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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2009
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 33-50080
AMERICAN BAR ASSOCIATION MEMBERS/
STATE STREET COLLECTIVE TRUST
(Exact Name of Registrant as Specified in its Charter)
New Hampshire | 04-6691601 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
20 Trafalgar Square, Suite 449 Nashua, New Hampshire |
03063 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code: (603) 589-4097
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Registration S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ¨ |
Accelerated Filer ¨ | Non-Accelerated Filer x | Smaller reporting company ¨ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
As of June 30, 2009, the aggregate market value of the units of beneficial interest in the various funds of the Collective Trust held by non-affiliates was approximately $3.1 billion.
Table of Contents
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PART I | ||||
ITEM 1. |
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RECENT AND EXPECTED CHANGES TO THE PROGRAM; ROLE OF NORTHERN TRUST |
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Investment Advisor FeesIndex Funds and Indexed Portions of Managed Funds |
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ITEM 1A. |
Risk Factors | 94 | ||
ITEM 1B. |
Unresolved Staff Comments | 100 | ||
ITEM 2. |
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ITEM 3. |
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ITEM 4. |
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PART II | ||||
ITEM 5. |
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ITEM 6. |
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ITEM 7. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
118 | ||
ITEM 7A. |
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ITEM 8. |
144 | |||
ITEM 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
144 | ||
ITEM 9A. |
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ITEM 9B. |
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PART III | ||||
ITEM 10. |
146 | |||
ITEM 11. |
149 | |||
ITEM 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
149 | ||
ITEM 13. |
Certain Relationships and Related Transactions, and Director Independence |
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ITEM 14. |
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PART IV | ||||
ITEM 15. |
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F-1 |
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements in this Report, including, without limitation, those relating to the objectives and strategies of the investment options, constitute Forward-Looking Statements within the meaning of the Private Securities Litigation Reform Act of 1995. The American Bar Association Members/State Street Collective Trust (the Collective Trust) desires to take advantage of the safe harbor provisions of such Act and is including this special note to enable it to do so. Forward-looking statements included in this Report, or subsequently included in other publicly available documents filed with the Securities and Exchange Commission, and other publicly available statements issued or released by the Collective Trust, involve known and unknown risks, uncertainties and other factors which could cause the actual results, performance or achievements of the investment options to differ materially from the future results, performance or achievements expressed or implied by such forward-looking statements. For a description of these factors, see the descriptions of each of the investment options found in Item 1, Business.
ITEM 1. | Business. |
The American Bar Association Members/State Street Collective Trust (the Collective Trust) was organized on August 8, 1991. The Collective Trust is maintained exclusively for the collective investment of monies administered on behalf of the ABA Retirement Funds program (the Program). As of December 31, 2009, assets contributed under the Program may be invested in five predominantly actively managed collective investment funds (the Managed Funds), six collective investment funds, each of which was designed to replicate a specific securities index (the Index Funds), the Real Asset Return Fund, which is designed to provide capital appreciation in excess of inflation, five Retirement Date Funds, a group of balanced investment funds each of which is designed to correspond to a particular time horizon to retirement, and three Target Risk Funds, each of which is designed to represent risk and reward characteristics that reflect varying levels of investment risk (collectively, the Funds). The Funds and the Self-Managed Brokerage Account are investment options under the Program, which is sponsored by ABA Retirement Funds.
On July 2, 2009, availability of the Large-Cap Value Equity Fund, Large-Cap Growth Equity Fund, Mid-Cap Value Equity Fund, Mid-Cap Growth Equity Fund and Small-Cap Equity Fund was terminated. See Terminated Funds. In addition, on July 2, 2009, the Collective Trust ceased offering Units in the Balanced Fund, although assets under the Program invested in the Balanced Fund will remain so invested until they are transferred to another investment option. See Balanced Fund.
The Collective Trust may offer and sell an unlimited number of units of beneficial interest (Units), representing interests in the separate collective investment fund portfolios of the Collective Trust, each Unit to be offered and sold at the per Unit net asset value of the corresponding fund portfolio.
State Street Bank and Trust Company of New Hampshire (State Street or the Trustee), a New Hampshire chartered non-depository trust company and a wholly-owned subsidiary of State Street Bank and Trust Company (State Street Bank), serves as trustee of the Collective Trust. State Street Bank is a trust company established under the laws of The Commonwealth of Massachusetts and is a wholly-owned subsidiary of State Street Corporation, a Massachusetts corporation and a bank holding company registered with the Federal Reserve Board pursuant to the Federal Bank Holding Company Act of 1956,
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as amended. State Street Bank assumed responsibility for administering and providing the investment options for the Program on January 1, 1992. State Street Bank served as trustee of the Collective Trust prior to December 1, 2004. For additional information regarding the relationship between State Street and State Street Bank, see State Street and State Street Bank.
Since May 1, 2009, ING Life Insurance and Annuity Company, a Connecticut corporation (ING Life), acting through its affiliates, including ING Institutional Plan Services, LLC, a Delaware limited liability company (ING Services), has provided recordkeeping, communication, marketing and administration services to the Program. See ING Life and ING Services. Prior to May 1, 2009, State Street Bank was responsible for the recordkeeping and administrative services required by the Program.
