lpl financial research -...

LPL FINANCIAL RESEARCH

Member FINRA/SIPC of 5

Income w/

Cap Growth

Maximum

Income

Moderate

Income

Risk Ave

rse

Income

Risk

Return

The Risk Averse Income Profile

Appealing to what many see as the “core” benefit of fixed income investing, the Risk Averse Income profile is where the highest-quality, shortest-maturity instruments reside along the Spectrum. While no investment is without risk, this profile contains investments that offer limited credit risk (low chance for default), shorter maturity (less sensitivity to rising interest rates) and less currency risk (generally US dollar denominated securities).

Some of the investment products and strategies that comprise the Risk Averse profile include:

§ Money market funds

§ Certificates of Deposit (CDs)

§ Short-to-intermediate maturity U.S. Treasuries

§ Diversified bonds

§ Intermediate-term municipal bonds

§ Mortgage-backed securities (MBS)

§ Return of premium fixed annuities

§ Single premium immediate annuities (SPIAs)

§ Treasury Inflation Protected Securities (TIPS)

§ LPL Financial Research centrally-managed income-focused portfolio (offered in Model Wealth Portfolios)

The Risk Averse profile is primarily appropriate for investors who can withstand only the smallest levels of volatility and risk. However, while historically avoiding risk has been rewarded with decent levels of income, currently investments in the Risk Averse Income profile may not be offering sufficient income to meet client needs.

In other words, there are two ways to get out of balance from a risk-reward perspective. One is to assume too much risk per unit of desired return. This is the most common investment pitfall. But another to watch for is when returns (or income) are so low that they do not fully compensate for the risk being taken — even if that amount of risk is extremely low. In the Risk Averse profile, while risks are very minimal, one can argue that the returns are too low to justify even the smallest amount of risk being undertaken. For many, the Risk Averse profile currently offers a misbalance of risk and reward, not because the risk has increased, but rather because the reward of most of the strategies is extremely low.

The Income Spectrum

Risk Averse Income Snapshot

Target Yield Range* 1 – 3%

Investment Objective Income with Capital Preservation

Consistent, steady income, low interest rates may keep these income levels low.

* Target yield range is based on the products’ current yield in the Risk Averse Income profile, and are subject to change.

LPL Financial Member FINRA/SIPC of 5

THE INCOME SPECTRUM: RISK AVERSE INCOME

Consequently, though money market funds, CDs and short-to-intermediate-term U.S. Treasuries are options that fall into the Risk Averse profile, currently we do not recommend investing in these securities (or other vehicles that primarily hold those securities like some mutual funds). For those investors for which the Risk Averse profile best fills their investment needs and matches their risk-return profile, we recommend looking to several other asset classes or securities.

Investment Option Details

§ Diversified Bonds: Diversified bonds are simply a broad basket of bonds that seek to outperform the overall bond market. This diversified basket allows for diversification of risk, return and income levels. This basket includes short- to intermediate-term U.S. Government bonds, investment-grade corporate bonds, mortgage-backed securities and asset-backed securities. The 12-month yield on these securities is currently averaging about 2.1% (Barclays Capital US Aggregate Bond Index as of 2/29/12). The primary ways to gain exposure to diversified bonds: a basket of individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Intermediate-Term Municipal Bonds: A municipal bond is a bond typically issued by a municipality, meaning a city, other local government or their agencies, for the purpose of financing the infrastructure needs of the issuer. The issuer typically uses proceeds from a bond sale to pay for capital projects or for other purposes it cannot or does not desire to pay for with funds already available. And, in return, investors receive interest on their investment. The two most common types of municipal bonds are revenue bonds, which pay principal and interest from a specific stream of future income from a specific project (meaning tolls from a highway for example), and general obligation bonds, which pay principal and interest based on the full faith and credit of the municipality (meaning from any variety of sources). General obligation bonds have historically been considered the most secure type of municipal bond, and normally carry lower risk and lower interest rates. If investors purchase individual municipal bonds, the interest paid by the municipality is often exempt from all federal taxes, as well as state or local taxes (subject to certain restrictions). However, bonds issued for certain purposes are subject to the alternative minimum tax. Intermediate-term municipal bonds typically have duration of between 5 and 10 years. The 12-month yield on these securities is currently 2.5% (Barclays Capital Municipal Bond Index as of 2/29/12). The primary ways to gain exposure to intermediate-term municipal bonds: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Mortgage-Backed Securities (MBS): A mortgage-backed security is an asset-backed security whose cash flows are backed by the principal and interest payments of a set of mortgage loans. Payments are typically made monthly over the lifetime of the underlying loans. These

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values and yields will decline as interest rates rise and bonds are subject to availability and change in price .An increase in interest rates will cause the prices of bonds and bond mutual funds to decline.

Municipal bonds are subject to availability, price, and to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rate rise. Interest income may be subject to the alternative minimum tax. Federally tax-free but other state and local taxes may apply.

This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.



payments can be further broken down into different classes of securities, depending on the riskiness of different mortgages as they are classified under the MBS. These securities are mostly impacted by interest rate, prepayment, and credit risk. The 12-month yield on these securities is currently 2.6% (Barclays Capital U.S. MBS Index as of 2/29/12). The primary ways to gain exposure to MBS: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Return of Premium Fixed Annuity: An Annuity is a financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years.

This fixed annuity offers a guaranteed return over a set time period at competitive rates compared with CDs. Withdrawals can usually be made up to 10% of the initial premium without penalty; however, clients may fully liquidate if they choose and are guaranteed the amount they originally invested into the annuity contract. In such cases, the surrender charges on the annuity normally take away a portion or all of the earnings on the contract. A surrender charge is a fee levied on the policyholder upon cancellation. The fee is used to cover the costs of keeping the insurance policy on the insurance provider’s books. Current returns within these products range from 1% to 3.5%, depending upon the type of rate guarantee being offered and the length of surrender charges within the product.

