GINSGLOBAL INDEX FUNDS HINDSIGHT INDEX PRODUCTS Gins

GINSGLOBAL INDEX FUNDS HINDSIGHT INDEX PRODUCTS

Gins. Global Index Funds § Experience includes packaging product for: § § § § AEGON - Transamerica Life (Canada) American General Life – AIG ING Group Friends Provident UK HSBC (Suisse) Barclays Bank Morgan Stanley

Gins. Global Index Funds Hindsight Index Life & Annuity policies § Fastest growing Index Life policies – ING, AIG. § Over $3 bn face (life cover) written since ’ 06. § Same 3 indexes as Guaranteed Index Note = New ING product launch (2010)

Gins. Global Index Funds § “Hindsight” Guaranteed Index products: § Index Universal Life – AIG, AEGON, Transamerica… § Index Annuities – variable and fixed - AIG § US Hindsight Index CD & Note designs § § Tranches issued monthly (3 - 5 yr terms) Wall Street Issuers include: (HSBC, Morgan Stanley, Merrill) Available via Schwab, Pershing, Fidelity platforms Sold by banks, advisors or brokers.

20/20 Hindsight Feature Automatic LOOK-BACK allocation Weighted by Performance: 70% of Best Performer; 30% of the 2 nd Best; 0% of the 3 rd

Key Benefits of Hindsight Indexing? Benefits for the Client Simple to understand Greater diversification (avoids allocation dilemma) Unlimited upside potential Automatically overweight in best index (region; style) Higher return potential than single index approaches

Key Benefits of Hindsight Indexing? Benefits for the RIA or B/D Unique ETF/ETN product No upfront index allocation required Transparent returns linked to popular Indices Proven new account builder Easy asset allocation explanation

HINDSIGHT INDEX PRODUCTS Hindsight Index Product Family § § § § Global Equity - (S&P 500, Eurostx 50, Hang Seng) US Cap-weighted - (S&P 500, S&P 400, S&P 600) Commodity Mix – (DJ AIG Comm, Oil, Gold …. ) US Asset Mix (REIT, Barclays Agg, DJIA) Emerging Markets (BRIC indexes) US Portfolio Mix (Conservative, Moderate, Aggressive) Global Forex Mix ($/Euro; $/yen; $/Pound)

Broker/Dealer Offering § What if: § § § ETF/ETN ‘Hindsight’ version. Remove life insurance costs. 3 Global Indexes (US, Europe, Asia). Benefit of look-back feature (Hindsight). Broad Index exposure.

HINDSIGHT ETF/ETN § § § § Weighting 75/25/0 look-back feature. Multi-index ‘best of 3’. Daily liquidity (accepting new monies). Redemptions daily. CUSIP #; Bloomberg Ticker. 10 -20 yr Term (principal less fees). Low tracking error. Frequent Index reset – cliquet.

Benefits: ETNs § No ordinary income tax levied. § Pay capital gains only at time of redemption. § No capital gains while holding ETN. § No OID rate (CDs). § Daily priced NAV. § Backed by strongest global banks. (counterparty) § Enjoy overweight position in best performing indexes. § 5 - 6 year duration; can exit early.

HINDSIGHT NOTE DETAILS § 75/25/0 LOOK-BACK USED: § § § § Underlying Indexes (S&P 500, Eurostoxx & Hang Seng). No Caps. No Averaging (pt to pt). 5 yr term typically. 100% participation. Minimum 2. 5% annual coupon included. Cap Mix = S&P large, mid and small cap index mix

HSBC Hindsight CD BENEFITS § § § 100% Principal Protection No forex risk - 4 year CD Retroactive Hindsight Feature - overweights best Index Ideal for retirement plans Superior returns to regular CDs Automatic: LOOK-BACK allocation to the best performing indexes. Index weightings: 50% 1 st; 30% 2 nd; 20% 3 rd. 3

Hindsight Indexing § Hindsight products are vehicles that retroactively and selectively package only the bestperformances of 2 or more investment choices (indexes, mutual funds, portfolios, hedge funds) - while at the same time offering investors the benefit of a capital guarantee. § There are no up-front fees with Hindsight Products: The client benefits from 100% of his invested capital.

HSBC Global Hindsight CD returns S&P 500, Eurostoxx & Hang Seng - 6 yr product Average Annual Return = 8. 9% Annualized (compound) Return = 7. 4% § § § 50%, 30%, 20% best index weighting Period covered: Dec 1986 – January 2010 Covers 206 cases: separate 6 yr cases Total Return Avg 6 yr Case 53. 4% (Based on Quarterly Averaged CD product return) Std Dev 4. 1%

AIG Elite Global Index UL § Features: ($100 mn premium p. a. ; >$1 bn face written in 1 § § § 3 Global Indexes (US, Europe, Asia) Benefit of look-back feature (Hindsight) Fixed (General Account) product Index weighting 75%, 25%, 0% No caps - Point to Point return 2. 5% annual minimum crediting st yr)

Example – 3 yr Hindsight performance § Start Date: § Maturity Date: 29 Sept 2002 27 Sept 2005 § S&P 500 § 29 Sept 2002 27 Sept 2005 815. 28 1228. 81 § Thus a performance of 50. 72%

Example § DJ Eurostoxx 50 29 Sept 2002 27 Sept 2005 § Thus a performance of 2204. 39 3428. 51 55. 53% § Hang Seng 29 Sept 2002 27 Sept 2005 § Thus a performance of 9072. 21 15428. 52 70. 06%

Example § Basket at Maturity: § Top Index: 2 nd best: 3 rd best: Hang Seng (Index 1) Eurostoxx 50 (Index 2) S&P 500 (Index 3) § 60% Hang Seng + 30% Eurostoxx + 10% S&P 500 § Thus a performance of 63. 77% § For every $100 invested the final payout at maturity is $163. 77.