Since May 1, 2009, The Northern Trust Company (Northern Trust), acting through its wholly-owned subsidiary, Northern Trust Global Advisors, Inc., as investment fiduciary appointed by ABA Retirement Funds, has made recommendations to State Street regarding certain Funds and the engagement and termination of Investment Advisors with respect to those Funds. See Recent and Expected Changes to the Program; Role of Northern Trust.
For a description of upcoming expected changes relating to the Program, see Recent and Expected Changes to the Program; Role of Northern Trust.
The Program is sponsored by ABA Retirement Funds, an Illinois not-for-profit corporation organized by the American Bar Association, which we refer to as the ABA, to sponsor retirement programs for self-employed individuals and employers who are members or associates of the ABA or other affiliated organizations. The Program is a comprehensive retirement program that provides Employers with tax-qualified employee retirement plans, a variety of investment options and related recordkeeping and administrative services. The law practices, bar associations and other organizations which are eligible to adopt the Program are referred to in this Report as Eligible Employers, and those which adopt the Program are referred to as Employers. The term Participants means self-employed individuals and employees (together with their beneficiaries where applicable) of Employers which have adopted the Program for their practices. As of December 31, 2009, there were approximately 3,900 plans participating in the Program through which approximately 40,000 Participants participated in the Program.
As trustee of the Collective Trust, State Street is responsible for the operation and management of the Funds under the Collective Trust. For a more complete description of the relationship between State Street and State Street Bank and Northern Trust in the structuring of the investment options available under the Program, see State Street and State Street Bank and Recent and Expected Changes to the Program; Role of Northern Trust respectively. For a description of expected changes to the arrangements with State Street and State Street Bank, see Recent and Expected Changes to the Program; Role of Northern Trust.
ING Life, through its affiliates, including ING Services, provides recordkeeping, communication, marketing and administration services to the Program. State Street Bank is the sole trustee of each of the ABA Members Trusts. See ING Life and ING Services and State Street and State Street Bank.
DESCRIPTION OF INVESTMENT OPTIONS
As of December 31, 2009, the Collective Trust offered five Managed Funds, six Index Funds, the Real Asset Return Fund, five Retirement Date Funds and three Target Risk Funds. The Managed Funds, the Index Funds, the Real Asset Return Fund, the Retirement Date Funds and the Target Risk Funds, together with the Self-Managed Brokerage Account, are investment options under the Program.
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All proceeds received by the Collective Trust relating to the contribution, transfer or allocation of assets to a Fund are applied to the purchase of Units of such Fund. Assets invested through the ABA Members Plans are held under the American Bar Association Members Retirement Trust (the Retirement Trust), and assets invested through individually designed plans are held under the American Bar Association Members Pooled Trust for Retirement Plans (the Pooled Trust). State Street Bank is the sole trustee of each of the Retirement Trust and Pooled Trust (collectively the ABA Members Trusts).
The Stable Asset Return Fund invests primarily in high quality fixed-income instruments and investment contracts. The Bond Core Plus Fund invests in debt securities of varying maturities. The Large Cap Equity Fund invests primarily in equity securities of large capitalization companies. The Small-Mid Cap Equity Fund invests primarily in equity securities of small and medium capitalization companies. The International All Cap Equity Fund invests primarily in equity securities of issuers domiciled outside the U.S. Assets contributed or held under the Program may also be invested in six Index Funds, each of which is designed to replicate a specific securities index. Assets contributed or held under the Program may also be invested in the Real Asset Return Fund, which invests in a diversified portfolio of primarily Treasury Inflation Protected Securities, commodity futures and real estate investment trusts. Assets contributed or held under the Program may also be invested in the Retirement Date Funds, which are a group of balanced investment funds each of which is designed to correspond to a particular time horizon to retirement. In addition, assets contributed or held under the Program may be invested in the Target Risk Funds, each of which is designed to represent risk and reward characteristics that reflect varying levels of investment risk. Finally, assets contributed under the Program may be invested in publicly traded debt and equity securities and shares of numerous mutual funds through Self-Managed Brokerage Accounts. Assets invested in the Stable Asset Return Fund, the Large Cap Equity Fund, the Small-Mid Cap Equity Fund, the International All Cap Equity Fund, the Index Funds, the Real Asset Return Fund, the Retirement Date Funds and the Target Risk Funds are also invested in whole or in part into collective investment funds maintained and managed by State Street Bank in compliance with the investment objectives and restrictions of such Funds.
