Glossary

12b-1 Fees: Fees paid by the fund out of fund assets to cover distribution expenses and sometimes shareholder service expenses.

403(b): see Tax-Deferred Annuity

529 College Savings Plan ("qualified state tuition program"): A tax-advantaged savings plan that helps families and individuals save for higher education. These plans offer a number of benefits including tax deferral on earnings, professional money management and the flexibility to use the proceeds at virtually any accredited educational institution.

5500 Form or Annual Report: A report required to be filed annually by the program sponsor with the Internal Revenue Service, regarding the qualification, financial condition and operations of the funded plan.

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Accumulation Unit: Money paid in or transferred into an investment division of the separate account is credited in the form of accumulation units. Any increase or decrease in value is based upon the investment performance of the underlying investment portfolio.

After Tax Savings: Term used to describe investments or contracts purchased with money that has already been taxed. Also known as "non-qualified" investments or contracts.

Annuitant: The person(s) on whose life the income payments are based. The contract owner decides who the annuitant(s) will be.

Annuitize: To convert the account balance under a deferred annuity contract into a stream of income, either for one or more lifetimes or a specific period of time.

Annuity: A tax-deferred contract can provide an income for a specified time period, such as a number of years or for life. There are two types of annuities: deferred annuities, which allow you to grow your assets tax deferred and convert your account balance to income payments at a later date, and immediate annuities, which generally allow you to receive income payments right away.

Annuity Date: The date when your annuity income payments begin. This date usually appears in your annuity contract. You may be able to change this date, with limitations, before you reach the annuity date.

Asset Allocation: A financial strategy for investing money into various asset classes such as stocks, bonds and cash — based upon your financial goals, risk tolerance and time horizon. Asset allocation has two main advantages: it can help increase investment returns and reduce risk.

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Benchmark Index: Commonly referred to stock or bond indices used to measure market performance and to compare the relative performance of an investment portfolio. Investing into indices directly is not possible. In addition, these benchmark indices do not have transaction costs and other expenses which an investment portfolio does.

Beneficiary: The person(s) who receive(s) money upon the death of the annuity's contract owner or annuitant. The contract owner decides who the beneficiary will be.

Bonds: An IOU or promissory note issued by companies or governments and their agencies. Bonds provide income and some growth potential but not as much growth potential or historical price fluctuations as stocks. The amount of interest paid by a bond varies depending on its credit risk (the risk the issuer will repay the loan), and on its maturity risk. High quality, short-term bonds generally pay the lowest yields, and low quality, long-term bonds pay higher yields.

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Carrier: see Provider.

Cash Equivalents: A security that can be readily converted into cash (e.g. Treasury bill or money market fund).

Closed-End Fund: A type of mutual fund that generally does not continuously offer shares for sale. Rather, they sell a fixed number of shares at one time (in the initial public offering), after which the shares typically trade on a secondary market, such as the New York Stock Exchange or the Nasdaq Stock Market. Closed-end funds are permitted to invest in a greater amount of "illiquid" securities than mutual funds, are not redeemable, and are managed by separate entities known as "investmen advisors".

Contract Owner: The person(s) or entity who purchases the annuity and has all rights to the contract. In a variable deferred annuity, for example, this person can make investment decisions, transfer money among funding options, make withdrawals, and name the annuitant and the beneficiary.

Contribution: A payment made into a fund by a program sponsor or a participant. A participant contributing to a Tax-Deferred Annuity generally deposits such funds on a before-tax basis through salary reduction.

Credit Risk: The risk that a creditor or bond issuer will not pay the interest and/or principal owed when it is due.

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Death Benefit: The guarantee that if you should die before you convert your variable annuity into regular income payments (annuitize your contract), your annuity's beneficiaries will receive the higher of the account value or a different amount specified in the annuity (such as the amount you contributed to the annuity, less withdrawals). In many variable annuities, the death benefit can increase over time.

