Equity indexed annuities:   Equity indexed annuities explained: Equity indexed annuities (EIA’s) have fast become the most popular type of annuity. Even though EIA’s are categorized as a ‘fixed’ annuity, they can be considered a safe investment alternative. How so? EIA’s participate in the stock market while guaranteeing your principal and locking in your gains. This means that you can never loose money or earned interest, even though you are ‘invested’ in the stock market. EIA’s are the only product which offers stock market related gains with the ultimate loss protection. Simply said, you make money when the market goes up but you cannot loose money when the market goes down. Guarantee – No loss provision Once you make a premium payment you will never have less in your account than your premium payment. Once interest has been credited to your equity index annuity the value of your annuity will never decrease unless you make a withdrawal even if the stock market goes down. Long term stock market growth Your rate of return is based on the performance of the index of your choice. (Dow Jones, S&P 500, Nasdaq, etc) EIA’s allow you to ‘invest’ with a 100 % no-loss protection. How your return is calculated You cannot loose money with your EIA when the stock market goes down. But how is your rate of return calculated when the stock market is up? Keep in mind that different companies use different methods. Your funds can be allocated to a number of different indexes (Dow Jones, S&P 500, Nasdaq, etc.). The rate of return can is determined by one of the following methods: Point-to-point Margin or spread Averaging Caps High water mark Participation rate Low water mark Ratchet or annual reset Point-to-point: The index value at the beginning of the term is compared to the index value at the end of the term. The term can be 1, 3, 5, 7 or 10 years. The difference is your gain. Averaging: The index value at the beginning of the term is compared with the average index value during the term. Daily, monthly or annual averages can be used. The term can be 1, 3, 5, 7 or 10 years. High water mark: The index-linked interest, if any, is decided by looking at the index value at various points during the term, usually the annual anniversaries of the date you bought the annuity. The interest is based on the difference between the highest index value and the index value at the start of the term. Interest is added to your annuity at the end of the term. Low water mark: The index-linked interest, if any, is decided by looking at the index value at various points during the term, usually the annual anniversaries of the date you bought the annuity. The interest is based on the difference between the index value at the end of the term and the lowest index value. Interest is added to your annuity at the end of the term. Margin or spread: Margins or spreads are fancy terms for fees. I. e. a 2 % margin means that your rate of return will be reduced by 2 %. Margins or spreads can only be charged when your account increases in value. Caps: Caps are the same as maximums. A cap of 10 % means that your rate of return cannot exceed 10 %. Participation rate: Participation rate refers to the percentage of your funds that participates in the gain. A participation rate of 75 % on a 10 % gain means that your gain is 7.5 % Ratchet or annual reset If the ratchet method is used, your gains are locked in annually. Your principal plus your gains will be used as foundation for the next year. Annual reset used the original principal as foundation to determine your gains every year.

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