Capital Preservation and Fixed-Income Options

Capital preservation (cash) options may appeal to risk-averse investors, parents with children near college age, or those with children currently enrolled in college.


Fixed-income (bonds) options may appeal to investors seeking to diversify their portfolios and those seeking to reduce risk.

Please refer to the CollegeAdvantage Offering Statement and Participation Agreement for details.


CAPITAL PRESERVATION AND FIXED-INCOME OPTIONS
INVESTMENT OBJECTIVES
ASSET
CATEGORY
UNDERLYING INVESTMENTS
INVESTMENT STYLE/ CHARACTERISTICS

Vanguard Prime Money Market Option

(cash)

Seeks to provide current income while maintaining liquidity and preserving principal.

Cash/Short-Term Investments

Vanguard Prime Money Market Fund

Invests in high-quality, short-term money market instruments.

Vanguard Inflation- Protected Bond Option

(bonds)

Seeks to provide inflation protection and income consistent with investment in inflation- indexed securities.

Treasury Inflation-Protected Securities (TIPS)

Vanguard Inflation-Protected Securities Fund

Volatility typically lower than nominal U.S. Treasury bonds. Provides unique diversification benefits.

PIMCO Total Return Option

(bonds)

Seeks maximum total return, consistent with preservation of capital and prudent investment management.

Investment-Grade Intermediate-Term Bond

PIMCO Total Return Fund

Invests in a diversified portfolio of actively managed, high quality bonds to maximize return and control risk.

PIMCO High Yield Option

(bonds)

Seeks maximum total return, consistent with preservation of capital and prudent investment management.

High-Yield Bond

PIMCO High Yield Fund

Invests primarily in high-yield, non-investment grade bonds.

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Vanguard Prime Money Market Option (Cash/Short-Term Investments)

The Vanguard Prime Money Market Option seeks to provide current income while maintaining liquidity and preserving principal.

The Vanguard Prime Money Market Option invests in the Vanguard Prime Money Market Fund, which invests in high-quality, short-term money market instruments, including certificates of deposit, banker’s acceptances, commercial paper, and other money market securities.

The Vanguard Prime Money Market Option's investment in the Vanguard Prime Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the fund seeks to preserve the value of the investment at $1 per share, it is possible that the Vanguard Prime Money Market Option may lose money by investing in the fund.

Vanguard Inflation-Protected Bond Option (Treasury Inflation-Protected Securities, or TIPS)

The Vanguard Inflation-Protected Bond Option seeks to provide inflation protection and income consistent with investment in inflation-indexed securities.

The Vanguard Inflation-Protected Bond Option invests in the Vanguard Inflation-Protected Securities Fund, which invests at least 80% of its assets in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations.

The fund may invest in bonds of any maturity; however, its dollar-weighted average maturity is expected to be in a range of 7 to 20 years. All bonds purchased by the fund will be rated investment grade.

PIMCO Total Return Option (Investment-Grade Intermediate-Term Bond)

The PIMCO Total Return Option invests in the PIMCO Total Return Fund, which seeks maximum total return consistent with preservation of capital and prudent investment management.

The fund seeks to achieve its investment objective by investing under normal circumstances at least 65% of its total assets in a diversified portfolio of fixed-income instruments (bonds) of varying maturities, currently averaging around 5 years.

These are primarily investment-grade bonds, but the fund may invest up to 10% of its total assets in high-yield, lower-rated bonds. The fund may  invest up to 30% of its total assets in bonds denominated in foreign currencies, but will normally limit its foreign currency exposure to 20% of total assets.

The PIMCO Total Return Fund is a diversified portfolio of high quality bonds that is actively managed.

PIMCO High Yield Trust Option (High-Yield Bond)

The PIMCO High Yield Option invests in the PIMCO High Yield Fund, which seeks maximum total return consistent with preservation of capital and prudent investment management.

The fund seeks to achieve its investment objective by investing under normal circumstances at least 80% of its assets in a diversified portfolio of high-yield securities, also known as junk bonds.

The average portfolio duration of this fund normally varies within two years (plus or minus) of the duration of the Merrill Lynch U.S. High Yield BB-B Rated Constrained Index, which as of June 30, 2008, was nearly five years. The fund may invest up to 20% of its total assets in bonds denominated in foreign currencies.

 

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