Investment Options

Investment Objective

The Conservative Income Portfolio seeks to provide current income and some capital appreciation.

Investment Strategy

The Conservative Income Portfolio invests entirely in the Vanguard LifeStrategy Income Fund (the “Income Fund”). The Income Fund invests in other Vanguard Mutual Funds according to a fixed formula that reflects an allocation of approximately 80% of the Income Fund’s assets to bonds, and 20% to common stocks.

The Income Fund’s indirect bond holdings are a diversified mix of short-, intermediate-, and long-term U.S. government, U.S. agency, and Investment Grade U.S. corporate bonds; mortgage-backed and asset-backed Securities; and government, agency, corporate, and securitized investment-grade foreign bonds issued in currencies other than the U.S. dollar (but hedged by Vanguard to minimize foreign currency exposure). Its indirect stock holdings are a diversified mix of U.S. and foreign large-, mid-, and small-capitalization stocks. The Income Fund’s board of trustees allocates the Income Fund’s assets among the underlying funds based on the Income Fund’s investment objectives and policies. The Income Fund’s board of trustees may change these allocations from time to time without shareholder approval.

Investment Risks

Because the Conservative Income Portfolio invests entirely in the Vanguard LifeStrategy Income Fund, the Portfolio is primarily subject to bond risks, including interest rate risk, credit risk, income risk, and call risk. The Portfolio is also subject to moderate levels of currency hedging risk, nondiversification risk, country/regional risk, and currency risk, and a low to moderate level of stock market risk.

To learn more about this investment portfolio, please visit Vanguard's website.