Conservative Allocation Option

Investment strategy

To varying degrees, each of these Investment Options invests in certain funds that mainly invest in equity securities, including:

• U.S. equity securities across all capitalization ranges;
• Foreign equity securities of large- and mid-capitalization companies, including the securities of issuers located in developed countries and emerging-market countries; and
• Stocks of U.S. companies across all capitalization ranges within the real estate sector, including equity real estate investment trusts (commonly known as “REITs”).

Also, to varying degrees, each of these Investment Options invests in certain funds that mainly invest in debt securities, including:

• A wide spectrum of public, investment-grade, taxable, fixed-income securities in the U.S., including government, corporate and international dollar-denominated bonds, as well as mortgage-backed and asset-backed securities;
• A diversified group of high-yielding, higher-risk corporate bonds (commonly known as “junk bonds”) with medium- and lower-range credit quality ratings; and
• Publicly issued U.S. Treasury Inflation-Protected Securities (commonly known as “TIPS”).

Funds that mainly invest in equity securities may have greater potential for returns than funds that mainly invest in debt securities, but may also have greater risk of loss than funds that mainly invest in debt securities. The Aggressive Allocation Option allocates more assets to funds that mainly invest in equity securities (including real estate securities) than the Moderate Allocation Option, and the Moderate Allocation Option allocates more assets to funds that mainly invest in equity securities (including real estate securities) than the Conservative Allocation Option. The Conservative Allocation Option allocates more assets to funds that mainly invest in debt securities than the Moderate Allocation Option, and the Moderate Allocation Option allocates more assets to funds that mainly invest in debt securities than the Aggressive Allocation Option. In addition to its investments in funds, the Conservative Allocation Option also invests in a funding agreement. See Guaranteed Investment Option in the Program Description for details about the funding agreement.