Dunn Warren - Investment Advisers

We use three procedures each month to manage variable annuities:

RISK ANALYSIS

We classify each industry or potential investment (mutual fund, sub-account, or exchange traded fund) available in the account by the volatility relative to the S&P 500 into five sectors:

Risk Sector A:	Volatility 2x the S&P 500
Risk Sector B:	Volatility 1.5x the S&P 500
Risk Sector C:	V olatility 1.0x the S&P 500
Risk Sector S:	Special funds that have volatility less than the S&P 500 or investments that can short or are inverse of the market
Risk Sector F:	Fixed income bond funds

Once funds are classified by risk characteristics, we can then match the investment with the investment objective of the client.

Risk Analysis – Potential Loss of Investing at the Top of the Stock Market

Dow Jones Losses from Peak to Trough 1961 to Present

Source: Dunn Warren Investment Advisors; the Dow Jones Index is an unmanaged list of 30 stocks determined by the Dow Jones & Co.

RISK/REWARD MATRIX

We use our proprietary Risk/Reward Matrix to graphically indicate the probability of investment returns in the current market environment. This is comprised of current market valuation, economic growth, and investor sentiment. The model is composed of 16 economic factors used to evaluate the amount of risk and opportunity in the market, or for a specific investment.

RELATIVE STRENGTH

The last component of our system is relative strength, which we use to make our investment selection. Relative strength is our way of avoiding value traps - investments that look compelling on valuation, but lack investment appeal and are more likely to decline in value. We compare the investment's strength over the last 6-12 months relative to all the other investment options available to us. We will sell an investment if its performance has been poor relative to the other investment options, or the current market environment makes the investment too volatile for the portfolio.

Relative Strength – Annual Return of S&P/Barra Indexes and Lehman Aggregate Bond Index

Each Color Represents an Investment Area

Source: Index returns from Barra Inc. (www.Barra.com), Standish Mellon (www.standishmellon.com) and Dunn Warren Investment Advisors. All of the Indexes represented above are unmanaged and can not be purchased as investments. The Lehman Brothers aggregate bond index is composed of securities from Lehman Brothers Government/corporate bond index, mortgage-backed securities Index and Asset-backed securities index. The index’s total return consists of price appreciation plus income are a percentage of the original investment. The S&P/Barra Growth and Value indexes are constructed by dividing the stocks in an index according to a single attribute: book-to-price ratio. The value and growth indexes are capitalization-weighted, meaning that each stock is weighted in proportion to its market value.