§ Single Premium Immediate Annuities (SPIA) with a Cash Refund: This is a fixed annuity that provides a guaranteed stream of income (for life or a specified time period) in exchange for a one-time lump sum payment called a “premium.” The income payments from a SPIA typically start shortly after the lump sum payment is made to the insurance company and are subject to the issuer’s claims paying ability. The payments can be received monthly, quarterly, semi-annually or annually. Payment amounts depend on several factors, including initial investment, payment option, interest rate, age and gender. The “cash refund” is a death benefit option available with most SPIAs today that entitles beneficiaries to the difference between the premium paid and the payments received by the annuitant. Payments today for a single life male age 65 with a cash refund range between 5.1% and 5.9%.

§ Treasury Inflation-Protected Securities (TIPS): TIPS help eliminate inflation risk to investors as the principal is adjusted semiannually for inflation based on the Consumer Price Index and provide a real rate of return guaranteed by the U.S. Government. TIPS principal increases with inflation and decreases with deflation. When TIPS mature, investors are paid the adjusted principal or original principal, whichever is greater. TIPS pay interest twice a year, at a fixed rate. The rate is applied to the adjusted principal, meaning that, like the principal, interest payments rise with inflation and fall with deflation. If investors purchase individual

Mortgage-Backed Securities are subject to credit, default risk, prepayment risk that acts much like call risk when you get your principal back sooner than the stated maturity, extension risk, the opposite of prepayment risk, and interest rate risk.

Annuity contracts contain exclusions, limitations, reductions of benefits, and terms for keeping them in force. Your licensed financial professional can provide you with costs and complete details.

Early withdrawals may be subject to surrender charges. Partial or complete withdrawals of taxable amounts will be subject to ordinary income tax and, if prior to age 59½, may result in an additional 10% federal income tax penalty. Withdrawals from an annuity generally have the effect of reducing the death benefit, any living benefits and cash surrender value.



TIPS, its semiannual principal inflation adjustments are considered taxable income by the Internal Revenue Service (IRS) even though investors do not receive that growth in principal until they sell the bond or it reaches maturity. However, the growth in principal and interest income is exempt from state and local income taxes. The 12-month yield on these securities is currently 1.8% (Barclays Capital US TIPS Index as of 2/29/12). The primary ways to gain exposure to TIPS: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ LPL Financial Research Income Focused Model Wealth Portfolio: Model Wealth Portfolios is a centrally-managed advisory platform where LPL Financial Research has discretion to manage client assets based upon the investment theme and investment objective selected by an investor. The Income Focused portfolio managed by LPL Financial Research combines multiple asset classes and mutual funds together with the goal of generating attractive total returns and income yields for investors. In order to do this, LPL Financial Research attempts to select a strong lineup of income-producing mutual funds that have historically proven track records in higher income asset classes. n

This piece should be used in conjunction with The Income Spectrum Questionnaire.

Treasury inflation-protected securities (TIPS) help eliminate inflation risk to your portfolio as the principal is adjusted semiannually for inflation based on the Consumer Price Index - while providing a real rate of return guaranteed by the U.S. Government.

IMPORTANT DISCLOSURES

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance reference is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.

The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Principal risk: An investment in Exchange Traded Products (ETPs), structured as a mutual fund or unit investment trust, involves the risk of losing money and should considered as part of an overall program, not a complete investment program. An investment in ETPs involves additional risks: not diversified, the risks of price volatility, competitive industry pressure, international political and economic developments, possible trading halts, Index tracking error.

Investing in mutual funds involve risk, including possible loss of principal. Investments in specialized industry sectors have additional risks, which are outlined in the prospectus.

There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not ensure against market risk.

Asset allocation does not ensure a profit or protect against a loss.

An Asset Class is a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations. The three main asset classes are equities (stocks), fixed-income (bonds) and cash equivalents (money market instruments).

The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

Investors should consider the investment objectives, risks, charges, and expenses of the investment company before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read the prospectus carefully before investing.

Member FINRA/SIPC of 5

RES 3659 0412 Tracking # 1-058884 (Exp. 04/13)

Not FDIC/NCUA Insured | Not Bank/Credit Union Guaranteed | May Lose Value | Not Guaranteed by any Government Agency | Not a Bank/Credit Union Deposit

This research material has been prepared by LPL Financial.

To the extent you are receiving investment advice from a separately registered independent investment advisor, please note that LPL Financial is not an affiliate of and makes no representation with respect to such entity.


An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fed seeks to preserve the value of your investments at $1.00 per share, it is possible to lose money investing in the Fund.

The Barclays Capital U.S. Aggregate Index is comprised of the U.S. investment-grade, fixed-rate bond market.

The Barclays Capital High Yield Municipal Bond Index is an unmanaged index made up of bonds that are non-investment grade, unrated, or rated below Ba1 by Moody’s Investors Service with a remaining maturity of at least one year.

The Barclays Mortgage-Backed Securities Index includes 15- and 30-year fixed-rate securities backed by mortgage pools of the Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), and Federal National Mortgage Association (FNMA).

Neither LPL Financial nor any of its affiliates make a market in the investment being discussed nor does LPL Financial or its affiliates or its officers have a financial interest in any securities of the issuer whose investment is being recommended neither LPL Financial nor its affiliates have managed or co-managed a public offering of any securities of the issuer in the past 12 months.


Member FINRA/SIPCPage 1 of 5

Income w/

Cap Growth

Maximum

Income

Moderate

Income

Risk Ave

rse

Income

Risk

Return

The Moderate Income Profile

The Moderate Income profile offers the opportunity for slightly higher levels of income that are commensurate with the additional risks. Importantly, the increased levels of return are a direct result of the additional credit, interest rate and/or currency risk being undertaken. What makes the investments in the Moderate Income profile attractive is that they generally have one of the four primary risk types. Investors should understand the impact of these higher levels of risk and be willing to sustain greater swings in return and higher volatility in the attempt to reap higher levels of income.

Some of the investment products and strategies that comprise the Moderate Income profile include:

§ Long-Term U.S. Treasuries

§ Fixed Indexed Annuities

§ Hedged Foreign Bonds

§ Investment-Grade Corporate Bonds

§ Long-Term Municipal Bonds

§ Structured Products

§ Unit Investment Trusts


Each of these investments introduces new and varying risks relative to the Risk Averse profile on the Income Spectrum.

