OPTIMIZE TAX-DEFERRED INCOME

1. Invest Today with Tomorrow in MindTMTurning Actionable Tax Ideas into a Lifetime of Advantage for Your Clients HARNESS THE POWER OF COMPOUND GROWTH PROTECT THE TRANSFER OF WEALTH OPTIMIZE TAX-DEFERRED INCOME

2. 1 Capital Preservation Growth 2 Tax Minimization 3 Introduction When Asked What is Most Important to Clients… The answers consistently given are:

3. Age: 16-30 1% Age: 30-55 19% Age: 70+ 27% Age: 55-70 53% Introduction Large Market and Inefficient Investments • Pre-retirees and retirees represent a “sweet-spot” • People aged 55 and up control 80% of investable assets1 • Many are in highly taxed investment vehicles • Over $730 billion sitting in GICs, certificates of deposits and other savings accounts2 • $121 billion in fixed income mutual funds3 • $19 billion in Canada Savings Bonds4 Total Investable Assets Sources:1Capgemini, The Canadian Wealth Management Market 2004/2005, 2Investor Economics 2005 Household Balanced Sheet Report, 3IFIC September 2006, 4Government of Canada, Debt Management Strategy, April 2006

4. Interest / Income Dividends Capital Gain Return of Capital Tax paid 46.4% Tax paid 23.2% Tax paid 31.3% You keep 53.6% You keep 100% (taxes are deferred) You keep 76.8% You keep 68.7% Inefficient cash flow Efficient cash flow Introduction Not All Cash Flows are Taxed Equally Assumes a marginal tax rate of 46.41%, top rate for Ontario; non-eligible dividends

5. Introduction What is Invest Today with Tomorrow in Mind™? • Understanding how decisions made today will impact your clients throughout their accumulation, decumulation, and wealth transfer phases of life • Focusing on how long-term tax efficient and tax effective investment strategies impact your clients’ overall wealth plan • Protecting your business from the inevitable impact of your clients’ RRIF drawdown and general tax erosion

7. Flexibilityto change investments without incurring a taxable event Benefit from compounded growth Keep your client’s assets invested in a lower tax bracket for life Actionable Strategies Harness the Power of Compound Growth Using Corporate Class to Get Your Client’s Assets Working Harder

8. Actionable Strategies How Does Corporate Class Work? Change investments as your client’s life changes under a tax deferred structure • Defer taxes on capital gains when switching between investments • Enables a lifetime of flexibility Corporate Class Fund A Fund B Fund C Fund D Fund E Fund F Fund G Fund H

9. 900,000 Using Corporate Class: $826,695 800,000 700,000 The Difference: $183,721 600,000 500,000 400,000 300,000 Not Using Corporate Class: $642,974 200,000 100,000 - 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 Actionable Strategies Corporate Class in ActionDuring the Accumulation Phase Your client keeps $183,721 more on their $100,000 investment! *Capital Gain taxes are paid by Non-Corporate Class investors when switching between funds Source: Globe HySales and Franklin Templeton, January 1, 1986 to March 31, 2006 To simulate the Corporate Class returns for pre-inception periods, annual Series A returns of the Funds were reduced by 22.5 BP (capital tax charges on Corporate Class), BCEF Series F returns were reduced by 169BP (actual return difference between series A and Corporate Class) Assumes: dividends reinvested, all taxes paid MTR 46.41%. Assumes investment on Jan.1 of the year shown and switch on Dec.31 of the year shown, excluding Franklin Templeton Balanced Growth Portfolio where the switch was not made and is indicated as n/a.

10. $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 Actionable Strategies Corporate Class in ActionDuring the Decumulation Phase Your client gets 30% more After-Tax Income After Tax Income Total After Tax Income: In Corporate Class: $1,034,003 In Series A: $792,280 Amount invested: Corporate Class:$826,695 Series A:$642,974 30% More After Tax Income 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 Year Corporate Class Series A Scenario assumes effective tax rate is 27.94%. Marginal tax rate of 46.41%, 8% return per year, withdrawing 8% of income per year. The 8% return is hypothetical and for illustration purposes only, actual fund returns may differ.

