1. Financial Management by Matthew A. Sammut Fortrus Financial Your Investment Coach & Educator

2. Cash Flow Management Know your incoming revenues versus outgoing expenses – budget Know your incoming revenues versus outgoing expenses – budget Ensure you have a disciplined savings plan(s) in place Ensure you have a disciplined savings plan(s) in place Do a regular review of your personal situation Do a regular review of your personal situation Do not let debt payments strap you Do not let debt payments strap you

3. Debt Management Goal should be elimination of debt Goal should be elimination of debt Deductible versus non-deductible debt Deductible versus non-deductible debt Careful with too much leverage Careful with too much leverage Manage interest rate cycles Manage interest rate cycles Shorten term of debts Shorten term of debts

4. Asset Management Net Worth Statement Do a regular review of your assets and liabilities – feeling of advancement Do a regular review of your assets and liabilities – feeling of advancement Verify that your assets are diversified Verify that your assets are diversified Caution about putting all your net worth in a home Caution about putting all your net worth in a home Manage your liabilities – interest charges and terms Manage your liabilities – interest charges and terms Net Worth = Assets - Liabilities Net Worth = Assets - Liabilities

5. Retirement Planning First goal is to set realistic goals First goal is to set realistic goals Second is to create a plan to reach those goals Second is to create a plan to reach those goals Maximize your RRSP as there is an immediate tax savings and it grows tax free Maximize your RRSP as there is an immediate tax savings and it grows tax free Pension adjustments + F.V. projections for your pension Pension adjustments + F.V. projections for your pension

6. Estate Planning Try to ensure that your assets will be transferred tax free - discussions about estate taxes returning Try to ensure that your assets will be transferred tax free - discussions about estate taxes returning Create a will and review every 3 years or when a major life event occurs including marriage, re-marriage, births Create a will and review every 3 years or when a major life event occurs including marriage, re-marriage, births Consider gifting and income splitting Consider gifting and income splitting

7. Education Planning Costs of post secondary education continue to escalate Costs of post secondary education continue to escalate Government plans in place for education saving – RESP Government plans in place for education saving – RESP RESP’s grow tax free and provide an immediate government credit RESP’s grow tax free and provide an immediate government credit Higher education is necessary in today’s economic environment Higher education is necessary in today’s economic environment

8. Portfolio Management Total portfolio includes both liquid and non-liquid investments Total portfolio includes both liquid and non-liquid investments Liquid portfolio should be actively managed – does not mean trading Liquid portfolio should be actively managed – does not mean trading Critical cycles we go through both short and long term Critical cycles we go through both short and long term Liquid asset categories include cash, fixed income and equities Liquid asset categories include cash, fixed income and equities

9. Portfolio Management Con’t Following are key steps: 1. Determine your investable capital 2. Key objectives & strategies 3. Asset allocation (mix) strategy 4. Possible currency allocation 5. Security selection

10. Investable Capital Should have a reserve fund set up, which should be a minimum 6 months required life expenses Should have a reserve fund set up, which should be a minimum 6 months required life expenses Have shorter-term specialty plans set up like home savings; vacation etc. Have shorter-term specialty plans set up like home savings; vacation etc. After these plans is your investable capital which includes RRSP’s and cash portfolios After these plans is your investable capital which includes RRSP’s and cash portfolios

11. Key Objectives Critical to work out key objectives with your spouse, both long and short-term Critical to work out key objectives with your spouse, both long and short-term Determine your risk tolerance Determine your risk tolerance Break down objectives to macro (growth, income, liquidity etc.) and micro issues (education, retirement plans etc.) Break down objectives to macro (growth, income, liquidity etc.) and micro issues (education, retirement plans etc.)