Currently, our least favorite of these investment choices is Long-Term U.S. Treasuries. With 30-year Treasury yields hovering just above 3% (as of March 30, 2012), the long maturity presents too much interest rate risk to justify such a paltry income expectation. One consideration for those investors willing to lengthen duration and take on more interest rate risk is a diversified portfolio of longer-dated Municipal Bonds, which offer relatively high-quality exposure, taxable benefits and higher income relative to equivalent maturity Treasuries.

Given record profits and cash flow by corporations in 2011, one of our favorite ideas in the Moderate Income profile is Investment-Grade Corporate Bonds, which have historically held an annuable average yield advantage of approximately 1.4% over comparable U.S. Treasuries. We view these assets as relatively attractive for higher-quality, credit-oriented fixed income

The Income Spectrum

Moderate Income Snapshot


Investment Objective Income with Moderate Growth

Moderate income with moderate risk, potential for principal and income fluctuation.

Interest Rate Risk is the risk that an investment’s value will change due to a change in the absolute level of interest rates, in the spread between two rates, in the shape of the yield curve or in any other interest rate relationship. Such changes usually affect securities inversely and can be reduced by diversifying (investing in fixed-income securities with different durations) or hedging (e.g. through an interest rate swap).

Currency Risk is a form of risk that arises from the change in price of one currency against another. Whenever investors or companies have assets or business operations across national borders, they face currency risk if their positions are not hedged.

Credit Risk is the risk of loss of principal or loss of a financial reward stemming from a borrower’s failure to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. Investors are compensated for assuming credit risk by way of interest payments from the borrower or issuer of a debt obligation. Credit risk is closely tied to the potential return of an investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk.

* Target yield range is based on the products’ current yield in the Moderate Income profile, and are subject to change.

LPL Financial Member FINRA/SIPC Page 2 of 5

THE INCOME SPECTRUM: MODERATE INCOME

investments. While credit risk is assumed with corporate bonds, the attractive income levels and shorter duration stance (less interest rate risk) result in favorable risk-reward characteristics for the appropriate investor.


§ Fixed Indexed Annuities: An Annuity is a financial product sold by financial institutions that is designed to accept and grow funds from an individual and then, upon annuitization, pay out a stream of payments to the individual at a later point in time. Annuities are primarily used as a means of securing a steady cash flow for an individual during their retirement years.

These annuities were developed as an alternative for risk-averse investors who may be uncomfortable being directly invested in the market, but are willing to take some risk to potentially earn returns above the current fixed annuity rates. They are classified as fixed annuities and typically offer a minimum guaranteed interest rate, which can range anywhere from 1% – 2% with principal protection. Principal protection guarantees a minimum return equal to the initial investment (the principal amount). These products differ from traditional fixed annuities because they are tied to an index using a pre-determined crediting method. As of March 2012, these products have an upside potential between 3.25% and 4.25% annually depending upon the crediting strategy and investment amount.

§ US Dollar-Hedged Foreign Bonds: Foreign bonds are issued by governments or corporations located outside of the United States. These bonds are economically tied to these foreign governments or corporations. These bonds are structured very similarly to a traditional U.S. bond as both pay regular streams of interest income and repay the principal at maturity. Relative to U.S. securities, these bonds offer diversification and have historically had higher interest income because there is more credit risk with these foreign issuers. A strong move by the US dollar against the foreign currency in which the bond is denominated would help the actual interest and principal payments that investors receive due to the fact the securities are hedged out of foreign currencies and into US dollars. In order to alleviate the currency risk, the foreign currency exposure is hedged by buying futures contracts that allow investors to lock in the exchange rate from the foreign currency into US dollars at a future date. This makes it so that any changes in currency values do not impact the principal and interest received. The 12-month yield on these securities is currently averaging about 5% (JPMorgan GBI Global ex-US Index Hedged Index as of 02/29/12). The primary ways to gain exposure to US dollar-hedged foreign bonds: individual bonds with hedging activity undertaken, or LPL Financial recommended mutual funds.

§ Investment-Grade Corporate Bonds: These bonds are issued by corporations and pay regular streams of interest income and repay the principal if held until maturity. Investment-grade corporate bonds have a credit rating from Standard and Poor’s of BBB- or higher. In addition to interest rate risk, these bonds also are subject to the credit

Fixed annuities are long-term investment vehicles designed for retirement purposes. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. Guarantees are based on the claims paying ability of the issuing company. Withdrawals made prior to age 59 are subject to a 10% IRS penalty tax and surrender charges may apply.

Investing in foreign securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.


These bonds may not be suitable for all investors. Please consider the risks carefully.



risk of the underlying issuer. In this environment, the 12-month yield on these securities is currently averaging about 2.5% (Barclays Capital US Corporate Investment Grade Index as of 2/29/12). The primary ways to gain exposure to investment-grade corporate bonds: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Long-Term Municipal Bonds: A municipal bond is a bond typically issued by a municipality, meaning a city, other local government or their agencies, for the purpose of financing the infrastructure needs of the issuer. The issuer typically uses proceeds from a bond sale to pay for capital projects or for other purposes it cannot or does not desire to pay for with funds already available. And, in return, investors receive interest on their investment. The two most common types of municipal bonds are revenue bonds, which pay principal and interest from a specific stream of future income from a specific project (meaning tolls from a highway for example), and general obligation bonds, which pay principal and interest based on the full faith and credit of the municipality (meaning from any variety of sources). General obligations bonds have historically been considered the most secure type of municipal bond, and therefore carry lower risk and lower interest rates. If investors purchase individual municipal bonds, the interest paid by the municipality is often exempt from all federal taxes, as well as state or local taxes (subject to certain restrictions). However, bonds issued for certain purposes are subject to the alternative minimum tax. On average, long-term municipal bonds typically have duration of between 6 and 15 years. The 12-month yield on these securities is currently averaging about 4.5% (Bank of America Merrill Lynch Municipals, 12-22 Yr Index as of 02/29/12). The primary ways to gain exposure to municipal bonds: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Structured Products: A structured product is generally a pre-packaged investment strategy based on derivatives, such as a single security, a basket of securities, options, indices, commodities, debt issuance and/or foreign currencies. There is no single, uniform definition of a structured product. In general, returns are tied to an index, but they usually also offer an annual 0.5 – 1.0% minimum rate guarantee — which guarantees a minimum return if the index does not yield positive returns — that is paid at maturity. There are three different classes of structured products typically offered at LPL Financial:

