Active-Based Conservative Portfolio

Investment strategy

To varying degrees, each Active-Based Multi-Fund Portfolio invests in certain mutual funds that mainly invest in equity securities, including:

• A broad and diverse group of equity securities of U.S. companies, with a greater emphasis on small capitalization, value, and high profitability companies as compared to their representation in the U.S. market;
• Equity securities of large foreign companies associated with developed market countries;
• A broad and diverse group of equity securities associated with emerging markets, which may include frontier markets, with a greater emphasis on small capitalization, value, and high profitability companies; and
• Equity securities of issuers that are principally engaged in or related to the real estate industry, including real estate investment trusts (REITs).

Also to varying degrees, each Active-Based Multi-Fund Portfolio invests in certain mutual funds that mainly invest in debt securities, including:

• Various types of investment-grade fixed income securities issued by U.S. and foreign public or private issuers, including issuers in emerging markets;
• Fixed income securities whose principal value increases or decreases based on changes in inflation over the life of the security, typically U.S. Treasury Inflation-Linked Securities, as well as other inflation indexed bonds issued by U.S. and foreign public and private issuers;
• Various types of lower-rated or unrated higher-yielding debt investments of U.S. and foreign issuers (often called “junk bonds”), including floating rate loans and floating rate debt securities; and
• Floating rate loans and floating rate debt securities, most of which are below investment grade and which may be non-U.S. dollar denominated.

The Active-Based Aggressive Portfolio allocates more assets to mutual funds that mainly invest in equity securities (including real estate securities) than the Active-Based Moderate Portfolio, and the Active-Based Moderate Portfolio allocates more assets to mutual funds that mainly invest in equity securities (including real estate securities) than the Active-Based Conservative Portfolio. The Active-Based Conservative Portfolio allocates more assets to mutual funds that mainly invest in debt securities than the Active-Based Moderate Portfolio, and the Active-Based Moderate Portfolio allocates more assets to mutual funds that mainly invest in debt securities than the Active-Based Aggressive Portfolio. In addition to its investments in mutual funds, the Active-Based Conservative Portfolio also invests in a funding agreement.