12. Asset Allocation Based on your investable capital, objectives and risk tolerance Based on your investable capital, objectives and risk tolerance Includes key asset classes – cash, fixed income and equities Includes key asset classes – cash, fixed income and equities Subcategories where you can break down above asset classes Subcategories where you can break down above asset classes Must be an economic/investment cycle component Must be an economic/investment cycle component

13. Cash Investments Include the following investments: Bank accounts Bank accounts Treasury bills Treasury bills Short-term GIC’s (<1 year) Short-term GIC’s (<1 year) Short-term term deposits Short-term term deposits Money market funds Money market funds KNOW THE RISKS OF EACH

14. Currency Allocation If you have enough liquid capital (> $250,000) very important If you have enough liquid capital (> $250,000) very important Must know the world trends – use professional advisors Must know the world trends – use professional advisors Example is the Cdn. dollar has appreciated 25% versus US $ in the last 3 years Example is the Cdn. dollar has appreciated 25% versus US $ in the last 3 years

15. Security Selection Can diversify through a mutual fund Can diversify through a mutual fund More aggressive strategies – including hedge funds and derivatives More aggressive strategies – including hedge funds and derivatives Ensure you understand true risks of all securities you are investing in Ensure you understand true risks of all securities you are investing in Cash and fixed income products should be very safe Cash and fixed income products should be very safe Small percentage in speculative inv. Small percentage in speculative inv.

16. Professional Help Be very careful of advisor choice Be very careful of advisor choice Determine if they are paid by commission or fee Determine if they are paid by commission or fee Do they manage the money or are they a third party Do they manage the money or are they a third party What qualifications do they have What qualifications do they have Should be trust, knowledge, access to products and a connection Should be trust, knowledge, access to products and a connection

17. Types of Professionals Bankers Bankers Brokers / investment advisors Brokers / investment advisors Financial planners Financial planners Money managers Money managers Insurance agents Insurance agents Mutual fund salespeople Mutual fund salespeople

18. Risk Management Only purchase top quality products in cash and fixed income products Only purchase top quality products in cash and fixed income products Equities should generally be quality – value versus growth analysis Equities should generally be quality – value versus growth analysis Some speculative component possible Some speculative component possible Diversification – also international Diversification – also international Asset class and equity sector mgt. Asset class and equity sector mgt.

19. Risk Management CDIC up to $100,000 at banks CDIC up to $100,000 at banks Use different banks and subsidiaries of banks Use different banks and subsidiaries of banks Be aware of the risk of the institution you are using Be aware of the risk of the institution you are using Segregated versus firm owned Segregated versus firm owned

20. Mutual Funds Immediate diversification Immediate diversification Know the underlying objective of the mutual fund Know the underlying objective of the mutual fund Look at historical data but do not chase returns Look at historical data but do not chase returns Diversify to different sectors both industry and geographically Diversify to different sectors both industry and geographically

21. Hedge Funds More sophisticated product that is not regulated More sophisticated product that is not regulated Numerous strategies including long- short; arbitrage etc. Numerous strategies including long- short; arbitrage etc. Fees tend to be very high – 1 to 2% plus performance fees of 20% Fees tend to be very high – 1 to 2% plus performance fees of 20% Tend to offer greater risk Tend to offer greater risk

22. Overview of Economy Economy should be in major recession but averted due to rapidly lowering interest rates Economy should be in major recession but averted due to rapidly lowering interest rates Created a huge debt bubble – highest levels in history including governments, business and individuals Created a huge debt bubble – highest levels in history including governments, business and individuals Very leveraged economy – hedge funds and debt Very leveraged economy – hedge funds and debt

23. Overview of Economy High risk of recession/depression, possibly prolonged one like Japan High risk of recession/depression, possibly prolonged one like Japan Savings rate is near zero; capital investment has plummeted since 2000 Savings rate is near zero; capital investment has plummeted since 2000 Commodity prices have escalated like the 1970’s – other deflationary forces Commodity prices have escalated like the 1970’s – other deflationary forces Employment figures are a problem Employment figures are a problem

24. Summary Manage your cash flow and net worth Manage your cash flow and net worth Portfolio management of liquid and non-liquid investments Portfolio management of liquid and non-liquid investments Macro and micro planning Macro and micro planning Take control and spend time planning Take control and spend time planning Find high quality advisors to help develop and implement a plan Find high quality advisors to help develop and implement a plan