� Principal guarantee with no FDIC insurance coverage

� FDIC insured

� Some portion of, but not all, principal is guaranteed

Overall, returns are not guaranteed and the principal is only guaranteed when the security is held to maturity. Structured product CDs possess inherent risks, such as market and liquidity risks. If an investor sells a CD prior to maturity, they may receive more or less than the original investment. CD returns may not track full performance of the indices


This information is not intended to be a substitute for specific individualized tax, legal or investment planning advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity and redemption features.

An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values and yields will decline as interest rates rise and bonds are subject to availability and change in price.

Investing in foreign securities involves special additional risks. These risks include, but are not limited to, currency risk, political risk, and risk associated with varying accounting standards. Investing in emerging markets may accentuate these risks.

Structured products typically have two components; a note and a derivative and a fixed maturity. They are complicated investments intended for a “buy and hold” strategy and offer protection from downside risk in exchange for forgoing some upside potential to achieve that protection. Principal protection may vary from partial to 100 percent. There is no assurance that the investment objective will be attained.

Investing in structured notes is not equivalent to investing directly in the underlying securities or index and carry risks such as loss of principal and the possibility that you may own the referenced asset at a lower price, due to economic and market factors that my either offset or magnify each other. At maturity, if the derivative turns out to be valuable, the investor can gain exposure to the upside of that index.

Derivatives involve additional risks including interest rate risk, credit risk, the risk of improper valuation and the risk of non-correlation to the relevant instruments they are designed to hedge or to closely track.



themselves and may not be suitable for all investors. Investors should carefully read the related term sheet and prospectus and/or disclosure statement before investing. Structured product CDs may be treated differently than traditional CDs for tax purposes and investors should consult their tax advisor on what the implications are for them.

§ Unit Investment Trusts (UIT): A UIT is an investment company that offers a fixed, unmanaged portfolio, generally of stocks and bonds, as redeemable “units” to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income. Unit investment trusts are one of three types of investment companies; the other two are open-ended mutual funds and closed-end funds. The securities held in a UIT remain fixed, thereby giving the investor a defined perspective of the product holdings. Fixed Income UITs may be able to provide many sought-after features, like yield and income, by investing in securities including insured and uninsured municipal bonds, Build America Bonds, corporate bonds and agency securities. Many of the available products are yielding in the 5 – 9% range (depending on the underlying securities). UIT strategies are long-term; therefore, investors should consider their ability to pursue investing in successive trusts and the tax consequences.

§ LPL Financial Research Income Focused Model Wealth Portfolio: Model Wealth Portfolios is a centrally-managed advisory platform where LPL Financial has discretion to manage client assets based upon the investment theme and investment objective selected by an investor. The Income Focused portfolio managed by LPL Financial Research combines multiple asset classes and mutual funds together with the goal of generating attractive total returns and income yields for investors. In order to do this, LPL Financial Research attempts to select a strong lineup of income-producing mutual funds that have historically proven track records in higher income asset classes. n





There is no assurance that these techniques are suitable for all investors or will yield positive outcomes.

Certificates of Deposit are FDIC insured and offer a fixed rate of return. Brokered CDs sold prior to maturity in the secondary market may result in loss of principal due to fluctuations in the interest rate or lack of liquidity. Brokered CDs are registered with the Depository Trust Corp. (“DTC”). Brokered CDs with step-down and/or call provisions may be less favorable than traditional CDs without these features.

Insured Bond is a bond with interest and principle payments insured by a third party. Insured bonds are usually found as a feature of municipal bonds; they are purchased, underwritten and repackaged by a financial guarantee company who then sells the issue to investors.

The issuance of Build America Bonds (BAB) began in April of 2009. They were authorized by the ARRA economic stimulus of 2009 and can be issued for qualifying infrastructure projects. They are taxable municipal bonds and are considered a category of bonds.

Unit Investment Trusts (UITS) are a fixed portfolio of securities with a set term. Strategies are long term, therefore investors should consider their ability to pursue investing in successive trusts and the tax consequences.


RES 3660 0412 Tracking # 1-058886 (Exp. 04/13)







An increase in interest rates will cause the prices of bonds and bond mutual funds to decline.


Default Risk is when companies or individuals will be unable to make the required payments on their debt obligations. Lenders and investors are exposed to default risk in virtually all forms of credit extensions. To mitigate the impact of default risk, lenders often charge rates of return that correspond the debtor’s level of default risk. The higher the risk, the higher the required return, and vice versa.

Liquidity Risk is the risk stemming from the lack of marketability of an investment that cannot be bought or sold quickly enough to prevent or minimize a loss.

Market Risk is the day-to-day potential for an investor to experience losses from fluctuations in securities prices. This risk cannot be diversified away.


Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read carefully before investing.

The JPMorgan GBI Global ex-US Index Hedged Index tracks fixed rate issuances from high-income countries spanning the globe, launched in 1989.

Barclays Capital US Corporate Investment Grade measures the performance of investment grade corporate bonds.

The BofA Merrill Lynch 12-22 Year Municipal Securities Index tracks the performance of tax-exempt investment grade debt of US Municipalities having at least 12 year and less than 22 years remaining term to maturity.




Income w/

Cap Growth

Maximum

Income

Moderate

Income

Risk Ave

rse

Income

Risk

Return

The Maximum Income Profile

For investors willing to assume greater levels of risk in the attempt to achieve higher levels of income, the Maximum Income profile offers investments with varying levels of risk coupled with the potential opportunity for very attractive income levels.

