Your investment options
Overview of the Accounts
XYZ has eight investment portfolios, or Accounts, which are divided into several categories reflecting different investment management strategies. They are:
Equity Accounts:
• Stock Account
• Global Equities Account
• Growth Account
Index Account:
• Equity Index Account
Fixed-Income Accounts:
• Bond Market Account
• Inflation-Linked Bond Account
Specialty/Balanced Account:
• Social Choice Account
Money Market Account:
• Money Market Account
XYZ’s goal is to provide retirement benefits. XYZ has a long-term investment perspective and the Accounts provide a wide range of investment alternatives. Each Account has its own investment objective, policies and special risks. The investment objective of an Account cannot be changed without the approval of a majority of Account participants. XYZ can change investment policies without such approval. There is no guarantee that any Account will meet its investment objective.
Each of the Stock, Global Equities, Equity Index, Bond Market and Inflation-Linked Bond Accounts has a policy of investing, under normal circumstances, at least 80% of its respective assets (net assets, plus the amount of any borrowings for investment purposes) in certain securities implied by its name, including such terms as “equity” and “index.” Each of these Accounts will provide its participants with at least 60 days’ prior notice before making changes to this policy. The Accounts are not appropriate for market timing. You should not invest in the Accounts if you are a market timer.
Equity Accounts
Stock Account
Investment Objective: A favorable long-term rate of return through capital appreciation and investment income by investing primarily in a broadly diversified portfolio of common stocks.
Principal Investment Strategies: Under normal circumstances, the Stock Account invests at least 80% of its assets in a broadly diversified portfolio of common stocks. XYZ’s investment adviser, XYZ-XYZ Investment Management, LLC (“TCIM”), typically uses a combination of three different investment strategies to manage the Account—active management, quantitative and indexing—and invests in both domestic and foreign securities to achieve the Account’s investment objective. TCIM seeks to achieve the Account’s overall investment objective by managing the Account in segments, each of which may use one of these different investment strategies.
A portion of the Account is managed using an active management strategy. With active management, TCIM looks for stocks that it believes are attractively priced based on an analysis of the company’s prospects for growth in earnings, cash flow, revenues or other relevant measures. TCIM also looks for companies whose assets appear undervalued in the market. In general, TCIM focuses on companies with shareholder-oriented management dedicated to creating shareholder value. The Account may invest in companies of any size, including small companies.
A portion of the Account is managed using a quantitative strategy. With quantitative strategies, TCIM may use several different investment techniques to build a portfolio of stocks that is structured to resemble and share the risk characteristics of various segments of the benchmark index, while also seeking to outperform that benchmark index. Quantitative strategies often employ proprietary, quantitative modeling techniques for stock selection, country allocation and portfolio construction. Quantitative analysis involves the use of mathematical models and computer programs that attempt to outperform the index by over- and underweighting certain stocks in the index. Relative to TCIM’s other approaches for managing other equity accounts, in general, the quantitative methodology is designed so that the Account diverges from and may outperform its benchmark index, but remains closer to the benchmark than other equity accounts using a traditional active management style.
A portion of the Account is managed using an index strategy. This portion of the Account is designed to track various segments of the component indices of the Account’s composite index. This portion of the Account buys most, but not necessarily all, of the stocks in the indices of its composite index, and will attempt to closely match the overall investment characteristics of its composite index.
The Account invests in foreign stocks and other equity securities. The Account also may invest in fixed-income securities and money market instruments traded on foreign exchanges or in other foreign securities markets, or that are privately placed. Foreign securities have different types and levels of risk than domestic securities. The Account will also invest a portion of its foreign investments in emerging market securities and, to a lesser extent, foreign developed market small-cap equities. Under normal circumstances the Account seeks to maintain the weightings of its holdings as approximately 65%–75% domestic equities and 25%–35% foreign equities. Under normal circumstances, the foreign equities portion of the Account will include investments in both developed and emerging market securities and in securities of large-, mid- and small-capitalization issuers. For a discussion of additional risks concerning investments in foreign securities, see “Additional information about investment strategies and risks” below.
Within the Account’s globally diversified, multi-investment style strategy, the Account allocates assets to a variety of underlying investment strategies. The allocations to such strategies, including domestic or foreign investments in mega-cap, large-cap, mid-cap and small-cap and various industry sector specializations, may change over time. See “More about benchmarks and other indices” below for information about the Stock Account Composite Index.
=/Principal Investment Risks: The Account is subject to the following principal investment risks:
Investing in securities traded on foreign exchanges or in foreign markets involves risks beyond those of domestic investing. These include political or social instability, changes in currency rates and the possible imposition of market controls or currency exchange controls. These risks may be enhanced with respect to investments in emerging markets. Also, seeking enhanced results relative to an index may cause that portion of the Account that is managed using a quantitative strategy to underperform the index. Furthermore, because of the Account’s size, it may be buying or selling blocks of stock that are large compared to the stock’s trading volume, making it difficult to reach the positions called for by TCIM’s investment decisions and/or affecting the stock’s price. As a result, TCIM may not be able to adjust the portfolio as quickly as it would like.
As with any investment, you can lose money by investing in this Account.
Who May Want to Invest: The Stock Account may be best for individuals who have a longer time horizon, think stocks will perform well over time and want to invest in a broadly diversified stock portfolio.
See “Principal risks of investing in the Accounts” below and “Additional information about investment strategies and risks” below for more information.
=/Global Equities Account
Investment Objective: A favorable long-term rate of return through capital appreciation and income from a broadly diversified portfolio that consists primarily of foreign and domestic common stocks.
=/Principal Investment Strategies: Under normal circumstances, the Global Equities Account invests at least 80% of its assets in equity securities of foreign and domestic companies. Typically, approximately 50% of the Account is invested in foreign securities (including foreign emerging market issuers), and approximately 50% in domestic securities, as TCIM deems appropriate. However, when market conditions warrant, the Account may invest more than 60% of its assets in U.S. issuers. In such cases the Account will invest at least 30% in foreign issuers. These percentages may vary according to market conditions. Normally, the Account will be invested in at least three different countries, one of which will be the United States, although the Account will usually be more diversified. For a discussion of additional risks concerning investments in foreign securities, including emerging market securities, see “Additional information about investment strategies and risks” below.
The Account can invest in companies of any size, including small companies. Investing in smaller companies entails more risk. See “Principal investment risks” for the Account below.
TCIM typically uses a combination of three different investment strategies to manage the Account—active management, quantitative and indexing—and invests in both domestic and foreign securities. TCIM seeks to achieve the Account’s overall investment objective by managing the Account in segments, each of which may use one of these different investment strategies to achieve the Account’s investment objective. For that portion of the Account that is actively managed, TCIM looks for stocks that it believes are attractively priced based on an analysis of the company’s prospects for growth in earnings, cash flow, revenues or other relevant measures. TCIM also looks for companies whose assets appear undervalued in the market. In general, TCIM focuses on companies with shareholder-oriented management dedicated to creating shareholder value.
A portion of the Account is managed using a quantitative strategy. With quantitative strategies, TCIM may use several different investment techniques to build a portfolio that is structured to resemble and share the risk characteristics of various segments of the benchmark index, while also seeking to outperform that benchmark index. Quantitative strategies often employ proprietary, quantitative modeling techniques for stock selection, country allocation and portfolio construction. Quantitative analysis involves the use of mathematical models and computer programs that attempt to outperform the index by over- and underweighting certain stocks in the index. Relative to TCIM’s other approaches for managing other equity accounts, in general, the quantitative methodology is designed so that the Account diverges from and may outperform its benchmark index, but remains closer to the benchmark than other equity accounts using a traditional active management style.
A portion of the Account is managed using an index strategy. This portion of the Account is designed to track various segments of the Account’s benchmark index. This portion of the Account buys most, but not necessarily all, of the securities in the Account’s benchmark index, and will attempt to closely match the overall investment characteristics of its benchmark index.
Within the Account’s globally diversified, multi-investment style strategy, the Account allocates assets to a variety of underlying investment strategies. The allocations to such strategies, including domestic or foreign investments in large-cap, mid-cap and small-cap and various industry sector specializations, may change over time.
The benchmark for the Global Equities Account is the MSCI All Country World Index. See “More about benchmarks and other indices” below for additional information about benchmarks.
=/Principal Investment Risks: The Account is subject to the following principal investment risks:
Investing in securities traded on foreign exchanges or in foreign markets involves risks beyond those of domestic investing. These include political or social instability, changes in currency rates and the possible imposition of market controls or currency exchange controls. These risks may be enhanced with respect to investments in emerging markets. Also, seeking enhanced results relative to an index may cause that portion of the Account that is managed using a quantitative strategy to underperform the index. The Account may also be subject to market timing risk due to “stale price arbitrage,” in which an investor seeks to take advantage of the perceived difference in price from a foreign market closing price. If not mitigated through effective policies, market timing can interfere with efficient portfolio management and cause dilution. The Account has in place policies and procedures that are designed to reduce the risk of market timing in the Account.
As with any investment, you can lose money by investing in this Account.
Who May Want to Invest: The Global Equities Account may be best for individuals who have a longer time horizon, think stocks will perform well over time and want to take advantage of the potential of foreign as well as domestic markets.
See “Principal risks of investing in the Accounts” below and “Additional information about investment strategies and risks” below for more information.
=/Growth Account
Investment Objective: A favorable long-term rate of return, mainly through capital appreciation, primarily from a diversified portfolio of common stocks that present the opportunity for exceptional growth.