Deferred Annuity: A type of personal retirement account that provides tax-deferred growth potential for long-term goals, such as retirement. When you are ready to receive income payments, the deferred annuity provides many choices, including guaranteed income for life. There are two types of deferred annuities: fixed and variable.

Diversification: A financial strategy to help reduce risk by spreading your assets across different asset classes, such as stocks and bonds, or across different types of securities within the same asset class. For example, you can diversify your stock holdings into stocks of different industries.

Dollar Cost Averaging: A financial strategy of making investments at regular intervals with a fixed dollar amount. A key benefit is that over time, your average per unit cost should be lower than either the market high or the average price. Dollar cost averaging does not guarantee a profit or protect against a loss. It involves continuous investment in securities regardless of fluctuating prices. You should consider your financial ability to continue purchases through periods of low price levels.

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ERISA: The Employee Retirement Income Security Act, government legislation passed in 1974 which regulates and mandates procedures for retirement plans for the Program Sponsor and provides certain protections for the program participants.

Expense Ratio: The amount, as a percentage of your total annuity account balance, that you pay annually for investment- and insurance-related charges.

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FINRA (The Financial Industry Regulatory Authority): FINRA, is the largest non-governmental regulator for all securities firms doing business in the United States. All told, FINRA oversees nearly 5,100 brokerage firms, about 173,000 branch offices and more than 665,000 registered securities representatives. Created in July 2007 through the consolidation of NASD and the member regulation, enforcement and arbitration functions of the New York Stock Exchange, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services.

Fixed Annuity: A tax-deferred annuity that guarantees you will earn stated or declared rates of return during the savings phase. When you convert this money into income payments, you will receive a fixed amount of income on a regular schedule.

Flexible Premium Annuity: An annuity that accepts periodic contributions, which can usually be made at any time (as opposed to single premium).

Free Look Period: Period of time after an annuity contract is issued and delivered (usually between 10 and 30 days) when the owner may cancel the contract and receive either their initial payment or the current value of the annuity contract. State rules vary.

Fund Performance: The measurement of gains or losses on the investment over a stated period of time.

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High-Yield Bonds: Lower-rated bonds, or bonds rated below investment grade quality (also known as "junk bonds"). These bonds typically have higher yields than investment grade bonds but also have higher credit risk, or risk that the issuer will not pay the interest and/or principal when it is due. High yield bonds generally fluctuate more in value than investment grade bonds.

Historical Performance: The return on an investment or an investment portfolio over its lifetime or certain periods of time.

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Immediate Annuity: An annuity contract that you generally buy with a lump sum and from which you begin receiving income within a short period, always less than 13 months. An immediate annuity can be either fixed or variable.

Income Options: The various ways to receive income payments that an annuity contract offers. Many annuities offer a variety of options you can choose from, including guaranteed income for life.

Income for a Guaranteed Time Period Annuity: An annuity income option that guarantees payments for a specific time period, usually from 5 to 30 years. If the annuitant dies before all payments have been made, then the owner (or beneficiary if the owner is deceased) will receive the balance of payments for the rest of the guaranteed period. You may be able to choose fixed or variable payments, depending on the annuity.

Income for Life Annuity: An annuity income option that guarantees income for the life of the annuitant, no matter how long he/she lives. The amount of the payment depends on your account value and the life expectancy of the annuitant. The payment amounts may be fixed or variable, depending on the annuity.

Income for Life with a Guaranteed Time Period Annuity: An annuity income option that guarantees payments for the annuitant's life, with a guaranteed number of years. If the annuitant dies during the guaranteed period, payments will continue to the annuity's owner (or beneficiary if the owner is deceased), for the remainder of the period. Many annuities also offer this option forthe lives of two annuitants. You may be able to choose fixed or variable payments, depending on the annuity.

Index Portfolio: Investment portfolio that attempts to mirror the performance of a benchmark index, such as the Composite Stock Price Index (S&P 500). The portfolio tends to hold all or many of the same stocks or bonds that are tracked by the actual index. Index portfolio fees may be lower than those on other portfolios because there is relatively little buying and selling of portfolio securities.

