advisor guideincome tax at 46.41% mtr – capital gains at 50% $37 net income $3,963 difference...
TRANSCRIPT
Advisor Guide
Tax-Efficient Investing at its Best
According to Section 51(1) of the Income Tax Act:
■ The investor may switch between the various classes of capital stock of a
corporation without tax consequences.
■ Income tax becomes payable only when capital stock holdings in the
corporation are sold.
Tax-efficient investing at its best
A Mutual Fund Corporation
■ Tax-deferral advantages of
an RSP
■ Ability to lock in investment gains
without triggering a taxable event
■ Tax-efficient source of stable
monthly income
■ Control when you pay tax on your
investment.No capital gains are triggered
when switching to different funds
Switchbetween
funds
Canadian Income
SpecialtyGlobal
$$
$
$
Tax-efficient investing at its best
CI Corporate Class
Tax is paid every year on income
Inclusion rate is 100% for interest income or 50% for dividends
100%Government bonds
100%Investment-gradecorporate bonds
100%High-yield corporate bonds
100%Income trusts
50%Preferred shares
50%Dividend-paying common shares
VOLATILITY
RETU
RN
Tax-efficient investing at its best
Across the Capital Structure
VOLATILITY
RETU
RN
50%Government bonds
50%Investment-grade corporate bonds
50%High-yield corporate bonds
50%Income trusts
50%Preferred shares
50%Dividend-paying common shares
Tax is paid at time of redemption*
Inclusion rate is always capital gain at 50%
*Dividends are minimized and can only be tax-advantaged dividends or capital gains, not interest income.
Tax-efficient investing at its best
With Corporate Class
Real After-Tax GIC Returns
Source: Bank of Canada, Statistics Canada. Based on the average one-year GIC rate, a top marginal tax rate of 46.4% for Ontario in 2008 and the annual rateof inflation.
After tax After inflation1-year GIC avg.
5%
4%
3%
2%
1%
0%
-1%
-2%
2000 2001 2002 2003 2004 2005 2006 2007 2008
Tax-efficient investing at its best
Negative After-Tax Returns
Trust Corporate Class
BondFund
CanadianEquityFund
GlobalEquityFund Bond Fund
Canadian Equity FundGlobal Equity Fund
Tax-efficient investing at its best
A Level Playing Field
The difference in the after-tax value of $10,000 in income from interest, dividends, capital gains andreturn of capital1
$5,3
60
$4,6
40
$7,6
94
$2,3
06
$7,6
80
$2,3
20
$10,
000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
InterestIncome
DividendIncome
Net
CapitalGains
Returnof Capital
Taxes Paid
1 Assumes a top marginal tax rate of 46.41% for Ontario, 2009.
Tax-efficient investing at its best
Why is Tax Efficiency Important?
Gross Tax* After Tax
Interest Income 4% – 2% = 2%Capital Gains 4% – 1% = 3%
Difference +50%*Marginal tax rate of 46.41%. (Capital gains inclusion rate of 50%.) Results have been rounded to the nearest whole number.
After-tax returns
Tax-efficient investing at its best
Turning Income into Capital Gains
Provides the ability to:
SWITCHbetween funds without
tax consequences
DEFER income tax on fund earnings
CONVERTdividend and interest income
into capital gains
At no additional cost over the equivalent trust fund
Tax-efficient investing at its best
Why CI Corporate Class?
Scenario assumes taxes are paid from the gains of the investment before reinvesting in another investment. Taxes are calculated as follows:closing value less initial investment x 40% estimated MTR = taxable capital gains x 50% estimated MTR = tax paid at switch.
Initial investment
Value
Switch investment – taxes paid
Reinvested amount
Value
Switch investment – taxes paid
Reinvested amount
Value at redemption
Taxes owed
Total after-tax
Year 1
Year 6
Year 12
Year 18
Corporate Class
$10,000
$20,000
$0
$20,000
$40,000
$0
$40,000
$80,000
$14,400
$66,000
Trust
$10,000
$20,000
$2,000
$18,000
$36,000
$3,600
$32,400
$64,480
$6,480
$58,320Difference $7,680
Tax-efficient investing at its best
Switch
* 2004 distribution $0.24 per unit, 2005 distribution $0.21 per unit, 2006 distribution $0.19 per unit, 2007 distribution $0.18 per unit, 2008distribution $0.19 per unit.
** Assumes top marginal rate of 46.41% for Ontario, 2008. Actual distribution is taxed by type of income.*** Assumes tax is paid outside the account and lowers the value of the investment.