=/Principal Investment Strategies: Under normal circumstances, the Growth Account invests at least 80% of its assets in common stocks and other equity securities. The Account invests primarily in large, well-known, established companies, particularly when TCIM believes they have new or innovative products, services or processes that enhance future earnings prospects. To a lesser extent, the Account may also invest in smaller, less seasoned companies with growth potential as well as companies in new and emerging areas of the economy. The Account may also invest in companies in order to benefit from prospective acquisitions, reorganizations, corporate restructurings or other special situations.
Growth-oriented companies are companies with a strong competitive position within their industry or a competitive position within a very strong industry. Generally, growth investing entails analyzing the quality of a company’s earnings (i.e., the degree to which earnings are derived from sustainable sources), and analyzing companies as if one would be buying the underlying business, not simply trading its equity. Growth investing also involves fundamental research and qualitative analysis of particular companies in order to identify and benefit from particular companies whose business prospects appear underappreciated by the market.
The Account may buy foreign securities and other instruments if TCIM believes they have superior investment potential. Depending on investment opportunities, the Account may invest up to 20% of its assets in foreign securities. The securities will be those traded on foreign exchanges or in other foreign markets and may be denominated in foreign currencies or other units.
TCIM typically uses a combination of three different investment strategies to manage the Account—active management, quantitative and indexing—and invests in both domestic and foreign securities. TCIM seeks to achieve the Account’s overall investment objective by managing the Account in segments, each of which may use one of these different investment strategies. For that portion of the Account that is actively managed, TCIM looks for stocks that it believes are attractively priced based on an analysis of the company’s prospects for growth in earnings, cash flow, revenues or other relevant measures. TCIM also looks for companies whose assets appear undervalued in the market. In general, TCIM focuses on companies with shareholder-oriented management dedicated to creating shareholder value.
A portion of the Account is managed using a quantitative strategy. With quantitative strategies, TCIM may use several different investment techniques to build a portfolio of stocks that is structured to resemble and share the risk characteristics of various segments of the benchmark index, while also seeking to outperform that benchmark index. Quantitative strategies often employ proprietary, quantitative modeling techniques for stock selection, country allocation and portfolio construction. Quantitative analysis involves the use of mathematical models and computer programs that attempt to outperform the index by over- and underweighting certain stocks in the index. Relative to TCIM’s other approaches for managing other equity accounts, in general, the quantitative methodology is designed so that the Account diverges from and may outperform its benchmark index, but remains closer to the benchmark than other equity accounts using a traditional active management style.
A portion of the Account is managed using an index strategy. This portion of the Account is designed to track various segments of the Account’s benchmark index. This portion of the Account buys most, but not necessarily all, of the securities in its benchmark index, and will attempt to closely match the overall investment characteristics of its benchmark index.
The benchmark for the Growth Account is the Russell 1000® Growth Index. See “More about benchmarks and other indices” below for additional information about benchmarks.
=/Principal Investment Risks: The Account is subject to the following principal investment risks:
Also, stocks of companies involved in reorganizations and other special situations can often involve more risk than ordinary securities. The Account will probably be more volatile than the overall equity market due to its focus on more growth-oriented sectors of the market.
As with any investment, you can lose money by investing in this Account.
Who May Want to Invest: The Growth Account may be best for individuals who are looking for long-term capital appreciation and a favorable long-term return but are willing to tolerate fluctuations in value. It may also be well suited to investors seeking exposure to growth-oriented companies who also have exposure to other segments of the stock market, including selective exposure to value-oriented companies.
See “Principal risks of investing in the Accounts” below and “Additional information about investment strategies and risks” below for more information.
Index Account
Equity Index Account
Investment Objective: A favorable long-term rate of return from a diversified portfolio selected to track the overall market for common stocks publicly traded in the United States, as represented by a broad stock market index.
=/Principal Investment Strategies: The Equity Index Account is designed to track the U.S. stock market as a whole and invests in stocks in its benchmark index, the Russell 3000® Index. The Account buys most, but not necessarily all, of the securities in the Russell 3000® Index, and attempts to closely match the overall investment characteristics of the Index. Using the Russell 3000® Index is not fundamental to the Account’s investment objective and policies. The Account can change the index at any time and will notify its participants if it does so. See “More about benchmarks and other indices” below for additional information about benchmarks.
The Account may also invest in securities and other instruments, such as futures, whose return depends on stock market prices. TCIM selects these instruments to attempt to match the total return of the Russell 3000® Index but may not always do so.
The Account is classified as a diversified investment company, as defined under the 1940 Act. However, the Account may become non-diversified under the 1940 Act without the approval of Account participants solely as a result of a change in relative market capitalization or index weighting of one or more constituents of its benchmark index, the Russell 3000® Index, which the Account seeks to track.
=/Principal Investment Risks: The Account is subject to the following principal investment risks:
As with any investment, you can lose money by investing in this Account.
Who May Want to Invest: The Equity Index Account may be best for individuals who have a longer time horizon, think U.S. stocks will perform well over time and want to invest in a broad range of securities in the U.S. market.
See “Principal risks of investing in the Accounts” below and “Additional information about investment strategies and risks” below for more information.
=/Non-principal investments of the Equity and Index Accounts
The Equity and Index Accounts may make certain other investments, but not as principal strategies. In addition to stocks, the Equity and Index Accounts may hold other types of securities and other investments with equity characteristics, such as convertible bonds, preferred stock, warrants and depository receipts. The Equity and Index Accounts may also invest in short-term debt securities of the same type as those held by the Money Market Account and other kinds of short-term instruments for cash management and other purposes. Investing in these instruments is intended to help the Accounts maintain liquidity, use cash balances effectively and take advantage of attractive investment opportunities. The Equity Accounts also may invest up to 20% of their assets in fixed-income securities. TCIM may also manage cash in the Accounts by investing in money market funds or other short-term instruments.
The Equity and Index Accounts may also buy and sell: (1) put and call options, including covered call options, on securities of the types they each may invest in and on securities indices composed of such securities; (2) futures contracts on securities indices composed of securities of the types in which each may invest; and (3) put and call options on such futures contracts. They may also buy and sell stock index futures contracts. The Equity and Index Accounts may use such options and futures contracts for hedging, cash management, and to seek to increase total return. Futures contracts permit an Account to gain exposure to groups of securities and thereby have the potential to earn returns that are similar to those that would be earned by direct investments in those securities or instruments.
The Equity and Index Accounts may invest in non-affiliated investment company securities, such as exchange-traded funds (“ETFs”). The Equity and Index Accounts may use ETFs for cash management purposes and other purposes, including to gain exposure to certain sectors or securities that are represented by ownership in ETFs. When an Equity or Index Account invests in ETFs or other investment companies, the Account bears a proportionate share of expenses charged by the investment company in which it invests.
In seeking to manage currency risk, these Accounts also may enter into forward currency contracts and currency swaps and may buy or sell put and call options and futures contracts on, and securities indexed to, foreign currencies. Although the Equity and Index Accounts may use options, futures or currency contracts at times to hedge certain risks, it is not the intent of these Accounts to hedge all equity or currency risks of the Accounts at any particular time.
The Equity and Index Accounts may invest in other derivatives and other similar financial instruments, such as equity swaps, so long as these derivatives and financial instruments are consistent with the Account’s investment objective and restrictions, policies and current regulations. The Accounts may use swaps to hedge or manage the risks associated with the assets held in an Account, to manage cash and to seek to increase total return.
The Equity and Index Accounts may also hold fixed-income securities that they acquire through mergers, recapitalizations or other situations. When TCIM believes market conditions are favorable, these Accounts may also invest in bonds or other debt instruments similar to those investments made by the Bond Market Account. The Equity and Index Accounts may also invest in debt securities with prices or interest rates that are linked to the return of a stock market index.
For more information on these and other investments the Equity and Index Accounts may utilize, please see the SAI.
Fixed-Income Accounts
Bond Market Account
Investment Objective: A favorable long-term rate of return, primarily through high current income consistent with preserving capital.
=/Principal Investment Strategies: Under normal circumstances, the Bond Market Account invests at least 80% of its assets in a broad range of fixed-income securities. The majority of the Account’s assets are invested in U.S. Treasury and other governmental agency securities, corporate bonds and mortgage-backed or other asset-backed securities. The Account’s holdings are mainly investment-grade securities rated in the top four credit rating categories by Moody’s Investors Service, Inc. (“Moody’s”) or Standard & Poor’s (“S&P”), or that TCIM determines are of comparable quality. Fixed-income securities may pay a fixed or variable rate of interest.
The Account will overweight or underweight individual securities or sectors as compared to their weight in the Bloomberg Barclays U.S. Aggregate Bond Index (the “Bloomberg Barclays Index”), the Bond Market Account’s benchmark index, depending on where TCIM finds undervalued, overlooked or misunderstood issues that TCIM believes offer the potential for superior returns compared to the Bloomberg Barclays Index. See “More about benchmarks and other indices” below for additional information about benchmarks.
The Account can also invest in below-investment-grade securities (also known as “high yield” or “junk” bonds) rated Ba1 or lower by Moody’s or BB+ or lower by S&P, as well as unrated securities that TCIM determines to be of a similar quality. However, TCIM does not intend to invest more than 20% of the Account’s assets in such securities. The Account can also make foreign investments, including emerging market fixed-income securities and non-dollar-denominated instruments, but such investments are not expected to exceed 20% of the Account’s assets.
The Account can also invest in mortgage-backed securities. These can include pass-through securities sold by private, governmental and government-related organizations, and collateralized mortgage obligations (“CMOs”). Mortgage pass-through securities are formed when mortgages are pooled together and interests in the pool are sold to investors. The cash flow from the underlying mortgages is “passed through” to investors in periodic principal and interest payments. CMOs are obligations fully collateralized directly or indirectly by a pool of mortgages on which payments of principal and interest are dedicated to payment of principal and interest.