Some of the investment products and strategies that comprise the Maximum Income profile include:

§ Emerging Market Debt

§ High-Yield Corporate Bonds

§ High-Yield Municipal Bonds

§ Preferred Securities

§ Unhedged Foreign Bonds

§ Unit Investment Trusts (UITs)

§ Variable Annuities


These ideas may produce attractive yields, but are not risk-free. Despite these risks, the yield potential on these income-generating asset classes is relatively high.


§ Emerging Market Debt (EMD): Emerging market debt is primarily issued by emerging market countries and companies. On average, EMD tends to have a lower credit rating than other foreign sovereign debt because of the increased economic and political risks inherent in those countries. Credit rating is an assessment of the credit worthiness of individuals and corporations. It is based upon the history of borrowing and repayment, as well as the availability of assets and extent of liabilities. However, only about half of all emerging market debt issues are not investment grade. Though individual bonds are available, most of these individual securities are relatively illiquid and their bid/ask spreads can be relatively wide. Emerging Market Debt also carries currency risk. A strong move by the US dollar against the foreign currency in which the bond is denominated would reduce the actual interest and

Maximum Income Snapshot


Investment Objective Growth with Income

High current income, greater potential for principal and/or income fluctuation.

* Target yield range is based on the products’ current yield in the Maximum Income profile, and are subject to change.

The Income Spectrum


THE INCOME SPECTRUM: MAXIMUM INCOME

principal payments that investors receive after they are converted to US dollars. Emerging Market Debt exhibits volatility, but LPL Financial Research believes the yields are attractive and worth the risk undertaken. As emerging market countries are showing a stronger growth trajectory than developed markets, we view the asset class to be a higher quality alternative to other non-investment grade bonds. The 12-month yield on these securities is currently averaging about 6.5% (J.P.Morgan EMBI Global Index as of 02/29/12). The primary ways to gain exposure to EMD: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ High-Yield Corporate Bonds: These bonds are issued by corporations and pay regular streams of interest income and repay the principal if held until maturity. High-yield corporate bonds are below investment grade, meaning they have a credit rating from Standard and Poor’s below BBB-. In addition to interest rate risk, these bonds also are subject to the credit risk of the underlying issuer. Since these issuers are not investment grade, the risk of default is higher than other corporate bonds. Traditionally, the yield on these securities is higher to compensate for those additional risks. Since there is specific issuer risk with these bonds, a packaged product, as opposed to individual bonds, should be a consideration. Over the long-term, High-Yield Corporate Bonds have had an average yield advantage of approximately 6.0% when viewed relative to comparable U.S. Treasuries. In this environment, the 12-month yield on these securities is currently averaging about 7.8% (Barclays Capital High Yield Index as of 02/29/12). The primary ways to gain exposure to high-yield corporate bonds: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ High-Yield Municipal Bonds: A municipal bond is a bond typically issued by a municipality, meaning a city, other local government or their agencies, for the purpose of financing the infrastructure needs of the issuer. The issuer typically uses proceeds from a bond sale to pay for capital projects or for other purposes it cannot or does not desire to pay for with funds already available. And, in return, investors receive interest on their investment. The two most common types of municipal bonds are revenue bonds, which pay principal and interest from a specific stream of future income from a specific project (meaning tolls from a highway for example), and general obligation bonds, which pay principal and interest based on the full faith and credit of the municipality (meaning from any variety of sources). General obligations bonds have historically been considered the most secure type of municipal bond, and therefore carry lower risk and lower interest rates. If investors purchase individual municipal bonds, the interest paid by the municipality is often exempt from all federal taxes, as well as state or local taxes (subject to certain restrictions). However, bonds issued for certain purposes are subject to the alternative minimum tax (AMT). High-yield municipal bonds can be considered lower-quality investment grade and/or below investment grade securities. In addition to interest rate risk, these bonds

Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values and yields will decline as interest rates rise and bonds are subject to availability and change in price.


This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

International investing involves special risks, such as currency fluctuation and political instability, and may not be suitable for all investors.

An obligation rated ‘BBB’ exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

Corporate bonds are considered higher risk than government bonds but normally offer a higher yield and are subject to market, interest rate and credit risk as well as additional risks based on the quality of issuer coupon rate, price, yield, maturity and redemption features.



also are subject to the credit risk of the underlying municipality. Since these bonds are not always rated investment grade, the risk of default may be higher than other higher-quality municipal bonds. However, the yield on these securities is higher to compensate for those additional risks. Since there is specific issuer risk with these bonds, LPL Financial Research believes that a packaged product, as opposed to individual bonds, is more prudent in this area. The 12-month yield on these securities is currently averaging about 6.5% (Barclays Capital Municipal Custom High Yield Composite Index as of 02/29/12). The primary ways to gain exposure to high-yield municipal bonds: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Preferred Securities: Preferred securities are a class of equity that is higher on the capital structure than a common equity, though below that of a fixed income security. Preferred securities have characteristics of both debt, as they pay a set income stream (in this case in the form of a dividend), and equity, since there is potential capital appreciation on the initial investment. Preferred security investors have to consider some of the trade-offs of these securities: though they do receive a set dividend payment that is fixed and paid prior to other dividends, they do not have the same capital appreciation potential as a common shareholder nor do they have voting rights. Preferred securities are either cumulative or noncumulative. A cumulative security requires that if the company does not pay the stated dividend at the stated time or amount, the difference accumulates and must be paid to those shareholders before any common stock holders can receive payments. A noncumulative security does not have this feature and payments that are missed or lower than stated are simply missed with no requirement to pay. Preferred securities’ yields are very attractive relative to U.S. Treasuries and somewhat more attractive relative to Investment-Grade Corporate Bonds. Preferred Securities are typically issued by financial corporations, which might be a concern for some investors, but we believe banks have continued to rebuild their balance sheets from the financial crisis of 2008. The 12-month yield on these securities is currently averaging about 7.1% (S&P Preferred Stock Index as of 02/29/12). The primary ways to gain exposure to preferred securities: individual securities, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Unhedged Foreign Bonds: Foreign bonds are issued by governments or corporations located outside of the United States and trade on foreign financial markets. These bonds are typically issued in the local currency of that foreign government or corporation. These bonds are structured very similarly to a traditional U.S. bond as both pay regular streams of interest income and repay the principal at maturity. Relative to U.S. securities, these bonds offer diversification and have historically had higher interest income because there is typically more credit risk with these foreign issuers as well as currency risk. A strong move by the foreign currency in which the bond is denominated relative to the US

