Investment Options

The right college financing strategy may be one of the most important investment decisions you will make. What if you're not an investment professional? We know most people aren't, so we've set up a choice of six investment options. Effective November 2, 2009, you can invest new contributions in any one or combination of these six investment options: the Managed Allocation Option, the Active Equity Option, the Equity Index Option, the Balanced Option, the Fixed Income Option, and the Guaranteed Option. These investment options vary in their investment strategy and degree of risk, allowing you to select an option or combination of options that may fit your needs.

• Review Investment Performance
• Fees and Expenses
• Underlying TIAA-CREF Funds - Institutional Class
• Read the KESPT Disclosure Booklet and Participation Agreements (PDF, 961KB)

Changing Your Investments
Once you invest in a particular investment option, you can transfer contributions and any earnings to another investment option once per calendar year or upon a transfer of funds to a KESPT account for a different beneficiary. (See the KESPT Disclosure Booklet and Participation Agreements (PDF, 961KB) for more information.)

Periodically Review Your Investments
It's a good idea to periodically re-evaluate your investment strategy as your goals, investment horizon, and personal situation change - for example, annually at tax time, on a yearly basis if your income changes, or upon the birth of another child.

Managed Allocation Option (Risk level shifts from Aggressive to Conservative) 
The Managed Allocation Option is designed to take into account the Beneficiary's current age and the number of years before the Beneficiary turns 18 and is expected to enter college. Allocations to the Managed Allocation Option will be placed in one of six Age Bands, as determined by the Beneficiary's current age. Each Age Band has a different investment objective and investment strategy, which are matched to the Beneficiary's expected investment time horizon.

The Age Bands for younger Beneficiaries seek a favorable long-term return by investing primarily in Mutual Funds that invest in equity or real estate-related securities, which carry a high level of risk, but offer potentially greater returns than could be achieved, by investing in more conservative investments. As a Beneficiary nears college age, your investments attributable to the Managed Allocation Option will be moved to more conservatively-invested Age Bands. The Age Bands for older Beneficiaries allocate less to Mutual Funds that invest in equity and real estate-related securities and allocate more heavily to Mutual Funds that invest in fixed-income and money market securities to preserve capital.

As the Beneficiary ages, assets in your Account that are attributable to this option are moved from one Age Band to the next on the first "rolling date" following the Beneficiary's fourth, eighth, twelfth, fifteenth and eighteenth birthdays. The rolling dates are March 20, June 20, September 20 and December 20 (or the first business day thereafter).

Allocations for all investments are as of November 2009. Allocations are reviewed and adjusted periodically.

Active Equity Option (Risk level - Aggressive) 
This Investment Option seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in a combination of actively managed equity Mutual Funds.

Assets in this Investment Option are allocated to Mutual Funds that invest heavily in domestic and foreign equity securities, which carry a high level of risk, but offer potentially greater returns than could be achieved by investing in more conservative investments. Because of the high exposure to domestic and foreign equities, and the corresponding high degree of risk, this Investment Option may be appropriate for you if you already have substantial college savings from less volatile investments (e.g., fixed-income) or you have a long investment horizon and you can tolerate a higher level of risk.

Equity Index Option (Risk level - Aggressive)
This Investment Option seeks to provide a favorable long-term total return, mainly from capital appreciation, by investing in equity index Mutual Funds. Because of the high exposure to domestic and foreign equities, and the corresponding high degree of risk, this Investment Option may be appropriate for you if you already have substantial college savings from less volatile investments (e.g., fixed-income) or you have a long investment horizon and you can tolerate a higher level of risk.

Allocations for all investments are as of November 2009. Allocations are reviewed and adjusted periodically.

Balanced Option (Risk level - Moderate)
This Investment Option seeks to provide favorable returns that reflect the broad investment performance of the financial markets through capital appreciation and investment income by investing in a balanced combination of equity and fixed-income Mutual Funds. This Investment Option may be appropriate for you if you have a medium to long investment horizon and can tolerate a moderate level of risk.

Guaranteed Option (Risk level - Conservative) 
This Investment Option seeks to preserve capital and provide a stable return. It may be appropriate for you if you have a short investment horizon and are looking for a conservative investment with a low level of risk. The contributions invested in this Investment Option are allocated to a Funding Agreement issued by TIAA-CREF Life to the Trust, which is the policyholder under the agreement. The Funding Agreement provides for a return of principal plus a guaranteed rate of interest and allows for the possibility that additional interest may be credited as declared periodically by TIAA-CREF Life. The interest rate guarantee is made only to the Trust, and not to Participants or Beneficiaries. The rate of any additional interest is declared in advance for a period of up to 12 months and is not guaranteed for any future periods. The term of the Funding Agreement is intended to coincide with the term of the Management Agreement.

Effective July 1, 2010, accumulations under the Funding Agreement for the Guaranteed Option as of June 30, 2010 as well as any contributions received and earnings on those contributions from July 1, 2010 until further notice, will be credited to the Kentucky Education Savings Plan Trust with an effective annual interest rate of 2.45% and are guaranteed to earn this rate through June 30, 2011, subject to the claims paying ability of TIAA-CREF Life Insurance Company.

Underlying TIAA-CREF Funds - Institutional Class 
Following is the list of underlying TIAA-CREF Funds - Institutional Class. For the Managed Allocation, Active Equity Option, Equity Index Option, and the Fixed Income Option an investment in KESPT is not the same as a direct investment in the mutual funds. Please read the prospectus for the TIAA-CREF Funds - Institutional Class for more information.

Please read the prospectus for the TIAA-CREF Funds - Institutional Class before investing. However, keep in mind that an investment in the Kentucky Education Savings Plan Trust is not the same as a direct investment in the underlying mutual funds.

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