The Account may make certain other investments, but not as principal investment strategies. For example, the Account may invest in interest-only and principal-only mortgage-backed securities. These instruments have unique characteristics and are more sensitive to prepayment and extension risks than traditional mortgage-backed securities.
TCIM may also use an investment strategy called “mortgage rolls” (also referred to as “dollar rolls”), in which the Account “rolls over” an investment in a mortgage-backed security before its settlement date in exchange for a similar security with a later settlement date. The Account may also engage in duration-neutral relative value trading, a technique in which the Account buys and sells government bonds of identical credit quality but different maturity dates in an attempt to take advantage of spread differentials along the yield curve.
TCIM seeks the Account’s investment objective through active management of security selection, sector allocation, yield-curve positioning, and duration management. While the Account seeks to preserve capital as part of its investment objective, this is only one factor in an actively managed approach of seeking a favorable long-term rate of return. Accordingly, there can be no assurance that the Account will succeed in preserving capital, and the Account may lose money because of the risks of investment in bonds and other eligible assets, including interest rate risk, credit risk, and other risks noted below.
The Account may purchase and sell futures, options, swaps, forwards and other fixed-income derivative instruments to carry out the Account’s investment strategies. In particular, the Account may purchase and sell interest rate futures to attempt to manage duration and/or certain risks.
=/Principal Investment Risks: The Account is subject to the following principal investment risks:
Interest rate risk is the risk that prices of portfolio securities held by the Account may decline if interest rates rise. For example, if interest rates rise by 1%, the market value of a portfolio with a duration of 5 years will decline by approximately 5%.
In addition, below-investment-grade securities, which are usually called “high-yield” or “junk” bonds, offer the potential for higher returns but also entail higher risks. Issuers of below-investment-grade securities may be in weak financial health, their ability to pay interest and principal is uncertain and they have a higher risk of becoming insolvent. Small changes in the issuer’s creditworthiness can have more impact on the price of lower-rated bonds than would comparable changes for investment-grade bonds. Lower-rated bonds can also be harder to value and sell and their prices can be more volatile than the prices of higher-quality securities. High-yield bond markets may react strongly to adverse news about an issuer or the economy, or to the perception or expectation of adverse news.
Bear in mind that all these risks can also apply to the lower levels of “investment-grade” securities, for example, Moody’s Baa and S&P’s BBB. Also, securities originally rated “investment-grade” are sometimes downgraded later, should a ratings service believe the issuer’s business outlook or creditworthiness has deteriorated. If that happens to a security in the Account, it may or may not be sold, depending on an analysis by TCIM of the issuer’s prospects. However, the Account will not purchase below-investment-grade securities if that would increase their amount in the portfolio above the Account’s current investment target. The Account does not rely exclusively on credit ratings when making investment decisions because such ratings may not alone be an accurate measure of the risk of lower-rated bonds. Instead, TCIM also does its own credit analysis, and pays particular attention to economic trends and other market events.
The Account can hold illiquid investments. The risk of investing in illiquid investments is that they may be difficult to sell for the value at which they are carried, if at all, or at any price within the desired time frame.
The Account’s investments in mortgage-backed securities are subject to prepayment or extension risk. This is the possibility that a change in interest rates would cause the underlying mortgages to be paid off sooner or later than expected.
As with any investment, you can lose money by investing in this Account.
Who May Want to Invest: The Bond Market Account may be best for individuals who have a longer time horizon, think bonds will do well over time and/or want to diversify other holdings invested in stocks.
See “Principal risks of investing in the Accounts” below and “Additional information about investment strategies and risks” below for more information.
It was previously disclosed that the Bond Market Account would change its name to the “Core Bond Account” effective May 1, 2021. However, this name change has been postponed. Participants will receive notice of the future timing of this name change once a new effective date has been determined and approved by XYZ’s Board of Trustees.
=/Inflation-Linked Bond Account
Investment Objective: A long-term rate of return that outpaces inflation, primarily through investment in inflation-indexed bonds—fixed-income securities whose returns are designed to track a specified inflation index over the life of the bond.
=/Principal Investment Strategies: Under normal circumstances, the Inflation-Linked Bond Account invests at least 80% of its assets in U.S. Treasury Inflation-Indexed Securities (TIIS). The Account can also invest in other inflation-indexed bonds issued or guaranteed by the U.S. government or its agencies, by corporations and other U.S. domiciled issuers as well as foreign governments. It can also invest in money market instruments or other short-term securities.
Like conventional bonds, inflation-indexed bonds generally pay interest at fixed intervals and return the principal at maturity. Unlike conventional bonds, an inflation-indexed bond’s principal is adjusted periodically to reflect changes in a specified inflation index. Inflation-indexed bonds are designed to preserve purchasing power over the life of the bond while paying a “real” rate of interest (i.e., a return over and above the inflation rate). These bonds are generally issued at a fixed interest rate that is lower than that of conventional bonds of comparable maturity and quality, but they are expected to retain their value against inflation over time.
The principal amount of a TIIS bond is adjusted periodically for inflation using the Consumer Price Index for All Urban Consumers (“CPI-U”). Interest is paid twice a year. The interest rate is fixed, but the amount of each interest payment varies as the principal is adjusted for inflation.
The principal amount of a TIIS investment can go down in times of negative inflation. However, the U.S. Treasury guarantees that the final principal payment at maturity will not be less than the original principal amount of the bond.
The interest and principal components of the bonds may be “stripped” or sold separately. The Account can buy or sell either component.
The Account can also invest in inflation-indexed bonds issued or guaranteed by foreign governments and their agencies, as well as other foreign issuers. These investments are usually designed to track the inflation rate in the issuing country. Under most circumstances, TCIM does not expect the Account’s investments in inflation-linked bonds of foreign issuers will be more than 25% of its assets, although this level may change.
The Account can also hold the same kind of fixed-income securities as the Bond Market Account. These securities will usually be investment-grade. However, the Account can invest up to 5% of its assets in fixed-income instruments that are rated below investment-grade, or in unrated securities of similar quality.
The Account may purchase and sell futures, options, swaps, forwards and other fixed-income derivative instruments to carry out the Account’s investment strategies. In particular, the Account may purchase and sell interest rate futures to attempt to manage duration and/or certain risks.
=/Principal Investment Risks: The Account is subject to the following principal investment risks:
In addition, because the investments in the Account are “marked-to-market” daily and because market values will fluctuate, the Account could lose money on its investments. As a result, its total return may not actually track the selected inflation index every year.
The benchmark for the Inflation-Linked Bond Account is the Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) 1–10 Year Index. See “More about benchmarks and other indices” below for additional information on benchmarks.
Market values of inflation-indexed bonds can be affected by changes in the market’s inflation expectations or changes in real rates of interest.
Also, the CPI-U may not accurately reflect the true rate of inflation. If the market perceives that the index used by TIIS does not accurately reflect inflation, the market value of those bonds could be adversely affected. In addition, participants who choose to receive annuity income through this Account should be aware that their income might not keep pace with inflation, especially if the average stated interest rate on the Account’s inflation-indexed bonds is below approximately 4%.
As with any investment, you can lose money by investing in this Account.
Who May Want to Invest: The Inflation-Linked Bond Account may be best for individuals who are especially concerned about high inflation, seek a modest “real” rate of return (i.e., greater than the inflation rate) and/or want to diversify holdings in stocks, conventional bonds and other investments.
See “Principal risks of investing in the Accounts” below and “Additional information about investment strategies and risks” below for more information.
=/Non-principal investments of the Bond Market and Inflation-Linked Bond Accounts
The Bond Market and Inflation-Linked Bond Accounts may make certain other investments, but not as principal strategies. For instance, the Bond Market and Inflation-Linked Bond Accounts may hold the same kind of money market and other short-term instruments and debt securities as the Money Market Account, as well as other kinds of short-term instruments. The Bond Market Account may also hold preferred stock and common stock through conversion of bonds or exercise of warrants.
The Bond Market and Inflation-Linked Bond Accounts may also buy and sell options, futures contracts and options on futures (including options and futures on foreign currencies). They may also enter into forward currency contracts and buy and sell securities indexed to foreign currencies. These Accounts may use options and futures as a hedging technique, for cash management purposes or to seek to increase total return. These Accounts may also use these techniques to help manage currency risk.
The Bond Market and Inflation-Linked Bond Accounts may buy and sell swaps and options on swaps. These Accounts may use these instruments as hedging techniques, for cash management purposes, and seek to increase total return. These instruments do, however, involve special risks. These Accounts are not required to hedge investments.
The Bond Market and Inflation-Linked Bond Accounts may invest in interest-only and principal-only mortgage-backed securities. These instruments have unique characteristics and are more sensitive to prepayment risk and extension risk than traditional mortgage-backed securities.
In addition, the Bond Market and Inflation-Linked Bond Accounts may invest in non-affiliated investment companies, such as ETFs, for cash management and other purposes, including to gain exposure to certain sectors or securities that are represented by ownership in ETFs. When invested in other investment companies, these Accounts will bear their proportionate share of expenses charged by these investment companies.
For more information on these and other investments the Accounts may utilize, please see the SAI.
Specialty/Balanced Account
Social Choice Account
Investment Objective: A favorable long-term rate of return that reflects the investment performance of the financial markets while giving special consideration to certain social criteria.
=/Principal Investment Strategies: The Social Choice Account invests in a diversified set of domestic and foreign stocks and other equity securities, bonds and other fixed-income securities, as well as money market instruments and other short-term debt instruments. The Account seeks to invest in issuers that are suitable from a financial perspective and whose activities are consistent with certain environmental, social and governance (“ESG”) or Impact criteria, which are described in more detail below.
