers) will be captured on the regular CI branded confirmations that are generated daily. Guaranteed Distribution cash flow transactions will not generate a trade confirmation.

6 FOR ADVISOR USE ONLY NOT FOR DISTRIBUTION TO CLIENTS This document is intended for advisor use only and is not a sales communication. Features associated with the calculation of the potential increases of guaranteed cash flow are applicable to G5 20 Series funds issued after March Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Except as described below, mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Bank of Montreal guarantees that at least the original amount you paid for the fund unit will be paid back to you over a 20-year period in equal monthly instalments. This guarantee does not apply to units redeemed before the end of that period. You will receive the net asset value per unit for any unit redeemed early. Mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. BMO Financial Group and Bank of Montreal are marketing names (also referred to as trade names or brand names) used by Bank of Montreal. BMO, BMO Financial Group, BMO (M-bar roundel symbol) Financial Group, Bank of Montreal and BMO Capital Markets are trademarks owned by Bank of Montreal. CI Investments, the CI Investments design, CI Guaranteed Retirement Cash Flow Series and G5 20 Series are registered trademarks of CI Investments Inc. G5 20 Series design is a trademark of CI Investments Inc. Published January Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I Head Office / Toronto Calgary Montreal Vancouver Client Services English: French: _E (12/15)