UNDERSTANDING THE BASICS – CORPORATE CLASS AND CORPORATE CLASS DISTRIBUTIONS

Two types of structures: Mutual Fund Trust is taxed under a single fund and corporate class has different funds under one corporation and taxed under the entire corporation.

Manulife Corporate Classes are similar to trust funds. They are professionally managed investments that pool the money from many different investors to invest in a diversified portfolio of stocks, bonds and other types of investments.

Differences in distributions: Both contain different distribution mixes and frequency. Corporate Class contains more tax efficient sources of income and occurs annually.

What is a mutual fund distribution?

A mutual fund distribution is the net investment income earned by a mutual fund and is distributed to investors on an annual basis.

When does it get paid to the investor?

Corporate Class Distributions are paid out on year end - April 30th annually and are allocated to investors based on the number of units they own of the fund on the day prior to the distribution date.

What can an investor do with the distribution?

Take it as a cash payment
Take it as a cash payment

Reinvest by purchasing additional units
Reinvest by purchasing additional units

Why do investors pay the tax instead of the mutual fund?

Mutual funds are generally taxed at a rate equivalent or close to an investors’ highest personal tax rate. If the mutual fund doesn’t distribute the investment income, then it will pay the highest tax rate on the lumpsum. By distributing the investment income to investors, the income is taxed at an investors’ marginal tax rate (for non-registered accounts) or none for registered accounts. Lowering the taxes paid by a mutual fund means more income for the investor and they can benefit from compound growth.

How does the mutual fund distribution impact the pricing (Net asset value) of a mutual fund?

After Distributions are paid out, the fund’s Net asset value (NAV) per share is reduced because it’s holding less assets. The value of the fund would drop by the same amount that was paid out in the distributions.*

Example: 5% distribution for a fund with a $10 NAV/unit

If the distribution is paid in cash:
Pre-distribution value of investment Distribution Cash paid to investor
Post-distribution value of investment
1,000 units @ $10 = $10,000 1,000 units @ $0.50 = $500 $500 1,000 units @ $9.50 = $9,500
If the distribution is reinvested:
Pre-distribution value of investment
Distribution
Reinvested distribution
Post-distribution value of investment
1,000 units @ $10 = $10,000 1,000 units @ $0.50 = $500 $500/$9.50 = 52.6316 units  1,052.6316 units @ $9.50 = $10,000

The investor’s portfolio is the same before and after the distribution in both examples. One has mutual fund units worth $9,500 and cash of $500 for a total value of $10,000 while other has mutual fund units worth $10,000.

Investors for corporate class: High net worth, limited RRSP contribution room, small business owners or executives, have high percentage of taxable interest income or seniors

* Please note, for ETFs, a capital gain distribution does not reduce the NAV.

1 This Fund has been capped to all new purchases as of April 6, 2018.

2 Formerly Manulife Canadian Dividend Income Class.

3 Formerly Manulife Canadian Equity Balanced Class.

4 Formerly Manulife Canadian Focused Class.

5 This fund has been capped to all new purchases as of March 28, 2013.

6 On April 6, 2018, the Manulife Canadian Monthly Income Class was renamed the Manulife Fundamental Income Class. On April 20, 2018, the Manulife Canadian Opportunities Balanced Class merged into the Manulife Fundamental Income Class.

7 On April 6, 2018, the Manulife Canadian Stock Class was renamed the Manulife Fundamental Equity Class. On April 20, 2018, Manulife Canadian Opportunities Class merged into the Manulife Fundamental Equity Class. Because the fund that was merged into the Manulife Fundamental Equity Class had a larger asset base than the Manulife Fundamental Equity Class, the performance data for the Manulife Fundamental Equity Class may not be provided for any period prior to the merger transaction.

8 On April 20, 2018, the Manulife Preferred Income Class merged into the Manulife Dividend Income Class.

9 On September 25, 2018 the Manulife Global Equity Unconstrained Fund was renamed the Manulife Global Franchise Class


The payment of distributions is not guaranteed and may fluctuate. If distributions paid by the fund are greater than the performance of the fund, then your original investment will shrink. Distributions should not be confused with a fund’s performance, rate of return, or yield. You may also receive return of capital distributions from a fund. Please consult with your tax advisor regarding the tax implications of receiving distributions. See the fund facts as well as the prospectus for more information on a fund’s distributions policy.

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