The Account is balanced, with assets divided between foreign and domestic stocks and other equity securities (about 60%) and bonds and other fixed-income securities, including money market instruments (about 40%). Under normal circumstances, the equity portion of the Account is divided between a generally larger domestic and a smaller foreign portion. Under normal circumstances, the fixed-income portion of the Account is divided between a generally larger domestic and a smaller foreign portion. As of December 31, 2020, the Account was invested in its various market segments as follows: domestic equity 41.84%; foreign equity 18.19%; domestic fixed-income 31.11%; and foreign fixed-income 8.26%.
When TCIM believes that market conditions or transaction needs make it appropriate, the equity portion of the Account can go as high as 70% or as low as 50% through adjustments to either or both of the domestic and foreign equity portions, with corresponding changes to the fixed-income portion. Any of these percentages can be changed even further if TCIM believes it would be appropriate.
The equity portion of the Account includes both a domestic and a foreign equities portion. The domestic equity portion attempts to track the return of the U.S. stock market as represented by the Russell 3000® Index. The foreign equity portion of the Account attempts to track the return of developed foreign markets as represented by the MSCI EAFE + Canada Index. TCIM may utilize quantitative and/or other investment strategies to facilitate the management of the overall Account.
See “More about benchmarks and other indices” below for information about the Social Choice Account Composite Index.
The ESG and Impact criteria the Account takes into consideration are non-fundamental investment policies. Such criteria and the universe of investments that the Account utilizes may be changed without the approval of the Account’s participants. While TCIM may invest in issuers that meet these criteria, it is not required to invest in every issuer that meets these criteria. In addition, concerns with respect to one ESG assessment category may not automatically eliminate an issuer from being considered an eligible Account investment.
Holdings in the equity portion of the Account are subject to certain ESG criteria. The ESG criteria are generally implemented based on data provided by independent ESG research vendor(s). All of the Account’s equity investments must meet or exceed minimum ESG performance standards to be eligible for inclusion in the Account. The evaluation process favors companies with leadership in ESG performance relative to their peers. Typically, environmental assessment categories include climate change, natural resource use, waste management and environmental opportunities. Social evaluation categories include human capital, product safety and social opportunities. Governance assessment categories include corporate governance, business ethics and governance and public policy. How well companies adhere to international norms and principles and involvement in major ESG controversies (examples of which may relate to the environment, customers, human rights and community, labor rights and supply chain and governance) are other considerations.
The ESG evaluation process for the equity portion of the Account is conducted on an industry-specific basis and involves the identification of key performance indicators, which are given more relative weight compared to the broader range of potential assessment categories. When ESG concerns exist, the evaluation process gives careful consideration to how companies address the risk and opportunities they face in the context of their industry and relative to their peers. The Account will not generally invest in companies significantly involved in certain business activities, including, but not limited to, the production of alcohol, tobacco, military weapons, firearms, nuclear power, thermal coal and gambling products and services.
Once a universe of ESG-eligible equity investments is established, TCIM then uses quantitative investment techniques to attempt to closely match, to the extent practicable, the overall risk characteristics of the equity portion of the Account’s composite benchmark index. Under these quantitative investment techniques, the Account uses a risk model to evaluate the universe of stocks in which the equity portion of the Account may invest and to inform the construction of a broadly diversified group of stocks. The Account’s equity holdings will generally consist of a subset of the eligible investment universe. The Account is not required to invest in all companies that meet the ESG criteria.
The fixed-income portion of the Account invests in a broad range of fixed-income instruments. The majority of this portion of the Account is invested in U.S. Treasury and other governmental agency securities, corporate bonds and mortgage-backed and other asset-backed securities. This portion’s holdings consist mainly of investment-grade securities rated in the top four credit rating categories by Moody’s or S&P, or that TCIM determines are of comparable quality. Up to 5% of this portion may also be invested in below-investment-grade (“high-yield”) securities rated Ba1 or lower by Moody’s or BB+ or lower by S&P, as well as unrated securities that TCIM determines to be of a similar quality. Additionally, this portion of the Account may be invested in foreign investments, including emerging market fixed-income securities and non-dollar-denominated instruments. Account investments in fixed-income securities issued by corporate entities or certain foreign governments are also subject to the ESG criteria discussed previously.
Holdings in the fixed-income portion of the Account are also subject to certain ESG or Impact criteria. In those limited cases where independent ESG criteria are not available for certain types of securities or for certain issuers, these securities may nonetheless be eligible for the fixed-income portion of the Account should they meet certain ESG criteria established by TCIM. All issuers not otherwise meeting the Impact framework described below must meet or exceed minimum ESG performance standards to be eligible for investment by the fixed-income portion of the Account.
The ESG criteria described above for the equity portion of the Account also apply to corporate issuers in the fixed-income portion of the Account. With respect to government issuers, the ESG evaluation process utilized by the fixed-income portion of the Account favors issuers with leadership in ESG performance relative to all peers. For government issuers, typically, environmental assessment categories include the issuer’s ability to protect, harness and supplement its natural resources, and to manage environmental vulnerabilities and externalities. Social assessment categories include the issuer’s ability to develop a healthy, productive and stable workforce and knowledge capital, and to create a supportive economic environment. Governance assessment categories include the issuer’s institutional capacity to support long-term stability and well-functioning financial, judicial and political systems, and capacity to address environmental and social risks. The government ESG evaluation process is conducted on a global basis and reflects how an issuer’s exposure to and management of ESG risk factor may affect the long-term sustainability of its economy.
Additionally, TCIM invests some of the fixed-income portion of the Account in accordance with XYZ’s proprietary Impact framework. These investments provide direct exposure to issuers and/or individual projects with social or environmental benefits. As of December 31, 2020, 42.3% of the Account was invested in Impact investments. Within this Impact allocation, the Account seeks opportunities to invest in publicly traded fixed-income securities that finance initiatives in areas including affordable housing, community and economic development, renewable energy and climate change and natural resources. These investments are selected based on the same financial criteria used by TCIM in selecting the Account’s other fixed-income investments. The portion of the Account invested in accordance with XYZ’s proprietary Impact framework is not additionally subject to the ESG criteria provided by a third party vendor.
As noted above, the fixed-income portion of the Account may invest in certain asset-backed securities, mortgage-backed securities and other securities that represent interests in assets such as pools of mortgage loans, automobile loans or credit card receivables. These securities are typically issued by legal entities established specifically to hold assets and to issue debt obligations backed by those assets. Asset-backed or mortgage-backed securities are normally created or “sponsored” by banks or other financial institutions or by certain government sponsored enterprises such as Fannie Mae or Freddie Mac. TCIM does not take into consideration whether the sponsor of an asset-backed security in which the Account invests meets the ESG criteria. That is because asset-backed securities represent interests in pools of loans, and not of the ongoing business enterprise of the sponsor. It is therefore possible that the Account could invest in an asset-backed or mortgage-backed security sponsored by a bank or other financial institution in which the Account could not invest directly.
The fixed-income portion of the Account may also use a trading technique called “mortgage rolls” or “dollar rolls” in which the Account “rolls over” an investment in a mortgage-backed security before its settlement date in exchange for a similar security with a later settlement date.
Money market instruments and short-term debt securities held by the Account are primarily securities with maturities of 397 days or less at the time of purchase that TCIM believes present minimal credit risks, including “government securities” as such term is defined in the applicable rules governing money market funds. The Account can also hold other kinds of short-term instruments. These help the Account to maintain liquidity, use cash balances effectively and take advantage of attractive investment opportunities.
The Account may also buy and sell options, swaps, options on swaps, futures contracts and options on futures. The Account may use these instruments as hedging techniques, for cash management purposes or to seek to increase total return. These instruments do, however, involve special risks. The Account is not required to hedge its investments and such instruments will not be subject to the Account’s ESG criteria.
The Board of Trustees of XYZ or a designated committee thereof (“Board of Trustees”) reviews the ESG criteria used to evaluate securities held by the Account and approves the vendor of that service. TCIM seeks to ensure that the Account’s investments are consistent with its ESG and/or Impact criteria, but TCIM cannot guarantee that this will always be the case for every Account investment. Consistent with its responsibilities, the Board of Trustees evaluates options for implementing the Account’s ESG evaluation criteria. TCIM has the right to change the ESG vendor(s) at any time and to add to the number of vendor(s) providing the universe of eligible companies. Investing on the basis of ESG criteria is qualitative and subjective by nature, and there can be no assurances that the process utilized by the Account’s vendor(s) or any judgment exercised by the Board of Trustees or TCIM will reflect the beliefs or values of any particular investor.
The Account is not restricted from investing in any securities issued or guaranteed by the U.S. government or its agencies or instrumentalities. The Account may also invest in securities issued by other countries or their agencies or instrumentalities as approved by the Board of Trustees.
=/Principal Investment Risks: The Account is subject to the following principal investment risks:
As with any investment, you can lose money by investing in this Account.
Who May Want to Invest: The Social Choice Account may be best for individuals who want to avoid investing in companies that do not meet certain ESG or Impact criteria; want an Account balanced among stocks, bonds and money market instruments; and/or want an Account that may be less volatile than an Equity Account.
See “Principal risks of investing in the Accounts” below and “Additional information about investment strategies and risks” below for more information.
=/Money Market Account
Money Market Account
Investment Objective: High current income consistent with maintaining liquidity and preserving capital.