Preferred Stock investing involves risk which may include loss of principal.



dollar would increase the actual interest and principal payments that investors receive after they are converted to US dollars. Some investors choose to hedge against this risk, since a strengthening of the US dollar leads to lower interest and principal payments, while others do not. Unhedged foreign bonds are those that do not hedge and therefore, are best poised to provide an additional boost in returns when the foreign currency has a strong move relative to the US dollar. The 12-month yield on these securities is currently averaging about 3.5% (JPMorgan GBI Global ex-US FX NY Index Unhedged Index as of 02/29/12). The primary ways to gain exposure to hedged foreign bonds: individual bonds, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Unit Investment Trusts (UIT): A UIT is an investment company that offers a fixed, unmanaged portfolio, generally of stocks and bonds, as redeemable “units” to investors for a specific period of time. It is designed to provide capital appreciation and/or dividend income. Unit investment trusts are one of three types of investment companies; the other two are mutual funds and closed-end funds. The securities held in a UIT remain fixed, thereby giving the investor a defined perspective of the product holdings. Fixed Income UITs may be able to provide many sought-after features, like yield and income, by investing in securities including insured and uninsured municipal bonds, Build America Bonds, corporate bonds and agency securities. Many are yielding in the 5 – 9% range (depending on the underlying securities). UIT strategies are long-term; therefore, investors should consider their ability to pursue investing in successive trusts and the tax consequences.

§ Variable Annuities: A variable annuity is an investment product with an insurance wrapper that offers tax-deferred growth, professionally managed investment portfolios, a death benefit and flexible withdrawal options that can help create a retirement income stream for life. Variable annuities are long-term, tax-deferred investment vehicles designed for retirement purposes and contain both an investment and insurance component. They are sold only by prospectus. Guarantees are based on the claims paying ability of the issuer. They carry surrender charges, mortality and expense risk charges, administrative charges as well as investment fees and charges. By employing a variable annuity as part of a client’s overall retirement plan the client can maintain their participation and flexibility in the equity market, and through the use of optional income features, can also help secure a predictable income stream for the rest of their life.

Withdrawals made prior to age 59½ are subject to a 10% IRS penalty tax and surrender charges may apply. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. The investment returns and principal value of the available sub-account portfolios will fluctuate so that the value of an investor’s unit, when redeemed, may be worth more or less than their original value.

§ LPL Financial Research Income Focused Model Wealth Portfolio: Model Wealth Portfolios is a centrally-managed advisory platform where

Unit Investment Trusts (UITS) are a fixed portfolio of securities with a set term. Strategies are long term, therefore investors should consider their ability to pursue investing in successive trusts and the tax consequences.

Payments of guaranteed principal and income, as well as living and death benefit guarantees, are contingent upon the claims-paying ability of the issuing company. Guarantees do not apply to the investment performance or safety of the underlying subaccounts in the variable annuity. Optional living and death benefits are available for an additional fee and may not be available in all states.

Variable annuities are for retirement purposes and are subject to market fluctuation, investment risk, and possible loss of principal.


Variable annuities are subject to longevity risk which is the risk of living too long and running out of money.



LPL Financial has discretion to manage client assets based upon the investment theme and investment objective selected by an investor. The Income Focused portfolio managed by LPL Financial Research combines multiple asset classes and mutual funds together with the goal of generating attractive total returns and income yields for investors. In order to do this, LPL Financial Research attempts to select a strong lineup of income-producing mutual funds that have historically proven track records in higher income asset classes. n





The issuance of Build America Bonds (BAB) began in April of 2009. They were authorized by the ARRA economic stimulus of 2009 and can be issued for qualifying infrastructure projects. They are taxable municipal bonds and are considered a category of bonds.

An increase in interest rates will cause the prices of bonds and bond mutual funds to decline.




Investors should consider the investment objectives, risks, charges and expenses of the investment company carefully before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read carefully before investing.

Investors should consider the investment objectives, risks, charges and expenses of the variable annuity contract and sub-accounts carefully before investing. The prospectus contains this and other important information about the variable annuity contract and sub-accounts. You can obtain contract and sub-account prospectuses from your financial representative. Read prospectuses carefully before investing.


J.P. Morgan Emerging Markets Bond Index Global (EMBI Global) tracks total returns for U.S. dollar denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds. Currently, the EMBI Global covers 188 instruments across 33 countries.

The Barclays Capital High Yield Index covers the universe of publicly issued debt obligations rated below investment grade. Bonds must be rated below investment-grade or high-yield (Ba1/BB+ or lower), by at least two of the following ratings agencies: Moody’s, S&P, Fitch. Bonds must also have at least one year to maturity, have at least $150 million in par value outstanding, and must be U.S. dollar denominated and non-convertible. Bonds issued by countries designated as emerging markets are excluded.


RES 3661 0412 Tracking # 1-060527 (Exp. 04/13)





The Barclays Capital Municipal Custom High Yield Composite Index is unmanaged has a 25% weighting in investment-grade triple-B bonds and 75% weighting in non-investment grade bonds. In addition, 75% of the index is in bonds issued as part of transactions of at least $100 million in size.

The S&P U.S. Preferred Stock Index is unmanaged and is designed to serve the investment community’s need for an investable benchmark representing the U.S. preferred stock market. Preferred stocks are a class of capital stock that pays dividends at a specified rate and has a preference over common stock in the payment of dividends and the liquidation of assets.

The JPMorgan GBI Global ex-US Index Hedged Index tracks fixed rate issuances from high-income countries spanning the globe, launched in 1989.


Credit Risk is the risk of loss of principal or loss of a financial reward stemming from a borrower’s failure to repay a loan or otherwise meet a contractual obligation. Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt. Investors are compensated for assuming credit risk by way of interest payments from the borrower or issuer of a debt obligation. Credit risk is closely tied to the potential return of an investment, the most notable being that the yields on bonds correlate strongly to their perceived credit risk.




