Understanding MERs

2011

Contents•What is an MER?

•What Does the MER Pay For?

•What Determines How Much I Pay?

•Are MERs Too High?

The Investment Funds Institute of Canada 2

What is an MER?•payment made by the fund (and by extension the unitholders of

the fund) to the fund company for the management, advisory, administrative and other services that it provides on an annual basis.

•expressed as a percentage of the average net asset value of the fund.

•definition, calculation and presentation mandated by securities law in National Instruments 81-101 and 81-106.

The Investment Funds Institute of Canada 3

What does the MER Pay for?

The Investment Funds Institute of Canada 4

What determines how much I pay?

Type of Fund

The Investment Funds Institute of Canada 5

What determines how much I pay?

Do I use Advice?

The Investment Funds Institute of Canada 6

What determines how much I pay?

If I use Advice, How is the Advisor Compensated?•typical annual trailer fees paid to the dealer/advisor:

•A commission can be charged under the SC option but in 90% or more of these trades the commission is waived by the advisor.

The Investment Funds Institute of Canada 7

What determines how much I pay?

What is my Total Cost of Ownership?

The Investment Funds Institute of Canada 8

Are MERs Too High?

Relative to other Registered Savings Plans?

The Investment Funds Institute of Canada 9

Are MERs Too High?

Relative to MERs paid in the US?

The Investment Funds Institute of Canada 10

CANADA

Admin / operating

fees

Management fees

Fund management

feesAsset-based commission

+

Mgmt

Expense

Ratio

(MER)

Load charges

Cost of Owner -

ship (COO)

= + =Sales taxes(GST )

+

Source: Mackenzie Report based on Bain Study

Key Comparisons

U.S.

Fund mgmtfees

Admin/ operating

fees12b -1

fee =++Total

Expense Ratio (TER)

Load charges

Cost of

Owner-ship

(COO)

=+

•Non -negotiableand prospectus defined

Are MERs Too High?Cost of Ownership for front load advisor sold mutual

funds by manager ($0-100K account size)

The Investment Funds Institute of Canada 11

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5%

1.74

2.01

2.06

2.07

2.122.13

2.142.14

2.18

2.23

2.27

2.33

2.37

2.38

2.41

Domestic   Equity

2.27

2.38

Table 3 – Cost of Ownership for front load advisor sold mutual funds by manager6 ($0-100K account size)7

Are MERs Too High?

The Investment Funds Institute of Canada 12

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5%

1.74

2.01

2.06

2.07

2.122.13

2.142.14

2.18

2.23

2.27

2.33

2.37

2.38

2.41

Domestic   Equity

2.27

2.38

Table 3 – Cost of Ownership for front load advisor sold mutual funds by manager6 ($0-100K account size)7

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5%

1.87

2.24

2.26

2.36

2.44

2.49

2.52

2.53

2.59

2.60

2.67

2.72

2.802.81

International   Equity

2.39

2.51

Asset categoriesTOR

0

0.5

1.0

1.5

2.0

2.5

3.0

3.5%

1.69

1.78

1.85

1.95

2.03

2.16

2.28

2.30

2.34

2.36

2.38

2.42 2.42

2.48

Balanced   Funds

2.23

2.34

0

0.5

1.0

1.5

2.0

2.5%

1.41

1.65 1.65

1.73

1.76

1.79

1.82

1.84

1.86

1.89

1.93

1.95

1.96

2.01

Fixed   Income

1.58

1.66

Domestic Equity International Equity

Balanced Funds Fixed Income