=/Principal Investment Strategies: The Account is a “government money market fund” as defined in the applicable rules governing money market funds and as such, invests at least 99.5% of its total assets in cash, U.S. Government securities and/or repurchase agreements that are collateralized fully by cash or U.S. Government securities. These investments include (1) securities issued by, or whose principal and interest are guaranteed by, the U.S. Government or one of its agencies or instrumentalities and (2) repurchase agreements involving securities issued or guaranteed by the U.S. Government or one of its agencies or instrumentalities. Short-term, U.S. Government securities generally pay interest that is among the lowest for income-paying securities. Because of this, the yield on the Account will likely be lower than the yields on funds that invest in longer-term or lower-quality securities.
The Account’s investments will be made in accordance with the applicable rules governing the quality, maturity and diversification of securities and other instruments held by money market funds. The Account maintains a dollar-weighted average maturity of 60 days or less and a dollar-weighted average life to maturity of 120 days or less, and invests in debt obligations that are deemed to mature in 397 days or less.
TCIM limits the Account’s investments to U.S. Government securities or securities that present minimal credit risks to the Account and are of eligible quality.
A government money market fund is not required to impose liquidity fees or redemption gates, and the Account does not currently intend to impose such fees and/or gates. However, the Account’s Board of Trustees could elect to subject the Account to such fees and/or gates in the future.
The above list of investments is not exclusive and the Account may make other investments consistent with its investment objective and policies.
The peer group average to which the Account is compared is the Monday Money Fund Averages—All Government.
=/Principal
Investment Risks: You could lose money by investing in the Money Market Account.
No
Constant Accumulation Value:
Who May Want to Invest: The Money Market Account may be best for individuals who have a shorter time horizon and/or who are risk averse.
See “Principal risks of investing in the Accounts” below and “Additional information about investment strategies and risks” below for more information.
=/Principal risks of investing in the Accounts
Principal risks of investing in equity Accounts
In general, the value of equity investments fluctuates in response to the performance and financial condition of individual companies that issue them and in response to general market and economic conditions. Therefore, the value of an investment in the Accounts that hold equity securities may decrease.
Investors should be aware that in light of the current uncertainty, volatility and distress in economies, financial markets, and labor and health conditions around the world, the risks below (including the risks related to investing in fixed-income instruments) are heightened significantly compared to normal conditions and therefore subject an Account’s investments and a shareholder’s investment in an Account to the risk of reduced yield and /or income and sudden and substantial losses. The fact that a particular risk below is not specifically identified as being heightened under current conditions does not mean that the risk is not greater than under normal conditions. There is no guarantee that an Account will meet its investment objective.
An investment in an Equity Account, the Index Account, or the equity portion of the Social Choice Account, or any Account’s equity investments, typically will be subject to the following principal investment risks described below:
• Issuer Risk (often called Financial Risk)—The risk that the issuer’s earnings prospects and overall financial position will deteriorate, causing a decline in the value of the issuer’s financial instruments over short or extended periods of time. In times of market turmoil, perceptions of an issuer’s credit risk can quickly change and even large, well-established issuers may deteriorate rapidly with little or no warning.
=/• Market Risk—The risk that the price of equity investments may decline in response to general market and economic conditions or events, including conditions and developments outside of the financial markets such as significant changes in interest and inflation rates, the availability of credit and the occurrence of other factors, such as natural disasters or public health emergencies (pandemics and epidemics). Accordingly, the value of the equity investments that an Account holds may decline over short or extended periods of time. Any investment is subject to the risk that the financial markets as a whole may decline in value, thereby depressing the investment’s price. Equity markets, for example, tend to be cyclical, with periods when prices generally rise and periods when prices generally decline. Foreign equity markets tend to reflect local economic and financial conditions and, therefore, trends often vary from country to country and region to region. During periods of unusual volatility or turmoil in the financial markets, an Account may undergo an extended period of decline. From time to time, an Account may invest a significant portion of its assets in companies in one or more related sectors or industries, which would make the Account more vulnerable to adverse developments affecting such sectors or industries.
=/The Accounts that make foreign investments are subject to:
• Emerging Markets Risk—The risk of foreign investment often increases in countries with emerging markets. For example, these countries may have more unstable governments than developed countries, and their economies may be based on only a few industries. Emerging market countries may also have less stringent regulation of accounting, auditing, \>financial reporting and recordkeeping requirements, which would affect an Account’s ability to evaluate potential portfolio companies. Because their financial markets may be very small, share prices of financial instruments in emerging market countries may be volatile and difficult to determine. Financial instruments of issuers in these countries may have lower overall liquidity than those of issuers in more developed countries. In addition, foreign investors such as the Accounts are subject to a variety of special restrictions in many emerging market countries. The risks outlined above are often more pronounced in “frontier markets” in which an Account may invest. Moreover, legal remedies for investors in emerging markets (including derivative litigation) may be more limited, and U.S. authorities (such as the SEC or U.S. Department of Justice) may have less ability to bring actions against bad actors in emerging market countries. Frontier markets are those emerging markets that are considered to be among the smallest, least mature and least liquid. These factors may make investing in frontier market countries significantly riskier than investing in other countries.
=/• Foreign Investment Risk—Foreign investments, which may include securities of foreign issuers, securities or contracts traded or acquired in non-U.S. markets or on non-U.S. exchanges, or securities or contracts payable or denominated in non-U.S. currencies, can involve special risks that arise from one or more of the following events or circumstances: (1) changes in currency exchange rates; (2) possible imposition of market controls or currency exchange controls; (3) possible imposition of withholding taxes on dividends and interest; (4) possible seizure, expropriation or nationalization of assets; (5) more limited financial information or difficulties interpreting it because of foreign regulations and accounting standards; (6) lower liquidity and higher volatility in some foreign markets; (7) the impact of political, social or diplomatic events; (8) economic sanctions or other measures by the United States or other governments; (9) the difficulty of evaluating some foreign economic trends; and (10) the possibility that a foreign government could restrict an issuer from paying principal and interest to investors outside the country. Brokerage commissions and custodial and transaction costs are often higher for foreign investments, and it may be difficult to use foreign laws and courts to enforce financial or legal obligations. To the extent an Account invests a significant portion of its assets in the securities of companies in a single country or region, it is more likely to be impacted by events or conditions affecting that country or region. Investment in an Account may be more exposed to a single country or a region’s cycles, stock market valuations and currency, which could increase its risk compared with a more geographically diversified Account. In addition, political, social, regulatory, economic or environmental events that occur in a single country or region may adversely affect the values of that country or region’s securities and thus the holdings of the Account.
The risks described above often increase in countries with emerging markets. For example, these countries may have more unstable governments than developed countries, and their economies may be based on only a few industries. Financial instruments of issuers in these countries may have lower overall liquidity than those of issuers in more developed countries. Emerging market countries typically have less established legal, accounting and financial reporting systems than those in more developed markets, which may reduce the scope or quality of financial information available to investors. Governments in emerging market countries are often less stable and more likely to take extra-legal action with respect to companies, industries, assets, or foreign ownership than those in more developed markets. Moreover, it can be more difficult for investors to bring litigation or enforce judgments against issuers in emerging markets or for U.S. regulators to bring enforcement actions against such issuers. Because the financial markets of emerging market countries may be very small, prices of issuers in emerging market countries may be volatile and difficult to determine. In addition, foreign investors such as an Account are subject to a variety of special restrictions in many such countries. The economies of some emerging markets may be particularly exposed to or affected by a certain industry or sector, and therefore issuers and/or securities of such emerging markets may be more affected by the performance of such industries or sectors.
=/The Accounts (or portions of an Account) that are managed according to a growth investment style are subject to:
• Style Risk/Risks of Growth Investing—Use of either a growth investing or value investing style entails the risk that equity securities representing either style may be out of favor in the marketplace for various periods of time, and result in underperformance relative to the broader market sector or significant declines in the Account’s portfolio value. Due to their relatively high valuations, growth stocks are typically more volatile than value stocks. For example, the price of a growth stock may experience a larger decline on a forecast of lower earnings, or a negative event or market development, than would a value stock. Because the value of growth companies is often a function of their expected earnings growth, there is a risk that such earnings growth may not occur or cannot be sustained. Accordingly, a stock with growth characteristics can have sharp price declines due to decreases in current or expected earnings and may lack dividends that can help cushion its share price in a declining market. In addition, growth stocks, at times, may not perform as well as value stocks or the stock market in general and may be out of favor with investors for varying periods of time.
=/The Accounts that are managed, in whole or in part, according to indexing techniques are subject to:
• Index Risk—The risk that the performance of an Account may not correspond to, or may underperform, its benchmark index for any period of time. Although each Account attempts to use the investment performance of its respective index as a baseline, it may not duplicate the exact composition of that index. In addition, unlike an Account, the returns of an index are not reduced by investment and other operating expenses, and therefore, the ability of an Account to match the performance of its index is adversely affected by the costs of buying and selling investments as well as other expenses. Therefore, no Account can guarantee that its performance will match or exceed its index for any period of time.
=/• Non-Diversification Risk—While the Equity Index Account is considered to be a diversified investment company under the 1940 Act, this Account may become non-diversified under the 1940 Act without Account participant approval when necessary to continue to track its benchmark index. Non-diversified status means that this Account can invest a greater percentage of its assets in the securities of a single issuer than a diversified investment company. Investing in a non-diversified investment company involves greater risk than investing in a diversified investment company because a loss in value of a particular investment may have a greater effect on the investment company’s return since that investment may represent a larger portion of the investment company’s total portfolio assets, which could lead to greater volatility in the investment company’s returns.
=/Because the Accounts are managed by an investment adviser, they are subject to management risk.