Income w/

Cap Growth

Maximum

Income

Moderate

Income

Risk Ave

rse

Income

Risk

Return

The Income with Capital Growth Profile

Income with Capital Growth combines modest levels of income with the potential for greater capital growth, which introduces the most amount of risk. While the income levels are attractive, the reward goal is more about total return — the combination of both income and capital appreciation. What comes with these higher expected total returns and attractive yields are risks associated with equity markets, which can be volatile. Investors have to be willing to accept significant levels of return losses in exchange for the potential total return rewards. The main types of risk involved with income-oriented investing lie with interest rates, credit quality, liquidity and equity sensitivity.

Often-used investment products and strategies in the Income with Capital Growth profile include:

§ Business Development Companies (BDCs)

§ Convertible Bonds

§ Dividend-Paying Stocks

§ Master Limited Partnerships (MLPs)

§ Non-traded Real Estate Investment Trusts (REITs)

§ Traded REITs

§ Variable Annuities


Within this profile there are some relatively common products while others are relatively more sophisticated. These more sophisticated products have some investor-level asset and net worth requirements as well as liquidity risk, which mean that there is a required longer-term holding period.


§ Business Development Companies (BDCs): BDCs are not publicly traded, but are registered with the SEC and regulated under the Investment Company Act of 1940. They offer individual investors access to private debt, an asset class that typically has been dominated by high-net-worth and institutional investors. A BDC enables individuals to pool their capital to invest in privately owned U.S. companies. The portfolio of debt and equity is positioned as a security and investors may purchase shares, similar to using stocks and bonds to invest in public

Income with Capital Growth Snapshot

Target Yield Range* 2 – 7% plus Capital Growth

Investment Objective Growth or Aggressive Growth

Significant capital appreciation and income potential, large swings possible in principal value and/or income amount.

* Target yield range is based on the products’ current yield in the Income with Capital Growth profile, and are subject to change.


Credit Quality is one of the principal criteria for judging the investment quality of a bond or bond mutual fund. As the term implies, credit quality informs investors of a bond or bond portfolio’s credit worthiness, or risk of default.



The Income Spectrum


THE INCOME SPECTRUM: INCOME WITH CAPITAL GROWTH

U.S. companies. Those companies intend to make earnings or interest payments to the BDC, whose objective is to pass income along to its investors through distributions. These investments are made with the goal of generating income and, to a lesser extent, capital appreciation.

Non-traded BDCs are not listed on a public exchange so their share prices are not as highly correlated to the equity markets. Correlation is a statistical measure of how two securities move in relation to each other. Additionally, because they are not traded, there is limited liquidity available with these types of products. They are more suitable for long-term investors who can afford to give up immediate access to their investment in exchange for an attractive income stream.

§ Convertible Bonds: A convertible bond is one that can be converted into a predetermined amount of the common stock at a certain time or times during its life. A convertible bond has a coupon rate lower than that of similar, non-convertible bond, since it has additional value through the option to convert the bond to stock, and thereby participate in further growth in the company’s stock price. The investor receives the potential upside of conversion into common stock while protecting on the downside with cash flow from the coupon payments and the return of the bond principal upon maturity. The 12-month yield on these securities is currently averaging about 3% (BofA Merrill Lynch All Convertibles All Quality Index as of 02/29/12). The primary ways to gain exposure to convertible bonds: individual bonds, or an LPL Financial recommended exchange-traded product (ETP).

§ Dividend-Paying Stocks: Dividend-paying stocks have become an increasingly popular way for investors to generate income in the current low interest rate environment. These are common stocks that have a history of paying dividends on a scheduled basis. Income on dividend-paying stocks tends to be below that offered by most fixed income investments, but with the higher risk in equities comes greater capital appreciation potential. The 12-month yield on these securities is currently averaging about 3% (Dow Jones U.S. Select Dividend Index as of 02/29/12). The primary ways to gain exposure to dividend-paying stocks: individual securities, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Master Limited Partnerships (MLPs): These investments receive favorable tax treatment due to their partnership structure and interests in natural resources industries. Similar to publicly traded REITs (discussed below), these entities pay out most of their income as dividend distributions. As a result, they are typically more income vehicles than capital appreciation vehicles. These securities are traditionally evaluated on their yields, i.e., their spreads above Treasuries, rather than on their price-to-earnings ratios or other traditional valuation factors. MLP yields are currently 4.77% (Alerian MLP Index as of 02/29/12). Spread is the difference between the bid and the ask price of a security or asset. The P/E ratio (price-to-earnings ratio) is a measure of the price paid for a share relative to the annual net income or profit earned by the firm per share. It is a financial ratio used for valuation: a higher P/E ratio means

The market value of convertible securities tends to decline as interest rates increase and may be affected by changes in the price of the underlying security.

There is no guarantee that the Business Development Company (BDC) will achieve its investment objectives. Investing in private equity and private debt is subject to significant risks and may not be suitable for all investors. These risks may include limited operating history, uncertain distributions, inconsistent valuation of the portfolio, changing interest rates, leveraging of assets, reliance on the investment advisor, potential conflicts of interest, payment of substantial fees to the investment advisor and the dealer manager, potential illiquidity and liquidation at more or less than the original amount invested.

Dividend paying stock payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

Master Limited Partnership (MLP) is a type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP’s cash flow, whereas the general partner is the party responsible for managing the MLP’s affairs and receives compensation that is linked to the performance of the venture.




that investors are paying more for each unit of net income, so the stock is more expensive compared to one with lower P/E ratio.

Importantly, MLPs do not have the same ability to grow as their traditional corporate counterparts. Traditional corporations have more flexibility to invest in their businesses to drive growth, while MLPs have less capital to deploy to grow due to their large dividend distributions. Most MLPs are in the pipeline area, but other areas include energy storage. At least 90% of income must come from “qualified sources” to qualify as an MLP. The dividend income from these instruments can bring extra filing requirements at tax time. Master Limited Partnership (MLP) is a type of limited partnership that is publicly traded. There are two types of partners in this type of partnership: The limited partner is the person or group that provides the capital to the MLP and receives periodic income distributions from the MLP’s cash flow, whereas the general partner is the party responsible for managing the MLP’s affairs and receives compensation that is linked to the performance of the venture.