Signature Canadian Bond Corporate Class & Signature Canadian Bond Fund
A $100,000 investment from December 2003 to December 2008
Amount invested on December 31, 2003
Unrealized capital gains
Distributions (realized gains before tax)*
Income tax paid on distributions**
Actual after-tax value of investment at December 31, 2008***
Corporate Class
$100,000
$18,916
n.a.
n.a.
$118,916
Trust
$100,000
$0
$18,159
$8,428
$109,594Difference $9,322
Tax-efficient investing at its best
Defer
* Assumes 96% return of capital, which does not attract tax, and 4% capital gains, redeemed at year end. Assumes top marginal rate of 46.41%for Ontario, 2009.
Cl Canadian Bond Corporate Class
Investment $100,000
SWP at 4% annually* $4,000
Income tax at 46.41% MTR – capital gains at 50% $37
Net income $3,963
Difference $1,819 annually, or 85% more income
Cl Canadian Bond Fund
Investment $100,000
Annual interest distribution 4% $4,000
Income tax at 46.41% MTR– interest income at MTR $1,856
Net income $2,144
Tax-efficient investing at its best
Convert
Wide investment choice with more than 55 funds covering Canadian and global income, balancedand equities, as well as Portfolio Select Series managed portfolios.
Tax-efficient investing at its best
Investment Options
T-Class provides an income solution that creates a predictable tax-efficient cash flow using CI Corporate Class funds.
By tapping into the unrealized gains in their Corporate Class funds, your clients can create apredictable, monthly income stream and still allow their investments to continue growing at rates thatcan potentially match, or outstrip the rate of withdrawal. They receive a tax-efficient income withoutsacrificing the potential for growth.
With T-Class they are able to have steady income from non-conventional sources, such as equities andbalanced portfolios.
■ tax-efficient income
■ guaranteed monthly distributions of 100% return of capital (ROC)
■ available for more than 30 CI Corporate Class funds
■ provides a high level of sustainable, tax-efficient cash flow with choice of two annual targetdistribution levels – 5% or 8%
Tax-efficient investing at its best
T-Class
This chart represents how T-Class works over time.
1 The original investment – which equals the adjusted cost base (ACB)
2 Represents the increase in the market value of the portfolio as it grows over time
3 As the client withdraws monthly income – which is ROC – each withdrawal lowers theadjusted cost base, until such time that,
4 The ACB reaches zero – and from there on any future withdrawals will be tax-advantagedcapital gains
Tax-efficient investing at its best
How does T-Class work?
1
2
3 4
Valu
e
Time
Market Value
Original ACB
Declining ACB
CI Private Managed Assets is a flexible program providing institutional and high net worth investorswith superior service and access to CI portfolio managers through a variety of platforms.
■ World-class money management
■ Asset allocation pools and U.S. dollar mandates also available
■ Daily liquidity and account values
■ Transparent institutional fees
Tax-efficient investing at its best
CI Private Managed Assets
Portfolio Select Series is a comprehensive investment program, delivering institutional qualityinvestment solutions:
■ Core Portfolios – multi-asset, multi-style, multi-manager optimized portfolios.
■ Flexibility to choose Managed Portfolios or Custom Portfolios.
■ Truly tax-efficient, based on CI Corporate Class platform.
■ Software guides you through the entire process, including customization.
■ Additional services – portfolio rebalancing, monitoring, personalized investment policy statementsand quarterly reporting.
■ Support and monitoring on your behalf make the choices simpler.
■ All unit types available – A (front end, DSC, low load), F, W, I.
■ Cost-effective program with competitive management fees.
■ Minimum initial investment of $50,000 per Managed Portfolio or $50,000 per account for CustomPortfolios.
Tax-efficient investing at its best
Portfolio Select Series
HARBOURADVISORS
All charts and illustrations in this guide are for illustrative purposes only. They are not intended to predict or project investment results.
®CI Investments, the CI Investments design and Harbour Advisors are registered trademarks of CI Investments Inc. Commissions, trailing commissions, management fees andexpenses all may be associated with mutual fund investments. Please read the prospectus before investing. Unless otherwise indicated and except for returns for periods less thanone year, the indicated rates of return are the historical annual compounded total returns including changes in security value. All performance data assume reinvestment of alldistributions or dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reducedreturns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. TMSignature Funds, Signature Global Advisors, Cambridge Fundsand Cambridge Advisors are trademarks of CI Investments Inc.
For more information on CI Corporate Class, please contact your CI sales team or visit www.ci.com
CORP
_CLS
_BRO
12-
09-E
2 Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7 I www.ci.comHead Office / Toronto416-364-1145 1-800-268-9374
Calgary 403-205-43961-800-776-9027
Montreal 514-875-00901-800-268-1602
Vancouver 604-681-33461-800-665-6994
Client Services English: 1-800-563-5181French: 1-800-668-3528