The Accounts that are managed, in whole or in part, according to active management investment techniques are subject to:
• Active Management Risk—The risk that the performance of an Account, which is actively managed, reflects in part the ability of the portfolio manager(s) to make active investment, strategic or trading decisions that are suited to achieving the Account’s investment objective. As a result of strategy, investment selection or trading execution, such Account could underperform its benchmark or other investment products with similar investment objectives.
=/The Accounts that are managed, in whole or in part, according to a quantitative investment methodology are subject to:
• Quantitative Analysis Risk—The risk that securities selected for Accounts that are actively managed, in whole or in part, according to a quantitative analysis methodology can perform differently from the market as a whole based on the model and the factors used in the analysis, the weight placed on each factor and changes in the factor’s historical trends and the risk that such quantitative analysis and modeling may not adequately take into account certain factors, may contain design flaws or inaccurate assumptions and may rely on inaccurate data inputs. If inaccurate market data is entered into a quantitative model, the resulting information will be incorrect. Because such models are based on assumptions of these and other market factors, the models may not take into account certain factors, or perform as intended, and may result in a decline in the value of an Account’s portfolio.
=/The Accounts that invest in large-cap securities are subject to:
• Large-Cap Risk—The risk that, by focusing on securities of larger companies, an Account may have fewer opportunities to identify securities that the market misprices and that these companies may grow more slowly than the economy as a whole or not at all. Also, larger companies may fall out of favor with the investing public as a result of market, political and economic conditions, including for reasons unrelated to their businesses or economic fundamentals.
=/The Accounts that invest in medium-sized and small-sized securities are subject to:
• Mid-Cap Risk—Securities of medium-sized companies may experience greater fluctuations in price than the securities of larger companies. From time to time, medium-sized company securities may have to be sold at a discount from their current market prices or in small lots over an extended period, since they may be harder to sell than larger-cap securities. In addition, it may be difficult to find buyers for securities of medium-sized companies that an Account wishes to sell when the company is not perceived favorably in the marketplace or during periods of poor economic or market conditions. Such companies may be subject to certain business risks due to their smaller size, limited markets and financial resources, narrow product lines and frequent lack of depth of management. The costs of purchasing and selling securities of medium-sized companies may be greater than those of more widely traded securities.
=/· Small-Cap Risk—Securities of small-sized companies may experience greater fluctuations in price than the securities of larger companies. The securities of small-sized companies often have lower overall liquidity than those of larger, more established companies. The number of small-sized companies whose securities are listed on securities exchanges has been declining while investor demand for the securities of such issuers has been increasing, in each case relative to historical trends, which may increase an Account’s exposure to illiquid investments risk. As a result, an Account’s investments in the securities of small-sized companies may be difficult to purchase or sell at an advantageous time or price, which could prevent the Account from taking advantage of investment opportunities. From time to time, small-sized company securities may have to be sold at a discount from their current market prices or in small lots over an extended period, since they may be harder to sell than larger-cap securities. In addition, it may be difficult to find buyers for securities of small-sized companies that an Account wishes to sell when the company is not perceived favorably in the marketplace or during periods of poor economic or market conditions. Such companies may be subject to certain business risks due to their smaller size, limited markets and financial resources, narrow product lines and therefore issuers and/or securities of such emerging markets may be more affected by the performance of such industries or sectors.
=/The Social Choice Account is subject to:
• ESG Criteria Risk—The risk that because the Account’s ESG criteria and/or proprietary impact framework exclude securities of certain issuers for nonfinancial reasons, the Account may forgo some market opportunities available to funds or accounts that do not use these criteria.
=/Principal risks of investing in the Fixed-Income Accounts and the Money Market Account
An investment in a Fixed-Income Account, the Money Market Account or the fixed-income portion of the Social Choice Account, or any Account’s fixed-income investments, typically will be subject to the following principal investment risks described below:
• Call Risk—The risk that an issuer will redeem a fixed-income security prior to maturity. This often happens when prevailing interest rates are lower than the rate specified for the fixed-income security. If a fixed-income security is called early, an Account may not be able to benefit fully from the increase in value that other fixed-income securities experience when interest rates decline. Additionally, an Account would likely have to reinvest the payoff proceeds at current yields, which are likely to be lower than the fixed-income securities in which the Account originally invested, resulting in a decline in income.
=/• Credit Risk (a type of Issuer Risk)—The risk that a decline, or perceived decline (whether by market participants, rating agencies, pricing services or otherwise), in an issuer’s financial position may prevent it from making principal and interest payments on fixed-income investments when due. Credit risk relates to the possibility that the issuer could default on its obligations, thereby causing an Account to lose its investment. Credit risk is heightened in times of market turmoil, when perceptions of an issuer’s credit risk can quickly change and even large, well-established issuers and/or governments may deteriorate rapidly with little or no warning. Credit risk is also heightened in the case of investments in lower-rated, high-yield fixed-income securities because their issuers are typically in weak financial health and their ability to pay interest and principal is uncertain. Compared to issuers of investment-grade securities, issuers of lower-rated, high-yield fixed-income investments are more likely to encounter financial difficulties and to be materially affected by such difficulties. High-yield securities may also be relatively more illiquid; therefore, they may be more difficult to purchase or sell than more highly rated securities.
=/• Current Income Risk—The risk that the income an Account receives may fall as a result of a decline in interest rates.
=/• Derivatives Risk—The risks associated with investing in derivatives may be different from and greater than the risks associated with directly investing in the underlying securities and other instruments. Derivatives such as swaps are subject to risks such as liquidity risk, interest rate risk, market risk, and credit risk. These derivatives involve the risk of mispricing or improper valuation and the risk that the prices of certain options, futures, swaps (including credit default swaps), forwards and other types of derivative instruments may not correlate perfectly with the prices or performance of the underlying security, currency, rate, index or other asset. Certain derivatives present counterparty risk, or the risk of default by the other party to the contract, and some derivatives are, or may suddenly become, illiquid. Some of these risks exist for futures, options and swaps which may trade on established markets. Unanticipated changes in interest rates, securities prices or currency exchange rates may result in poorer overall performance of an Account than if it had not entered into derivatives transactions. The potential for loss as a result of investing in derivatives, and the speed at which such losses can be realized, may be greater than investing directly in the underlying security or other instrument. Derivative investments can create leverage by magnifying investment losses or gains, and an Account could lose more than the amount invested.
=/• Downgrade Risk—The risk that securities are subsequently downgraded should TCIM and/or rating agencies believe the issuer’s business outlook or creditworthiness has deteriorated. If this occurs, the values of these investments may decline, or it may affect the issuer’s ability to raise additional capital for operational or financial purposes and increase the chance of default, as a downgrade may be seen in the financial markets as a signal of an issuer’s deteriorating financial position.
=/• Extension Risk—The risk that during periods of rising interest rates, borrowers may pay off their mortgage loans later than expected, preventing an Account from reinvesting principal proceeds at higher interest rates, resulting in less income than potentially available. These risks are normally present in mortgage-backed securities and other asset-backed securities. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can lengthen depending on homeowner prepayment activity. A decline in the prepayment rate and the resulting increase in duration of fixed-income securities held by an Account can result in losses to investors in the Account.
=/• Fixed-Income Foreign Investment Risk—Foreign investments, which may include fixed-income securities of foreign issuers, or securities or contracts payable or denominated in non-U.S. currencies, can involve special risks that arise from one or more of the following events or circumstances: (1) changes in currency exchange rates; (2) possible imposition of market controls or currency exchange controls; (3) possible imposition of withholding taxes on dividends and interest; (4) possible seizure, expropriation or nationalization of assets; (5) more limited financial information about the foreign debt issuer or difficulties interpreting it because of foreign regulations and accounting standards; (6) lower liquidity and higher volatility in some foreign markets; (7) the impact of political, social or diplomatic events; (8) economic sanctions or other measures by the United States or other governments; (9) the difficulty of evaluating some foreign economic trends; and (10) the possibility that a foreign government could restrict an issuer from paying principal and interest on its debt obligations to investors outside the country. It may also be difficult to use foreign laws and courts to force a foreign issuer to make principal and interest payments on its debt obligations. In addition, the cost of servicing external debt will also generally be adversely affected by rising international interest rates because many external debt obligations bear interest at rates which are adjusted based upon international interest rates.
The risks described above often increase in countries with emerging markets. For example, the ability of a foreign sovereign issuer, especially in an emerging market country, to make timely and ultimate payments on its debt obligations may be strongly influenced by the issuer’s balance of payments, including export performance, its access to international credit and investments, fluctuations of interest rates and the extent of its foreign reserves. If a deterioration occurs in the foreign country’s balance of payments, it could impose temporary restrictions on foreign capital remittances. In addition, there is a risk of restructuring certain foreign debt obligations that could reduce and reschedule interest and principal payments. Financial instruments of issuers in these countries may have lower overall liquidity than those of issuers in more developed countries. Emerging market countries typically have less established legal, accounting and financial reporting systems than those in more developed markets, which may reduce the scope or quality of financial information available to investors. Governments in emerging market countries are often less stable and more likely to take extra-legal action with respect to companies, industries, assets, or foreign ownership than those in more developed markets. Moreover, it can be more difficult for investors to bring litigation or enforce judgments against issuers in emerging markets or for U.S. regulators to bring enforcement actions against such issuers. The economies of some emerging markets may be particularly exposed to or affected by a certain industry or sector, and therefore issuers and/or securities of such emerging markets may be more affected by the performance of such industries or sectors.