§ Traded REITs: A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. These traded REITs offer a highly liquid method of investing in real estate including office buildings, retail centers, industrial buildings, apartments, medical office and hotels. Publicly-traded REITs offer tax-advantaged dividend payouts for real estate businesses that must pay out the majority of their profits as distributions to investors. The 12-month yield on these securities is currently averaging about 2.5% (FTSE Nareit All REIT Index as of 02/29/12). The primary ways to gain exposure to REITs: individual securities, LPL Financial recommended mutual funds, or an LPL Financial recommended exchange-traded product (ETP).

§ Non-traded REITs: Non-traded REITs pool the assets of several investors to purchase commercial real estate and real estate-related debt in a variety of real estate sectors including office buildings, retail centers, industrial buildings, apartments, medical office and hotels. Non-traded REITs are considered public, in that they are required to register with and report regularly to the U.S. Securities and Exchange Commission (SEC). Unlike their traded REIT peers, however, non-traded REITs are not listed on a public exchange so their share prices are not as highly correlated to the equity markets. Correlation is a statistical measure of how two securities move in relation to each other. However, given that they are not traded, there is limited liquidity available with these types of products. They are more suitable for long-term investors who can afford to give up immediate access to their investment in exchange for a potential attractive income stream.

Today, non-traded REIT offerings yield around 5.3% (FTSE Nareit All REIT Index as of 02/29/12). While each real estate sector and category has its own distinct risk and reward characteristics, non-traded REITs generally have the same basic set of goals:

� Build a portfolio of real estate assets that can be managed and then either sold, listed, or merged with another real estate entity.

Investing in real estate/REITs involves special risks such as potential illiquidity and may not be suitable for all investors. There is no assurance that the investment objectives of this program will be attained.



� Give investors direct access to the income and return stream generated by the real estate itself without the daily volatility of trading on a public exchange.

§ Variable Annuities: A variable annuity is an investment product with an insurance wrapper that offers tax-deferred growth, professionally managed investment portfolios, a death benefit and flexible withdrawal options that can help create a retirement income stream for life. Variable annuities are long-term, tax-deferred investment vehicles designed for retirement purposes and contain both an investment and insurance component. They are sold only by prospectus. Guarantees are based on the claims paying ability of the issuer. They carry surrender charges, mortality and expense risk charges, administrative charges as well as investment fees and charges. By employing a variable annuity as part of a client’s overall retirement plan the client can maintain their participation and flexibility in the equity market, and through the use of optional income features, can also help secure a predictable income stream for the rest of their life.

Withdrawals made prior to age 59½ are subject to a 10% IRS penalty tax and surrender charges may apply. Gains from tax-deferred investments are taxable as ordinary income upon withdrawal. The investment returns and principal value of the available sub-account portfolios will fluctuate so that the value of an investor’s unit, when redeemed, may be worth more or less than their original value.

§ LPL Financial Research Income Focused Model Wealth Portfolio: Model Wealth Portfolios is a centrally-managed advisory platform where LPL Financial has discretion to manage client assets based upon the investment theme and investment objective selected by an investor. The Income Focused portfolio managed by LPL Financial Research combines multiple asset classes and mutual funds together with the goal of generating attractive total returns and income yields for investors. In order to do this, LPL Financial Research attempts to select a strong lineup of income-producing mutual funds that have historically proven track records in higher income asset classes. n





The fast price swings in commodities and currencies will result in significant volatility in an investor’s holdings.

Stock investing may involve risk including loss of principal.


Payments of guaranteed principal and income, as well as living and death benefit guarantees, are contingent upon the claims-paying ability of the issuing company. Guarantees do not apply to the investment performance or safety of the underlying subaccounts in the variable annuity. Optional living and death benefits are available for an additional fee and may not be available in all states.

Variable annuities are for retirement purposes and are subject to market fluctuation, investment risk, and possible loss of principal.


Variable annuities are subject to longevity risk which is the risk of living too long and running out of money.


RES 3662 0412 Tracking # 1-060530 (Exp. 04/13)








Investors should consider the investment objectives, risks, charges, and expenses of the investment company before investing. The prospectus contains this and other information about the investment company. You can obtain a prospectus from your financial representative. Read the prospectus carefully before investing.

Investors should consider the investment objectives, risks, charges and expenses of the variable annuity contract and sub-accounts carefully before investing. The prospectus contains this and other important information about the variable annuity contract and sub-accounts. You can obtain contract and sub-account prospectuses from your financial representative. Read prospectuses carefully before investing.

The FTSE NAREIT US Real Estate Index Series is designed to present investors with a comprehensive family of REIT performance indexes that span the commercial real estate space across the US economy, offering exposure to all investment and property sectors. In addition, the more narrowly focused property sector and sub-sector indexes provide the facility to concentrate commercial real estate exposure in more selected markets.

The Dow Jones Select Dividend Index seeks to represent the top 100 U.S. stocks by dividend yield. The index is derived from the Dow Jones U.S. Index and generally consists of 100 dividend paying stocks that have 5 year non-negative Dividend Growth, 5 year Dividend Payout Ratio6 of 60% or less, and 3-month average daily trading volume of at least 200,000 shares.

BofA Merrill Lynch All Convertibles All Quality index consists of convertible bonds traded in the U.S. dollar denominated investment grade and non-investment grade convertible securities sold into the U.S. market and publicly traded in the United States. The Index constituents are market value weighted based on the convertible securities prices and outstanding shares, and the underlying index is rebalanced daily.

The Alerian MLP Index is a composite of the 50 most prominent energy Master Limited Partnerships that provides investors with an unbiased, comprehensive benchmark for this emerging asset class. The index, which is calculated using a float-adjusted, capitalization-weighted methodology, is disseminated real-time on a price-return basis (NYSE: AMZ) and on a total-return basis (NYSE: AMZX).


lpl financial research -...

Documents