Individual Retirement Account/Annuity (IRA): A tax-deferred retirement account for individuals that allows a contribution of 100% of earned income up to a maximum of $3,000 per year. (A contribution of up to $3,000 may also be made on behalf of a spouse.) With a Traditional IRA, some or all of the contribution may be tax deductible, depending on the individual's income level and coverage by qualified retirement plans. With a Roth IRA, the contribution is not tax deductible, but all earnings are tax free, provided certain conditions are met.

Individual Retirement Account/Annuity (IRA) Rollover: An individual account that is established to place funds disbursed from a qualified retirement plan to defer taxation.

Inflation Risk: The risk that the rising cost of goods and services will reduce the value of your investment, and your buying power, over time.

Insurance-Related Charge (of the Separate Account): An annual fee in a variable annuity that pays for general administrative expenses (such as financial, actuarial, accounting and legal expenses), and for the mortality and expense risk.

Interest-Only Option: Only the interest earned from the previous year will be paid to the participant as long as principal remains invested.

Interest Rate Risk: The risk that interest rates will rise and reduce the value of an investment. For example, bond prices generally move in the opposite direction of interest rates. As interest rates rise, bond prices generally fall, and vice versa.

International Stocks: Stocks of companies that are domiciled outside of the United States.

Investment Company: A company (corporation, business trust, partnership, or limited liability company) that issues securities and is primarily engaged in the business of investing in securities.

Investment Objective: A financial goal a client hopes to achieve through investing. Common investment objectives include: Preservation of Capital, Income, Growth and Income, Growth and Aggressive Growth.

Investment Choices: The investment portfolios offered in a variable annuity are sometimes referred to as investment choices, or subaccounts. Many variable annuities offer a wide range of stock and bond investment options, with different risk levels.

Investment-Related Charges: In a variable annuity, the investment-related charges are the annual amount you pay to cover the costs of the professionals who manage the investment portfolios and the expenses incurred by the portfolios. The percentage you pay depends on which investment options you select.

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Joint Account: An account in which two or more individuals are CO-owners.

Joint and Survivor Annuity: A fixed amount of money each month paid to the participant. If the participant is survived by a named contingent annuitant, payments will continue to this annuitant in accordance with the option elected, e.g.,100%, 66 2/3%, 50%, etc.

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Large Cap U.S. Stocks: An asset class that represents common stocks issued by large U.S. companies that have a market capitalization of $5 billion or more. (Market capitalization is the total market value of a company's outstanding shares.) A common benchmark for large-sized U.S. stocks is the Standard & Poor's Composite Stock Price Index.

Lehman Brothers Aggregate Bond Index: Most widely used benchmark for U.S. bond mutual funds and U.S. bond variable annuity portfolios. Tracks performance of debt instruments issued by corporations and the U.S. Government and its agencies.

Life Annuity: A fixed amount of money each month that continues for lifetime and ceases with the death of the individual

Life with Period Certain Annuity: A fixed amount of money each month that continues for the life of the individual with a guarantee that a minimum number of payments will be received.

Lipper: A Reuters company and a leader in supplying mutual fund information, analytical tools, and commentary. Lipper's benchmarking provides a guide to asset managers, fund companies, financial intermediaries, traditional media, web sites, and individual investors.

Long Term Care Insurance: Insurance which pays for long-term care services (such as nursing home and home care) that Medicare and Medigap policies do not cover.

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Management Fees: Management fees are fees that are paid out of fund assets to the fund's investment adviser for investment portfolio management, any other management fees payable to the fund's investment adviser or its affiliates, and administrative fees payable to the investment adviser that are not included in the "Other Expenses" category.

Market Risk: The chance that the stock or bond markets, or the economy as a whole, may stumble.

Mid Cap U.S. Stock: An asset class that represents common stocks of medium-sized U.S. companies, generally with a market capitalization of $1 billion to $5 billion. Mid cap stocks have a generally higher growth potential than large-sized companies, but also have a higher degree of risk.