=/• Floating and Variable Rate Securities Risk— Floating and variable rate securities provide for adjustment in the interest rate paid on the obligations. The terms of such obligations typically provide that interest rates are adjusted based upon an interest or market rate adjustment as provided in the respective obligations. The adjustment intervals may be regular, and range from daily up to annually, or may be event-based, such as based on a change in the prime rate. Because of the interest rate adjustment feature, floating and variable rate securities provide an investor with a certain degree of protection against rises in interest rates, although the investor will participate in any declines in interest rates as well. Generally, changes in interest rates will have a smaller effect on the market value of floating and variable rate securities than on the market value of comparable fixed-income obligations. Thus, investing in floating and variable rate securities generally allows less opportunity for capital appreciation and depreciation than investing in comparable fixed-income securities. Floating and variable rate securities may be subject to greater liquidity risk than other debt securities, meaning that there may be limitations on an Account’s ability to sell the securities at any given time. Such securities also may lose value.
=/• Illiquid Investments Risk—The risk that illiquid investments may be difficult to sell for the value at which they are carried, if at all, or at any price within the desired time frame. Illiquid investments are those that are not reasonably expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. Pursuant to applicable SEC regulations, an Account may not invest more than 15% of its net assets in illiquid investments that are assets. The Accounts have implemented a liquidity risk management program and related procedures to identify illiquid investments pursuant to this regulation. An Account may be limited in its ability to invest in illiquid and “less liquid” investments, which may adversely affect an Account’s performance and ability to achieve its investment objective. An Account’s investments in illiquid investments may reduce the returns of the Account because it may be unable to sell the illiquid investment at an advantageous time or price, which could prevent the Account from taking advantage of other investment opportunities. There is also a risk that unusually high withdrawal requests from certain large plans or participants (such as institutional investors) or asset allocation changes, may make it difficult for an Account to sell investments in sufficient time to allow it to meet withdrawals or require an Account to sell illiquid investments at reduced prices or under unfavorable conditions. Illiquid investments may trade less frequently, in lower quantities and/or at a discount as compared to more liquid investments, which may cause an Account to receive distressed prices and incur higher transaction costs when selling such investments. Securities that are liquid at the time of purchase may subsequently become illiquid due to events such as adverse developments for an issuer, industry-specific developments, market events, rising interest rates, changing economic conditions or investor perceptions and geopolitical risk. Dislocations in certain parts of the markets are resulting in reduced liquidity for certain investments. It is uncertain when financial markets will improve and economic conditions will stabilize. Liquidity of financial markets may also be affected by government intervention and political, social, health, economic or market developments. During period of market stress, a Fund’s assets could potentially experience significant levels of illiquidity.
=/• Income Volatility Risk—Income volatility refers to the degree and speed with which changes in prevailing market interest rates diminish the level of current income from a portfolio of fixed-income securities. The risk of income volatility is that the level of current income from a portfolio of fixed-income securities may decline in certain interest rate environments.
=/• Interest Rate Risk (a type of Market Risk)—The risk that the value or yield of fixed-income investments may decline if interest rates change. In general, when prevailing interest rates decline, the market values of outstanding fixed-income investments (particularly those paying a fixed rate of interest) tend to increase while yields on similar newly issued fixed-income investments tend to decrease, which could adversely affect an Account’s income. Conversely, when prevailing interest rates increase, the market values of outstanding fixed-income investments (particularly those paying a fixed rate of interest) tend to decline while yields on similar newly issued fixed-income investments tend to increase. If a fixed-income investment pays a floating or variable rate of interest, changes in prevailing interest rates may increase or decrease the investment’s yield. Fixed-income investments with longer durations tend to be more sensitive to interest rate changes than shorter-duration investments. Interest rate risk is generally heightened during periods when prevailing interest rates are low or negative. During periods of very low or negative interest rates, an Account may not be able to maintain positive returns. As of the date of this Prospectus, interest rates in the United States and in certain foreign markets are at low levels, which may increase an Account’s exposure to risks associated with rising interest rates. In general, changing interest rates could have unpredictable effects on the markets and may expose fixed-income and related markets to heightened volatility. A wide variety of factors can cause interest rates to rise (e.g., central bank monetary policies, inflation rates, general economic conditions). With respect to the Money Market Account, low or negative interest rates could cause the Account to lose value and experience a negative yield.
=/• Debt Issuer Risk (often called Financial Risk)—The risk that the issuer’s earnings prospects and overall financial position will deteriorate, causing a decline in the value of the issuer’s financial instruments over short or extended periods of time. In times of market turmoil, perceptions of an issuer’s credit risk can quickly change and even large, well-established issuers may deteriorate rapidly with little or no warning.
=/• Market Volatility, Liquidity and Valuation Risk (types of Market Risk)—Trading activity in fixed-income investments in which an Account invests may be dramatically reduced or cease at any time, whether due to general market turmoil, limited dealer capacity, problems experienced by a single company or a market sector, or other factors, such as natural disasters or public health emergencies (pandemics and epidemics). In such cases, it may be difficult for an Account to properly value assets represented by such investments. In addition, an Account may not be able to purchase or sell a security at a price deemed to be attractive, if at all, which may inhibit an Account from pursuing its investment strategies or negatively impact the values of portfolio holdings. Further, an increase in interest rates or other adverse conditions (e.g., inflation/deflation, increased selling of fixed-income investments across other pooled investment vehicles or accounts, changes in investor perception or changes in government intervention in the markets) may lead to increased redemptions and increased portfolio turnover, which could reduce liquidity for certain Account investments, adversely affect values of portfolio holdings, and increase an Account’s costs. If dealer capacity in fixed-income markets is insufficient for market conditions, this has the potential to further inhibit liquidity and increase volatility in the fixed-income markets. Certain fixed-income investments, with longer durations or maturities may face heightened levels of liquidity risk.
=/• Mortgage Roll Risk— The risk that TCIM will not correctly predict mortgage prepayments and interest rates, which will diminish the investment performance of an Account compared with what such performance would have been without the use of the strategy.
=/• Non-Investment-Grade Securities Risk—Issuers of non-investment-grade securities, which are usually called “high-yield” or “junk” bonds, are typically in weaker financial health and such securities can be harder to value and sell and their prices can be more volatile than more highly rated securities. While these securities generally have higher rates of interest, they also involve greater risk of default than do securities of a higher-quality rating. In addition, high-yield securities generally are less liquid than investment-grade securities and the risks associated with high-yield securities are heightened during times of weakening economic conditions or rising interest rates. Any investment in distressed or defaulted securities subjects an Account to even greater credit risk than investments in other below-investment-grade securities.
=/• Portfolio Turnover Risk—In pursuing its investment objectives, the Bond Market Account may engage in trading that results in a high portfolio turnover rate, which may vary greatly from year to year, as well as within a given year. A higher portfolio turnover rate may result in correspondingly greater transactional expenses that are borne by the Account. Such expenses may include bid-ask spreads, dealer mark-ups and other transactional costs on the sale of securities and reinvestment in other securities, and may result in the realization of taxable capital gains (including short-term gains, which are generally taxed to shareholders as ordinary income). These costs, which are not reflected in annual account operating expenses or in the example thereunder, may affect the Account’s performance.
=/• Prepayment Risk—The risk that during periods of falling interest rates, borrowers may pay off their mortgage loans sooner than expected, forcing an Account to reinvest the unanticipated proceeds at lower interest rates, resulting in a decline in income. These risks are normally present in mortgage-backed investments and other asset-backed investments. For example, homeowners have the option to prepay their mortgages. Therefore, the duration of a security backed by home mortgages can shorten depending on homeowner prepayment activity. A rise in the prepayment rate and the resulting decline in duration of fixed-income investments held by an Account can result in losses to investors in the Account.
=/• Special Risks of Inflation-Indexed Bonds—The risk that market values of inflation-indexed investments held by an Account may be adversely affected by a number of factors, including changes in the market’s inflation expectations, changes in real rates of interest or declines in inflation (or deflation). There is a risk that interest payments in inflation-indexed investments may fall because of a decline in inflation (or deflation). In addition, the Consumer Price Index for All Urban Consumers (CPI-U) may not accurately reflect the true rate of inflation. If the market perceives that any of these events have occurred, then the market value of those investments could be adversely affected.
=/• U.S. Government Securities Risk— U.S. Treasury obligations and some obligations of U.S. Government agencies and instrumentalities are supported by the full faith and credit of the U.S. Government. Other U.S. Government agencies or instrumentalities are backed by the right of the issuer to borrow from the U.S. Treasury. Still others are supported only by the credit of the issuer. No assurance can be given that the U.S. Government would provide financial support to its agencies or instrumentalities if not required to do so by law, and such agencies or instrumentalities may not have the funds to meet their payment obligations in the future. Therefore, securities issued by U.S. Government agencies or instrumentalities that are not backed by the full faith and credit of the U.S. Government may involve increased risk of loss of principal and interest. In addition, the value of U.S. Government securities may be affected by changes in the credit rating of the U.S. Government.
To the extent an Account invests significantly in securities issued or guaranteed by the U.S. Government or its agencies or instrumentalities, any market movements, regulatory changes or changes in political or economic conditions that affect the securities of the U.S. Government or its agencies or instrumentalities in which an Account invests may have a significant impact on the Account’s performance. Events that would adversely affect the market prices of securities issued or guaranteed by one U.S. Government agency or instrumentality may adversely affect the market prices of securities issued or guaranteed by other agencies or instrumentalities.
=/Past performance
The following bar charts and performance tables below help illustrate some of the risks of investing in the Accounts, and how investment performance during the accumulation period varies. The bar charts show XYZ investment performance during the accumulation period in the form of annual total returns of Class R1 units of each Account for the past 10 calendar years, have not been adjusted to reflect current fee rates and do not take into account any XYZ plan pricing where one or more XYZ Accounts are investment options in an employer retirement plan. Because the expenses may vary across classes, the performance of Class R1 may vary from the other classes. Below each chart, the best and worst returns of Class R1 for a calendar quarter during this period are noted.
