For individual policies, segregated funds are required under insurance law to provide a minimum guaranteed return of 75% of the original investment after 10 years or as a consequence of death. This guarantee does not apply to group policies. Manulife segregated funds in fact provide a 100% guarantee on individual policies, proportionately reduced by withdrawals, thus reducing the risk of a client's investment.

Mutual funds offer no guarantees.

In certain situations, a segregated fund policy may be protected from creditors in cases of bankruptcy, seizure, or garnishment. Where creditor protection is contested, the courts will take into consideration the relationship of the beneficiary to the client, the length of time that the contract has been in force, and other relevant factors.

Mutual funds offer no creditor protection.

If a client has a named beneficiary at the time of death, the value of his/her segregated fund units are generally paid directly to the beneficiary as soon as proof of death is established, without the need to provide a probated copy of the will.

Normally, the funds are paid to the estate and are subject to probate fees. However, if the account is set up as "joint tenants with right of survival", the need for probate is deferred until the death of the last surviving joint tenant.

All of the income of a segregated fund must be allocated, but not actually paid out, on the last valuation date of each year. A client's share of the fund's income is time-weighted,. In other words, if he/she owned units at any time during the year, he/she will be entitled to a share of the fund's income, the client will receive an allocation consisting of interest income and dividend income.

A client does not receive additional units as a result of an income allocation, but each unit held will have more value. In other words, the pre-distribution value of a client's investment equals the post-distribution value. The client will receive the income allocation when he/she eventually sells the units.

any or all of the income of a mutual 

Any capital gains and capital losses made by the fund on the sale of investment assets during the year must be allocated, but not actually paid out, on the last valuation date of each year. A client's share of the fund's capital gains and capital losses is time-weighted. In other words, if a client owned units at any time during the year, he/she will be entitled to a share of both the capital gain and the capital losses of the fund.

Clients do not receive additional units as a result of a capital allocation, but each unit held will have more value (if gains exceed losses) or less value (if losses exceed gains), so that the total value of the investment is maintained. Clients will receive the capital allocations when they eventually sell their units.

If capital gains made by the fund on the sale of investment assets during the year exceed capital losses during the same year, any or all of the net capital gain may be paid out, at the discretion of the fund manager, at the end of the year. It will normally be reinvested unless the client specifies otherwise. The client's share of the fund's net capital gain is based on the number of units he/she owns at the record date compared to the total number of units issued and outstanding as at the record date. If the capital losses made by the fund on the sale of investment assets during the year exceed the capital gains during the same year, the net capital loss is not distributed. Instead, it is carried forward to reduce a future years' net capital gains.

When net capital gains are paid out, a client receives the capital gains immediately but the unit value decreases accordingly. If, however, the client decides to reinvest his/her share of the net capital gains, he/she will acquire additional units at the lower unit value and this restores the investment to its pre-distribution value.

(a) Fund allocations of income and capital: If a client holds units of a segregated fund at any time during the year, he/she is entitled to a share of the income earned by the fund for the full year as well as a share of the capital gains and capital losses made by the fund on the sale of its investment assets during the entire year. When clients make a withdrawal by selling units part way through the year, they still receive a time-weighted share of the annual income and capital allocations for that year.

(b) Capital gains or capital losses on the sale of units: Aside from the investment assets of the fund, a client's units arre also an investment asset. Surrendering units will result in a capital gain or capital loss. If a client's units are in a gain position at the time of the withdrawal, the capital gain will be decreased by any fund allocations of income and capital. Conversely, if a client's units are in a loss position at the time of the withdrawal, the capital loss will be increased by any fund allocations of income and capital.

(a) Fund allocations of income and capital: Income distributions by the fund occur only at distribution dates and capital distributions occur only at year-end. If a client sells his/her units between distribution dates, he/she will not receive any income or capital that may have accrued since the last distribution date.

(b) Capital gains or capital losses on the sale of units: Aside from the investment assets of the fund, client's units are also an investment asset. Redeeming units will result in a capital gain or capital loss. Since the fund does not distribute income or capital between distribution dates, redeeming units between distribution dates will not result in a reduced capital gain (or increased capital loss). Putting it another way, a client's capital gain will be greater (or the capital loss lower) because he/she does not receive an income distribution between distribution dates.

Transfers from on e fund to another fund are treated as a surrender of units from one fund and a deposit to the other fund. The comments under "Withdrawals" apply with respect to the surrendered units.

Transfer from one fund to another fund are treated as a redemption of units from one fund and a purchase of units of the other fund. The comments under "Withdrawals" apply with respect to the redeemed units.

Each year, clients receive a tax slip for each fund, reporting their share of the income and capital allocations of the fund. All Canadian residents receive a T3 slip; Quebec residents also receive a Releve 16 slip. Non-residents of Canada receive an NR4 slip reporting only the income allocations (ie. capital allocations are not reported to non-residents).

Any capital gains or capital losses on the sale of units are also included on the T3 or Releve 16 slip for the year in which the transaction takes place.

Each year, clients receive a tax slip for each fund, reporting your share of the income and capital allocations of the fund. All Canadian residents receive a T# slip; Quebec resident also receive a Releve 16 slip. Non-residents of Canada receive an NR4 slip reporting only the income allocations (ie., capital allocation are not reported to non-residents.)

Any capital gains or capital losses on the sale of units are not included on the T3 or Releve 16 slip. Instead, clients will receive a T5008 or facsimile form (e.g., Manulife issues an annual statement detailing your redemptions and showing the proceeds and net book value of each transaction). From this information, clients can calculate the capital gain or capital loss on the sale of units during the year. This information is also reported to Revenue Canada.

Clients receive an official income tax receipt for any deposits made to the plan. As long as the funds remain in the plan, there is no tax reporting. However, when they make a withdrawal, they receive a tax slip reporting the total amount of the withdrawal as income, as well as information about the amount of income tax withheld from the payment. All Canadian residents receive a T4RSP or T4RIF slip; Quebec residents also receive a Releve 2 slip. Non-residents of Canada receive an NR4 slip. Non-residents of Canada receive an NR4 slip instead of a T4RSP, T4RIF or Releve 2 slip.

Clients receive an official income tax receipt for any deposits made to the plan. As long as the funds remain in the plan, there is no tax reporting. However, when they make a withdrawal, they receive a tax slip reporting the total amount of the withdrawal as income, as well as information about the amount of income tax withheld from the payment. All Canadian residents receive a T4RSP or T4RIF slip; Quebec residents also receive a Releve 2 slip. Non-residents of Canada receive an NR4 slip instead of a T4RSP, T4RIF or Releve 2 slip.

Under current legislation, a registered segregated fund policy may invest up to 100% in foreign assets without any penalties. However, Revenue Canada is proposing to restrict this to 20% starting January 1, 1998.

Registered mutual fund accounts may invest up to 20% in foreign assets without any penalties. Above that limit, there is a 1% penalty tax on the excess foreign content remaining in the plan on the last day of each month.