Example § Table:

BENEFITS OF THREE INDICES – CORRELATION ANXIETY

Benefits: Hindsight Notes § RIA focus (Schwab, NFS, Pershing platforms). § Overweight best performing index – retroactively. § Daily liquidity (redemptions available). § Higher return potential than single index approach. § No Foreign Exchange Risk. No Caps. No loads. § Most efficient way to track indexes – advanced strategies. …Hindsight Products Look-Back in Time.

Hindsight Note: Design § § § § Term: typically 5 yr - 10 yr. Point to Point return. 100% Participation Rate. No OID issue. No principal protection. 1933 Debt Instrument by A rated institution. Annual Fee: 35 -45 bps. 75/25/0 ‘best of’ Hindsight weighting.

Gins. Global services § § § § Full turn-key program Product Design Pricing algorithms - best hedging rates. Sales training Marketing templates Training seminars & technical support Daily administration pricing Accounting & Tax support

Conclusion § Consistent Design (maturity & mix) § Use broad index mix (price efficient) § Build in buffer 60/30/10 weighting. § Flexibility – as rates rise can tweak design.

Biography Anthony Ginsberg § Managing Director - Gins. Global Index Funds § Formerly: Director – Barclays Bank (Offshore) PLC § Financial Analyst – Salomon Brothers § Certified Public Accountant (USA) § Author – 3 Offshore Finance & Tax Haven books (NY Inst. of Finance; Prentice Hall; Butterworths publishers)

Global Equity Hindsight returns S&P 500, MSCI Europe and Hang Seng Index - 6 yr product Period Dec 1969 – Dec 1980 Dec 1969 – Dec 1985 Jan 1979 – Dec 1990 Jan 1979 – Dec 1995 Jan 1989 – Dec 2000 Jan 1989 – May 2005 Total Return Annualized 50. 66% 7. 07% 72. 60% 9. 52% 124. 62% 14. 44% 119. 78% 14. 02% 128. 52% 14. 77% 85. 23% 10. 82% (100% capital guarantee, 0% Coupon, 50%; 30%; 20% Index weighting, 80% part. rate)

1. Global Equity Hindsight returns S&P 500, MSCI Europe and Hang Seng Index - 6 yr product Annualized Return = 11. 54% § § § Period covered: Dec 1969 – May 2005 Covers 354 cases: separate 6 yr tranches 0% annual coupon; 80% participation rate Total Return Annual Average Avg 6 yr Case 92. 58% 15. 43% (100% capital guarantee, 50%; 30%; 20% Index weighting, Period Dec 1969 – May 2005)

2. USA Asset Mix Hindsight returns Dow Jones Index, DJ Real Estate, DJ Commodity Index - 5 yr product Annualized Return = 14. 9% § § Period covered: Dec ’ 91 - March ‘ 05 Covers 160 cases: separate 5 yr tranches Total Return Annual Average Avg 5 yr Case (75; 25%; 0% Index weighting) 100. 1% 20. 0%

3. USA Equity Hindsight returns S&P 500, S&P Mid. Cap 400, S&P Small. Cap 600 - 5 yr product Annualized Return = 14. 3% § § Period covered: Jan ’ 89 - April ‘ 08 Covers 172 cases: separate 5 yr tranches Total Return Annual Average Avg 5 yr Case (75; 25%; 0% Index weighting) 95. 5% 19. 1%

4. USA Equity Index Hindsight returns (large, mid and small cap - S&P 400, S&P 500, Russell 2 K) Annualized Return = 13. 67% § § Period covered: 20 years (August 1988 – August 2008) Covers 181 cases: separate 5 yr tranches Total Return Annual Average Avg 5 yr Case (75; 25%; 0% Index weighting) 89. 75% 17. 95%

5. Global Equity Index Hindsight returns (Eurostoxx 50, Emerging Markets, Hong Kong) Annualized Return = 16. 12% § § Period covered: 20 years (August 1988 – August 2008) Covers 181 cases: separate 5 yr tranches Total Return Annual Average Avg 5 yr Case (75; 25%; 0% Index weighting) 111. 09% 22. 22%

6. Alternative Index Hindsight returns (Global Commodity, US Real Estate, US$-Euro) Annualized Return = 13. 11% § § Period covered: 10 years (December 1998 – August 2008) Covers 57 cases: separate 5 yr tranches Total Return Annual Average Avg 5 yr Case (75; 25%; 0% Index weighting) 85. 16% 17. 03%