The performance tables following the charts show each Account’s average annual total returns for Class R1 units, as well as Class R2 and R3 units (whose performance prior to their inception date on April 24, 2015 is based on Class R1 performance), over the one-year, five-year and ten-year periods ended December 31, 2020, and how those returns compare to those of broad-based securities market indices (and a composite index in some instances). As of October 14, 2016, certain changes were made to the Money Market Account’s investment strategies. Performance information prior to this date reflects the Money Market Account’s investment strategies before this date. As a result, the Money Market Account’s performance after October 14, 2016 may differ materially from the performance information shown below for the period prior to October 14, 2016. Past performance does not guarantee future results.
The benchmarks and other indices listed below are unmanaged, and you cannot invest directly in an index. The use of a particular benchmark or comparative index is not a fundamental policy and can be changed without participant approval. The Accounts will notify you if such a change is made.
AVERAGE ANNUAL TOTAL RETURNS FOR CLASS R1 (%)
Stock Account
 |
2011 | - |
|
| 2012 | |||
| 2013 | |||
| 2014 | |||
| 2015 | - |
||
| 2016 | |||
| 2017 | |||
| 2018 | - |
||
| 2019 | |||
| 2020 |
Best quarter:
Global Equities Account
 |
2011 | - |
|
| 2012 | |||
| 2013 | |||
| 2014 | |||
| 2015 | - |
||
| 2016 | |||
| 2017 | |||
| 2018 | - |
||
| 2019 | |||
| 2020 |
Best quarter:
Growth Account
 |
2011 | ||
| 2012 | |||
| 2013 | |||
| 2014 | |||
| 2015 | |||
| 2016 | |||
| 2017 | |||
| 2018 | - |
||
| 2019 | |||
| 2020 |
Best quarter:
Equity Index Account
 |
2011 | - |
|
| 2012 | |||
| 2013 | |||
| 2014 | |||
| 2015 | - |
||
| 2016 | |||
| 2017 | |||
| 2018 | - |
||
| 2019 | |||
| 2020 |
Best quarter:
Bond Market Account
 |
2011 | - |
|
| 2012 | |||
| 2013 | - |
||
| 2014 | |||
| 2015 | |||
| 2016 | |||
| 2017 | |||
| 2018 | - |
||
| 2019 | |||
| 2020 |
Best quarter:
Inflation-Linked Bond Account
 |
2011 | ||
| 2012 | |||
| 2013 | - |
||
| 2014 | |||
| 2015 | - |
||
| 2016 | |||
| 2017 | |||
| 2018 | - |
||
| 2019 | |||
| 2020 |
Best quarter:
Social Choice Account
 |
2011 | ||
| 2012 | |||
| 2013 | |||
| 2014 | |||
| 2015 | - |
||
| 2016 | |||
| 2017 | |||
| 2018 | - |
||
| 2019 | |||
| 2020 |
Best quarter:
Money Market Account*
 |
2011 | ||
| 2012 | |||
| 2013 | |||
| 2014 | |||
| 2015 | |||
| 2016 | |||
| 2017 | |||
| 2018 | |||
| 2019 | |||
| 2020 |
Best quarter:
* Between
July 16, 2009 and March 7, 2017, XYZ withheld (“waived”) a portion of the Rule 12b-1
distribution and/or administrative expenses for each class of the XYZ Money Market Account when a
class’s yield was less than zero. Without this waiver, the total returns of the Money Market
Account would have been lower. For a period of three years after the date an amount was waived, it
was eligible for recoupment by XYZ, under certain conditions. All eligible expenses were recouped
by July 2018 for Class R3, September 2018 for Class R2 and June 2019 for Class R1.
XYZ has
agreed to withhold (“waive”) a portion of the Rule 12b-1 distribution and/or
administrative expenses for each class of the XYZ Money Market Account (the “Account”)
when a class’s yield is less than zero. Without this waiver, the total returns of each class
of the Account would be lower, and could be negative. XYZ may, for a period of three years after
the date an amount was waived, recover from the Account a portion of the amounts waived at such time
as the class’s daily yield would be positive absent the effect of the waiver and, in such
event, the amount of recovery on any day will be approximately 25% of the class’s yield (net
of all other expenses) on that day. This limited waiver may be terminated at any time, but is likely
to terminate sometime after June 30, 2021 and, in any event, will extend only through December 31,
2021. Upon expiration of the waiver, the total returns of each class of the Account will be lower,
and could be negative, particularly if interest rates remain low at the time of the waiver’s
expiration.
For
the periods ended
| Inception date | One year | Five years | Ten years | ||||||
| Stock Account | |||||||||
| Class R1 | 7/31/1952 | % | % | % | |||||
| Class R2 | 4/24/2015 | 1 | |||||||
| Class R3 | 4/24/2015 | 1 | |||||||
| Morningstar Aggressive Target Risk Index (reflects no deductions for fees, expenses or taxes) |
|||||||||
| XYZ Stock Account Composite Index2 (reflects no deductions for fees, expenses or taxes) |
|||||||||
| Global Equities Account | |||||||||
| Class R1 | 5/1/1992 | ||||||||
| Class R2 | 4/24/2015 | 1 | |||||||
| Class R3 | 4/24/2015 | 1 | |||||||
| MSCI All Country World Index (reflects reinvested dividends net of withholding taxes but reflects no deductions for fees, expenses or other taxes) |
|||||||||
| Growth Account | |||||||||
| Class R1 | 4/29/1994 | ||||||||
| Class R2 | 4/24/2015 | 1 | |||||||
| Class R3 | 4/24/2015 | 1 | |||||||
| Russell 1000® Growth Index (reflects no deductions for fees, expenses or taxes) |
|||||||||
| Equity Index Account | |||||||||
| Class R1 | 4/29/1994 | ||||||||
| Class R2 | 4/24/2015 | 1 | |||||||
| Class R3 | 4/24/2015 | 1 | |||||||
| Russell 3000® Index (reflects no deductions for fees, expenses or taxes) |
|||||||||
| Bond Market Account | |||||||||
| Class R1 | 3/1/1990 | - |
|||||||
| Class R2 | 4/24/2015 | - |
1 | ||||||
| Class R3 | 4/24/2015 | - |
1 | ||||||
| Bloomberg Barclays U.S. Aggregate Bond Index (reflects no deductions for fees, expenses or taxes) |
- |
||||||||
| Inflation-Linked Bond Account | |||||||||
| Class R1 | 5/1/1997 | ||||||||
| Class R2 | 4/24/2015 | 1 | |||||||
| Class R3 | 4/24/2015 | 1 | |||||||
| Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index (reflects no deductions for fees, expenses or taxes) |
|||||||||
| Social Choice Account | |||||||||
| Class R1 | 3/1/1990 | % | % | % | |||||
| Class R2 | 4/24/2015 | 1 | |||||||
| Class R3 | 4/24/2015 | 1 | |||||||
| Morningstar Moderate Target Risk Index (reflects no deductions for fees, expenses or taxes) |
|||||||||
| XYZ Social Choice Account Composite Index3 (reflects no deductions for fees, expenses or taxes) |
|||||||||
| Money Market Account4 | |||||||||
| Class R1 | 4/1/1988 | ||||||||
| Class R2 | 4/24/2015 | 1 | |||||||
| Class R3 | 4/24/2015 | 1 | |||||||
| Monday Money Fund Averages™—All Government |
Current performance may be higher or lower than that shown, and you may have a gain or a loss when you redeem your accumulation units.
| 1 | |
| 2 | The XYZ Stock Account Composite Index is a weighted average of two unmanaged indices. As of December 31, 2020 the XYZ Stock Account Composite Index consisted of: 70.0% Russell 3000® Index (domestic equities) and 30.0% MSCI ACWI ex USA IMI (foreign equities). The weights in the composite index approximately reflect the relative sizes of the domestic and foreign equity segments of the Stock Account. The Account’s composite index, the components that make up a composite index and the method of calculating a composite index’s performance may vary over time. See “More about benchmarks and other indices” below for additional information. |
| 3 | The XYZ Social Choice Account Composite Index is a weighted average of three unmanaged indices. As of December 31, 2020 the XYZ Social Choice Account Composite Index consisted of: 42.0% Russell 3000® Index, 40.0% Bloomberg Barclays U.S. Aggregate Bond Index and 18.0% MSCI EAFE + Canada Index. The weights in the composite index approximately reflect the relative sizes of the domestic, domestic investment-grade bond and developed foreign market segments of the Social Choice Account. The Account’s composite index, the components that make up a composite index and the method of calculating a composite index’s performance may vary over time. See “More about benchmarks and other indices” below for additional information. |
| 4 |
Between January 1, 2021 and May 1, 2022, XYZ Insurance waived a portion of the Rule 12b-1 distribution and/or administrative expenses for Class R1, Class R2, and Class R3 of the Account when a class’s yield was less than zero. Without this waiver, the total returns of the Account would have been lower. XYZ Insurance may, for a period of three years after the date an amount was waived, recover from the Account a portion of the amounts waived at such time as the class’s daily yield would be positive absent the effect of the waiver and, in such event, the amount of recovery on any day will be approximately 25% of the class’s yield (net of all other expenses) on that day. |
After-tax returns have not been shown, since they are not relevant to investors in the Accounts who hold their accumulation units through tax-deferred arrangements such as 401(a), 401(k) or 403(b) plans or IRAs. The benchmark indices reflect no deductions for fees, expenses or taxes.