Minimum Distribution Service: Federal tax law and regulations generally require that you begin taking minimum distributions from your Traditional IRAs, SEPs and SIMPLEs by April 1st of the calendar year following the year in which you reach age 701⁄2.

Morgan Stanley Capital International's EAFE® Index: Most widely used benchmark for international stock mutual funds and international stock variable annuity portfolios. Its holdings represent 80% of the world's stock market capital outside North America. EAFE® stands for Europe, Australasia and the Far East.

Mutual Fund: A mutual fund is a company that pools money from many investors and invests the money in stocks, bonds, short-term money-market instruments, or other securities. Legally known as an "open-end company," a mutual fund is one of three basic types of investment companies. The two other basic types are closed-end funds and Unit Investment Trusts (UITs).

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NAV (Net Asset Value): An investment company's total assets minus its total liabilities. Mutual fund companies generally must calculate their NAV at least once every business day, typically after the major U.S. exchanges close. An investment company calculates the NAV of a single share (or the "per share NAV") by dividing its NAV by the number of shares that are outstanding.

NASDAQ Composite Index: A statistical measure that indicates changes in The Nasdaq Stock Market. The Nasdaq Composite Index measures all Nasdaq domestic and foreign common stocks. It is market-value weighted: each company's security affects the index in proportion to its market value. Securities in the Nasdaq Composite Index generally are assigned to subindexes based on their Standard Industrial Classification (SIC) codes.

Non-Qualified Annuity: A tax-deferred annuity generally purchased by individuals with after-tax dollars, rather than as part of a tax qualified retirement plan such as an IRA.

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Participant: An employee or former employee who is eligible to be covered or to receive a benefit from the plan.

Period Certain Annuity: A fixed amount of money each month that is paid for the time specified.

Program Sponsor: The employer who maintains an employee benefit plan on behalf of its eligible workers.

Prospectus: The legal document that provides detailed information about your investment. It must be given to every person who is offered to buy registered securities.

Provider: A company which underwrites, invests contributions, or administers programs under a contractual agreement.

Purchase Payments: The contribution(s) made to an investment. Some annuities allow you to make a single contribution, and some allow you to make multiple contributions on a regular basis, or anytime you like.

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Qualified Annuity: An annuity contract you generally buy with pretax dollars as part of a tax-qualified retirement plan.

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Renewal Rate: The new, declared interest rate for money that has completed the initial guaranteed interest rate period. In a fixed deferred annuity, for example, the interest rate on your contract may be renewed periodically, usually every year, to reflect current market conditions.

Risk: A measure of the price volatility of an investment. There are different types of risk, including credit risk, interest rate risk, inflation risk and currency risk.

Risk Tolerance: The attitude of the investor as to the willingness to accept losses compared to investment gains.

Roth IRA: An IRA that enables your earnings to grow tax free, if certain conditions are met. Roth IRA contributions are not tax deductible, and are purchased with after-tax dollars. Like traditional IRAs, your contributions are limited to $3,000 per year. Eligibility is based on income (AGI) limits. For single taxpayers, you may contribute to a Roth IRA if your AGI is under $110,000. For married filing joint taxpayers, your combined AGI must be under $160,000 (for 1999).

Russell 1000® Index: Measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $13 billion; the median market capitalization was approximately $3.8 billion. The smallest company in the index had an approximate market capitalization of $1.4 billion.

Russell 2000® Index: Most widely used benchmark for small-cap stock mutual funds and small-cap stock variable portfolios. Measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index. As of the latest reconstitution, the average market capitalization was approximately $530 million; the median market capitalization was approximately $410 million. The largest company in the index had an approximate market capitalization of $1.4 billion.

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SEC (Securities & Exchange Commission): The federal agency created by the Securities Exchange Act of 1934 to administer that act and the Securities Act of 1933. The statutes administered by the SEC are designed to promote full public disclosure and protect the investing public against fraudulent and manipulative practices in the securities markets. Generally, most issues of securities offered in interstate commerce or through the mails must be registered with the SEC.

