BALANCED OPTIONS

Balanced options invest in a predetermined mix of stocks and bonds so that the asset allocation remains the same throughout the life of the account, regardless of the beneficiary’s age.

Great for:
Investors interested in a constant investment allocation.

Vanguard Conservative Growth Index Portfolio

The Vanguard Conservative Growth Index Portfolio invests in one Vanguard bond index fund and two Vanguard stock index funds resulting in an allocation of 75% of assets to investment-grade U.S. bonds and 25% of assets to stocks.

Through its ownership of the bond fund, the Option indirectly holds a broadly diversified collection of securities that approximates the Barclays Capital U.S. Aggregate Float Adjusted Index in terms of key risk factors and other characteristics. The index represents a wide spectrum of public, investment-grade, taxable fixed-income securities in the United States including:

• Government bonds
• Corporate bonds
• International dollar-denominated bonds
• Mortgage-backed securities
• Asset-backed securities

All securities have maturities of more than one year. The bond fund maintains a dollar-weighted average maturity consistent with that of the Index, which ranges between 5 and 10 years.

Through its ownership of the two stock funds, the Option also indirectly owns large-capitalization U.S. stocks and, to a lesser extent, international stocks and mid- and small-capitalization U.S. stocks.

Vanguard Moderate Growth Index Portfolio

The Vanguard Moderate Growth Index Portfolio invests in two Vanguard stock index funds and one Vanguard bond index fund resulting in an allocation of 50% of assets to stocks and 50% of assets to investment-grade U.S. bonds.

Through its ownership of the two stock funds, the Option invests in two Vanguard stock index funds that own large-capitalization U.S. stocks and, to a lesser extent, international stocks and mid- and small-capitalization U.S. stocks.

Through its ownership of the bond fund, the option also indirectly holds a mix of securities that approximates the Barclays Capital U.S. Aggregate Float Adjusted Index. The Index represents a wide spectrum of public, investment-grade, taxable fixed-income securities in the United States.

The bond fund maintains an average maturity that ranges between 5 and 10 years.

Vanguard Wellington Option

The Vanguard Wellington Option invests in the Vanguard Wellington Fund, which invests 60%-70% of its assets in dividend-paying and, to a lesser extent, non-dividend-paying common stocks of established medium-size and large companies.

In choosing these companies, the advisor seeks those that appear to be undervalued but have prospects for improvement. These stocks are commonly referred to as value stocks.

The remaining 30%-40% of the fund’s assets are invested mainly in fixed-income securities that the advisor believes will generate a reasonable level of income. These securities include investment-grade corporate bonds, with some exposure to U.S. Treasury and government agency bonds, and mortgage-backed securities.

The Vanguard Wellington Option is actively managed.

Vanguard Growth Index Portfolio

The Vanguard Growth Index Portfolio invests in two Vanguard stock index funds and one Vanguard bond index fund resulting in an allocation of 75% of assets to stocks and 25% of assets to investment-grade U.S. bonds.

Through its ownership of the two stock funds, the option indirectly owns primarily large-capitalization U.S. stocks and, to a lesser extent, international stocks and mid- and small-capitalization U.S. stocks.

Through its ownership of the bond fund, the option also indirectly holds a mix of securities that approximates the Barclays Capital U.S. Aggregate Float Adjusted Index.

The index represents a wide spectrum of public, investment-grade, taxable fixed-income securities in the United States.

The bond fund maintains a dollar-weighted average maturity consistent with that of the Index, which ranges between 5 and 10 years.