11. $241,723 More Income $135,551 More Asset Value $1,034,003 $639,839 $792,280 $504,288 Actionable Strategies Corporate Class in ActionAt the Transfer Phase Your client benefits by a total of $377,274 Cash Flow Received (over a 20 year period) Wealth at Transfer (At year 40) Capital gains tax paid at year 40 is $186,856 on $826,695 for the Corporate Class Investment and $138,686 on $642,974 for the Series A investment. Assumes both are redeemed at the end of year 40. Net amount after all capital gain taxes paid

12. Actionable Strategies Application #1 Clients looking for a core investment solution that evolves with their risk tolerance and life stages.

13. Actionable Strategies Quotential and Corporate Class • Benefits: • Switch among 7 fully diversified portfolios • Address your clients’ risk profiles throughout their life stages without triggering a taxable event • Defer tax event until client is in lower tax bracket • Benefit from compounded growth

14. Actionable Strategies Application #2 Individual and corporate clients seeking preferential tax treatment on their fixed income investments.

15. ManagedYield Actionable Strategies Preferential Tax Treatment on Fixed Income Investments Corporate Class Tax Shelter • For Individual Clients: • Beneficial for short-term transitory assets. Clients can hold investments in Corporate Class without triggering taxes • Ideal tax efficient income for clients who are approaching or are in retirement. Income investments are drawn down through a SWP and are in the form of capital gains • For Corporate Clients: • Capital gains have better tax treatment, allowing a corporation to bank any losses to reduce tax liability

16. Actionable Strategies Application #3 Clients looking to complement their RRSP

17. RRSP Tax Deduction Retirement Savings Tax-deferred flexibility Maximum annual contribution of $19,000 Non-Registered Tax deduction (with loan)* Retirement savings Tax-deferred flexibility (with Corporate Class) No maximum contribution Actionable Strategies What About RRSPs? Upon Decumulation… Non-Registered Cash flow is generally taxed as capital gains*** No forced redemption RRSP Full amount is taxed as income Forced to redeem at 69** *Interest may be deductible if certain criteria are met. Speak to your tax adviser about your specific situation. **Required to either redeem at 69 or rollover into a RRIF. ***Distributions may be taxed as income

18. Actionable Strategies Corporate Class vs. RRSPs In Accumulation $45,762 A difference after 20 years after tax! *For demonstration purposes only. Assumes the RSP and Corporate Class investments both grow at 8% annually and the $50,000 loan is an interest only loan with a rate of 6% with a marginal tax rate of 46.41%. Interest payment is deductible only if all conditions are met. Investor should talk with their tax advisor to discuss their specific situation. **A pre-authorized contribution (PAC) plan allows you to invest a specific amount of money at regular intervals.

19. Over 20 years 51% More/Year Actionable Strategies Corporate Class vs. RRSPs In Decumulation Corporate Class $18,644 pre-tax cash flow per year $3,232 in taxes per year (taxed as capital gains) $183,048 $15,412 after-tax cash flow per year RSP $13,983 pre-tax cash flow per year $6,490 in taxes per year (taxed as interest income) $137,286 $7,493 after-tax cash flow per year For demonstration purposes only. Assumes the RSP and Corporate Class investments both grow at 8% annually and the $50,000 loan is an interest only loan with a rate of 6% with a marginal tax rate of 46.41%.

20. Actionable Strategies Tools Show the Benefits of Corporate Class to Your Clients

21. Actionable Strategies Summary of Corporate Class • Choose from a wide range of investment solutions • 7 Quotential Portfolios: Canada’s #1 Managed Program • 27 Individual Mutual Funds • Benefit from compound growth – Your clients will have more $$ for retirement and more $$ for their estate • Defer taxes until your clients are potentially in a lower tax bracket = more money in their pocket

22. OPTIMIZE TAX-DEFERRED INCOME

23. Actionable Strategies Optimize Tax-Deferred Income Using Series T to Put More Money In Your Client’s Pocket • Flexibility to structure income around a clients’ specific requirements • Provide high, predictable cash flow whileensuring the lowest tax bracket on investment returns • Continue to grow your clients’ assets

24. Market Value Value Original ACB Declining ACB Time Sample Monthly RoC Distribution Actionable Strategies How Does Series T Work? Using the power of ROC, Series T allows your clients to defer capital gains tax until later and enjoy a higher cash flow now The ACB is lowered by each monthly distribution. If units are sold, the market value minus the current ACB is taxed as a capital gain.

