AAP is withdrawn for the Campaign of January 1, 2009.

Why settle for an ordinary GIC?

The Alternative Allocation Portfolio at a glance

The Alternative Allocation Portfolio is a multi-diversified investment tool:
 

• by asset class
• by management style
• by geographical region
• by manager
   

Its variable return is based on a basket of seven asset classes and complementary management styles.

Typical Allocation
		Management style
Asset Class	Details	Passive	Active	Alternative
1 - Fixed income	High-quality bonds and debentures	X	X
2 - Real estate	Shares of firms active in the residential, commercial and industrial real estate markets	X
3 - Equity	Shares of small to large-cap companies situated worldwide	X	X
4 - Alternative Strategies	Convertible bond arbitrage, event-driven and risk arbitrage, and short and long equity positions		X	X
5 - Commodities	Derivatives on commodities		X	X
6 - Managed futures	Futures contracts on natural resources, currencies and interest rates		X	X
7 - Event-driven bonds	Diversified portfolio of bonds which payout depends on an event or a catastrophe, such as hurricanes, earthquakes and typhoons		X

This allocation is reviewed monthly and may vary.

The seven asset classes with low correlation comprising the Alternative Allocation Portfolio are diversified worldwide. They are periodically rebalanced to take advantage of both bull and
bear markets.

We select managers whose expertise is recognized in the Industry and whose management styles are complementary.

Each deposit in the Alternative Allocation Portfolio is processed as follows.
 

• A portion is invested in a zero-coupon bond in order to guarantee its value at maturity.
• The rest is put into money market securities and acts as collateral on a loan equivalent to the initial deposit, granted by a financial institution. This amount is invested in the seven asset classes.
   
  • Result: the value of the deposit at maturity is not only guaranteed, it increases, thanks to returns on money market securities and performance of the asset classes.
     

Surrender

Partial or total surrenders are allowed. The surrender value equals the current value from which a market value adjustment is subtracted. It cannot exceed the current value.

Here is how the surrender value is established.

Surrender value = current value - market value adjustment

                          (Compound rate of a GIC with same term + 1.5% - 2.4%)
                                                 X
                          remaining period to maturity
                                                 X
                          current value

Let's consider a partial surrender after 2 years:

April 1, 2005	$10,000	Initial Deposit
April 1, 2007	$11,030	Current value after 2 years
	$2,000 surrender Remaining period to maturity: 4 years

1.  Calculating the surrender value based on a 4-year GIC rate of 3.40%
     Surrender value =
                [1 - (3.40% + 1.5% - 2.4%) x 4 years] x $11,030 = $9,927

2.  Calculating the new initial deposit
     Prorated adjustment of the surrender value =
               $10,000 x (1 - $2,000 / $9,927) = $7,985
     This represents the 100% capital guarantee

3.  Calculating the new current value
     New initial deposit adjusted to account for the growth accumulated so far =
                $7,985 x ($11,030 / $10,000) = $8,807

Fee Free Periodic Payments

As of April 1, 2005, periodic payments from a RRIF or a LIF, up to an annual maximum of
12% for the Alternative Allocation Portfolio, are not subjected to a market value adjustment.

To calculate the maximum periodical payments from a RRIF or a LIF, we use:
 

• for the first year: 12% of the initial deposit value
• for subsequent years: 12% of the current value as at January 1
   

One must note that these annual maxima are non-cumulative and are not adjusted to account for any deposit made during the calendar year.

Specific surrender rules apply to these periodic payments:
 

• According to the product priority order:
   

1. daily interest fund
2. guaranteed interest fund
3. SIP / TIP / AAP
4. special daily interest (pending a transfer)
5. segregated funds
    

• Then, within each product category, the "first in, first out" (FIFO) method is used, according to deposit/campaign dates (terms are not taken into consideration).
   

Fee Free Periodic Payments
   13 pages - 177 kb

Here are some additional examples which illustrate how the fee-free periodic payments are calculated.

Periodic payments (examples)
   4 pages - 139 kb