Fee Free Periodic Payments

2

Fee-free redemption? Yes, it's possible!

Periodic payments from a RRIF or a LIF are exonerated from market value adjustment up to a maximum of: 20% of the contract value per year (which

includes all products) of which 12% can come from SIP, TIP and

Alternative Allocation Portfolio

3

Redemption rules

To calculate the maximum periodic payments from a RRIF or a LIF, we use: % of the initial deposit value for the 1st year % of the current value as at January 1 for

subsequent years Non-cumulative

4

Redemption rules…

Product priority order1. Daily Interest Account2. Guaranteed Interest Account3. SIP / TIP / AAP4. Special daily interest account (pending a transfer)

Within each product category, the FIFO method is used (first in, first out): According to deposit dates (campaign dates)

(the terms are not taken into consideration)

5

Example 1

January 1, 2004 $5,000 Initial deposit in a 5-year GIA

$25,000 Initial deposit in a 3-year SIP

$30,000 Initial deposit in a 8-year TIP

Total investment on Jan 1, 2004 = $60,000

This simulation is not an indication or a guarantee as to future results.

6

Example 1: six months later…

July 1, 2004 $5,087.50 Current value of 5-year GIA

$25,575 Current value of 3-year SIP

$30,930 Current value of 8-year TIP

What is the maximum the client can redeem fee free?

20% of the initial deposit of $60,000= $12,000

7

Example 1: Where will the $ come from?

Step 1: the maximum amounts that can be redeemed from each product are calculated

Step 2: the payments are made according to the product priority rules and FIFO

8

Example 1…

Step 1: maximum calculated for each product

Max for 5-year GIA Total maximum $12,000, but the GIA current value is only $5,087.50

Max for 3-year SIP12% x $25,000= $3,000

Max for 8-year TIP12% x $30,000= $3,600

9

Example 1…

Step 2: payments made according to product priority rule and FIFO

Redeem the max from GIA $5,087.50 (current value)

Redeem the max from SIP & TIPSIP = $3,000TIP = $3,600

Total amount redeemed = $11,687.50

10

Example 2: three years into a contract

ProductCurrent

value (As of Jan 05)

Details of deposits and/or campaigns

Daily interest $2,000

GIA $16,8001) Deposit of $8k in Jan 03 ($8,712)2) Deposit of $8k in Jan 02 ($8,088)

SIP $33,7051) Deposit of $20k in Jan 02 campaign ($22,720)2) Deposit of $10k in Jan 03 campaign ($10,985)

TIP $48,9951) Deposit of $15k in Jan 03 campaign ($16,340)2) Deposit of $30k in Jan 04 campaign ($32,655)

Total current value = $101,500

11

Example 2…

What is the maximum the clientcan redeem fee free?

20% of current value $101,500= $20,300

Suppose that the client wants a periodic paymentof $22,000, then $1,700 will be with fees

12

Example 2…

Step 1: maximum calculated for each product

Max for DIA & GIA Total max $20,300, which has to be split among DIA & the two GIAs

Max for Jan 02 SIP 12% x $22,720 = $2,726

Max for Jan 03 SIP 12% x $10,985 = $1,318

Max for Jan 03 TIP 12% x $16,340 = $1,961

Max for Jan 04 TIP 12% x $32,655 = $3,919

13

Example 2…Step 2: payments made according to

product priority rule and FIFORedeem the max from DIA DIA = $2,000 (current value)

Redeem the max from GIAGIA = $16,800A) Jan 02 GIA = $8,088B) Jan 03 GIA = $8,712

Redeem from SIP & TIPA) Jan 02 SIP = $1,500 (fee free)B) Jan 02 SIP = $1,700 (with fees)

Total amount redeemed fee free = $20,300Total amount redeemed with fees = $1,700

Which completes the periodic payment of $22,000