25. A T Actionable Strategies Customize Your Cash Flow Switching between Series T and Series A of the same fund or portfolio is not a taxable disposition. This allows you to fine-tune your clients’ cash flow. 8% targeted distributions are not guaranteed and may change at the discretion of Franklin Templeton Investments.

26. Initial Investment in Series T $600,000 16 2/3 years Gives you: $36,000/year (tax deferred) Ending Value: $1,017,003 Actionable Strategies Series T in ActionDuring the Decumulation Phase Give Your Clients 16+ Years of Tax Deferred Income* * Assumes 8% annual growth with 6% annual Return of Capital. Returns are hypothetical and for illustration purposes only, actual fund returns and target distributions may differ.

27. Actionable Strategies Series T in ActionAt the Transfer Phase • Total cash flow over 16 2/3 years: $600,000 • Total Market Value: $1,017,003 • Taxes Payable at the end of 16 2/3 years: $235,995 • Net After-Tax Value: $781,008 Total Value to Client over 16 2/3 years: $1.38 million A higher net value to your client’s Estate * Assumes 8% annual growth with 6% annual Return of Capital and assumes a tax rate of 46.41%. Returns are hypothetical and for illustration purposes only, actual fund returns and target distributions may differ.

28. Clients looking for regular, tax efficient income through an investment vehicle that can weather different market environments Also Consider Series T for: Risk averse clients seeking income and estate preservation Clients facing an Old Age Security (OAS) clawback Philanthropic clients planning to give some of their investment to charity Actionable Strategies Applications for Your Practice Series T is suitable for:

29. Actionable Strategies Looking for Income and Estate Preservation? The best of both worlds… Approximate annual cost to purchase $500,000 Last to Die Insurance Policy *Assumes a tax rate of 46.41%. **Assumes no income distributions and no capital gains distributions ***For demonstration purposes only. Series T Example: Client purchases $500,000 last to die insurance, Cost is based on the average cost of insurance for a 65 year old couple based on Equitable Life Insurance rates. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Unlike GICs, mutual fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government insurer. Assumes that Series T is continued to be held. Taxes will be payable if investment is redeemed.

30. $64,000 $63,000 $62,000 $61,000 $60,000 $59,000 $58,000 $57,000 $56,000 Keep more of your OAS using Series T funds – OAS Clawback reduced by $1,200 Bonus Cash Flow from OAS Clawback Reduction Put more money in your pocket– Taxes reduced by $2,952 Bonus Cash Flow from Tax Savings After Tax Flow from using Regular Funds Actionable Strategies Clients Fighting the OAS Clawback Don’t let your clients miss out on potentially $4,152 extra cash a year* • Transfer client’s interest-bearing securities worth $100,000 into a Series T fund with an 8% pre-tax ROC distribution1 • OAS clawback is reduced by $1,200 and taxes are potentially reduced by $2,952 • Client’s total annual after-tax cash flow increases from $58,912 to $63,064* 1 8% targeted distributions are not guaranteed and are subject to change at any time. Tax rate of 32.98% is assumed based on a client’s gross annual income is $70,000 from pension. The 2006 threshold for OAS Clawback is $62,144.

31. Tax Reduction from Donation $K $50 $40 $30 $20 $10 $- Cash Donation In-kind Donation Actionable Strategies Client Seeking to Reduce Taxes through Charitable Giving • Scenario 1: Redeem Series T and donate its net value in cash • Ending market value of units : $100,000 • Taxes on capital gains: ($18,564) • Your donation receipt+: $81,436 • Total Tax Reduction $19,230 • Scenario 2: Donate Series T in kind at full market value • Your donation receipt: $100,000 • Gross tax benefit of the receipt: $46,410 • Your capital gains taxes: ($0) • Tax credit from receipt and total Tax reduction: $46,410 Donating Series T in-kind gives your client a tax advantage of $27,180 over a cash donation* *Based on a $100,000 donation,+ tax credit receipt from $37,794. Assumes a tax rate of 46.41%

32. Actionable Strategies Tools Show the Benefits of Series T to Your Clients

33. Invest Today with Tomorrow in MindTMTurning Actionable Tax Ideas into a Lifetime of Advantage for Your Clients HARNESS THE POWER OF COMPOUND GROWTH PROTECT THE TRANSFER OF WEALTH OPTIMIZE TAX-DEFERRED INCOME