Salary Reduction Agreement (SRA): A form filled out by the program participant that stipulates either a dollar amount or percentage of salary to be deducted from the employee's wages to be contributed to their retirement savings plan.

Savings and Investing Phase: Time period during a deferred variable annuity contract when money is invested and/or left to grow on a tax deferred basis. Also known as the Accumulation Phase.

Separate Account: The account established by an insurance company to hold the money you contribute to the investment choices in your variable annuity. It is separate from the company's general account. Money in the separate account is not available to the company's general creditors.

Share Value: See Unit Value.

SIMPLE Plans: A retirement program designed for small businesses. It can be set up either as an IRA or as a deferred arrangement (401(k)). In general, they are funded by the employees' contributions on a pretax basis, and employers are required to make matching contributions. Contributions and earnings grow tax deferred.

Small-Cap U.S. Stocks: This asset class represents common stocks of the smallest companies in the United States, with market capitalizations of under about $1 billion. In general, small-sized stocks are considered to be riskier than stocks of large companies, but also tend to have greater return potential over time.

Standard & Poor's Composite Stock Price Index (S&P 500 Index): Most widely used benchmark for U.S. stock mutual funds and U.S. stocks variable portfolios. The S&P 500 Index is an unmanaged index of stocks of 500 of the largest publicly traded companies in the U.S., with the bigger ones given more weight than the smaller ones.

Surrender Charge: — See Withdrawal Charge.

Systematic Withdrawal Program: A program that allows for periodic payments from an investment, for example on a monthly, quarterly, semiannual or annual basis. In a variable deferred annuity, you can generally make systematic withdrawals from your contract while keeping the rest of your money invested in the funding options.

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Tax Reform Act of 1986: A major piece of government legislation which regulates and promulgates rules and procedures for retirement programs, including TDAs.

Tax-Deferred Annuity (TDA): A tax effective retirement savings plan available to employees of not-for-profit organizations. An employee makes contributions on a payroll-deduction pretax basis into an individual account maintained on their behalf.

Tax-free Transfers: The ability to move money between the investment choices and fixed account within a variable annuity. In most annuities, these transfers are free of charge.

Tax-sheltered Annuity: A tax-deferred annuity available only to employees of schools, nonprofit hospitals and certain other tax-exempt organizations in which your contributions are made through payroll reduction on a pretax basis (up to certain limits). All earnings grow tax deferred until such time as you make any withdrawals.

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Unit Investment Trust: A type of mutual fund that has the following characteristics: 1) typically issues redeemable securities (or "units"), like a mutual fund at approximate net asset value. 2) will make a one-time "public offering" of only a specific, fixed number of units (like closed-end funds) 3) will have a termination date (a date when the UIT will terminate and dissolve) that is established when the UIT is created. 4) does not actively trade its investment portfolio. 5) does not have a board of directors, corporate officers, or an investment adviser to render advice during the life of the trust.

Unit Value: The dollar value of a single accumulation unit or annuity unit in a particular investment division. Unit value changes to reflect the current value of the underlying investments that correspond to the investment division.

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Variable Annuity: A type of annuity in which the account balance may fluctuate based on the value of investment portfolios underlying the separate account. The contract owner has the ability to allocate money among several available investment choices. The contract owner, not the insurance company issuing the contract, assumes the investment risk.

Variable Immediate Annuity: An income annuity that begins providing income payments right away, or soon after purchase. The amount of the payments is based upon the performance of investment choices that you select.

Volatility: The speed and extent to which the price of a security or an investment rises and falls within a given period of time.

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Withdrawal Charge: The penalty imposed by an issuer for early withdrawal. The withdrawal charge will be set forth in the contract.

Withdrawals: Money that you withdraw from your investment. In a deferred annuity, you can generally make full or partial withdrawals, although a withdrawal charge may be imposed. A tax penalty may also be imposed.

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Yield: The rate of return on an investment, generally expressed as a percentage of the current price.

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