Under the Collective Trusts Declaration of Trust, interests in the respective Funds are represented by Units, each of which represents an undivided pro rata share of the net assets of a Fund. Further, the Collective Trusts Declaration of Trust provides that each Fund constitutes a separate trust, and the assets of each trust shall be separately held, managed, administered, valued, invested, reinvested, distributed and accounted for and otherwise dealt with as a separate trust. Thus, an investment in any one Fund does not give rise to an interest in any other Fund or an interest in the Collective Trust as a whole. The Declaration of Trust also provides that any creditor of, or other person having any claim of any type against, a Fund may look only to the assets of such Fund for payment of obligations of such Fund, and that every contract, instrument, certificate or undertaking of or on behalf of any Fund shall be conclusively deemed to have been executed only by or for such Fund and no Fund shall be answerable for any obligation assumed or liability incurred by any other Fund. However, the enforceability of these provisions has never been tested, and the Collective Trust believes that, under New Hampshire law, the Funds have no separate legal existence and exist only as sub-trusts of the Collective Trust. Furthermore, neither the Employee Retirement Income Security Act of 1974, as amended (ERISA), nor the laws of the State of the New Hampshire, under which the Collective Trust is organized, have any specific statutory provision deeming assets of one sub-trust created under a trust to be unavailable to creditors of other sub-trusts so created. In the unlikely event that a particular Fund were not to have sufficient net assets with which to satisfy its obligations, it is possible that a court could determine that the assets of the other Funds could be available to satisfy those obligations.
Although the Funds are similar in some respects to registered open-end management investment companies (commonly referred to as mutual funds), the Funds are not required to be and are not registered as investment companies under the Investment Company Act. The Units representing
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interests in the Funds are held by State Street Bank, as trustee of the ABA Members Trusts. Neither the assets of the ABA Members Trusts nor the investment options are subject to the claims of the creditors of State Street or State Street Bank. The Units are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other governmental agency and are not deposits of State Street, State Street Bank or any other bank. The activities of each of State Street and State Street Bank in connection with the operation of the Collective Trust or the ABA Members Trusts, respectively, are subject to the requirements of ERISA. There are no voting rights connected with the ownership of Units. No officer of the Collective Trust or officer or director of State Street owns, beneficially or of record, any Units of beneficial interest in the Collective Trust. As of December 31, 2009, no person or entity vested with investment responsibility for the assets contributed to the Program owned more than 5% of the Units of beneficial interest in the Collective Trust or in any Fund offered thereunder, except that one Participant owned 8.95% of the outstanding Units of the Real Asset Return Fund; one Participant owned 5.61% of the outstanding Units of the Lifetime Income Retirement Date Fund; one Participant owned 5.65% of the outstanding Units of the 2010 Retirement Date Fund; one Participant owned 5.04% of the outstanding Units of the Conservative Risk Fund; one Participant owned 5.66% of the outstanding Units of the Moderate Risk Fund; and two Participants owned 7.21% and 6.07% respectively, of the outstanding Units of the Aggressive Risk Fund.
Units in the Funds are not redeemable securities within the meaning of the Investment Company Act because the holder does not have an entitlement to receive approximately the holders proportionate share of the Collective Trusts current net assets or the cash equivalent thereof (or the current net assets or cash equivalent thereof of any Fund) upon presentation of the Units to the Collective Trust. However, each Unit entitles its holder to exercise investment rights that are substantially similar to the rights of holders of redeemable securities issued by a mutual fund. Units in each Fund may be liquidated on each Business Day (subject to applicable restrictions under the terms of the Program) for cash equal to the per Unit net asset value of the Fund. In addition, transfers may be made among the Funds based on the relevant per Unit net asset values.
References in this Report to Business Day mean any day that the New York Stock Exchange is open for trading.
For purposes of the following descriptions of the Funds, and the description of the Balanced Fund, investments by a Fund directly or indirectly in collective investment funds maintained by State Street Bank, and investments by the Balanced Fund made in the Bond Core Plus Fund and the Large Cap Equity Fund, are generally treated as investments in the underlying securities held by those funds.
Assets contributed or held under the Program are eligible for investment in the following five Managed Funds, each of which is a predominantly actively managed collective investment fund designed to achieve a specific investment objective. Each of the Stable Asset Return Fund, the Bond Core Plus Fund and the International All Cap Equity Fund was established in September 1995, although prior to July 2, 2009, the Bond Core Plus Fund was named the Intermediate Bond Fund and the International All Cap Equity Fund was named the International Equity Fund. The Collective Trust established the other two Managed Fundsthe Large Cap Equity Fund and the Small-Mid Cap Equity Fundas investment options effective as of on or about July 2, 2009.
Investment Objective. The investment objective of the Stable Asset Return Fund is to provide current income consistent with the preservation of principal and liquidity. There can be no assurance that the Stable Asset Return Fund will achieve its investment objective.
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Strategy. The Stable Asset Return Fund does not make any direct investments, but invests all of its assets indirectly through the Stable Asset Fund Trust, which we refer to as SAFT, a collective investment fund maintained by State Street Bank. SAFT in turn invests in investment contracts, which we refer to as Traditional Investment Contracts, so-called Synthetic GICs with associated underlying assets, and high-quality fixed-income instruments, including by investing a portion of its assets in the SSgA Short Term Investment Fund, which we refer to as the Short-Term Fund or STIF, a collective investment fund maintained by State Street Bank. The Stable Asset Return Fund is the only investor in SAFT, while retirement plans other than those adopted under the Program also invest in the Short-Term Fund.
The Short-Term Fund invests in high-quality short-term instruments, which we refer to as Short-Term Investment Products, including obligations of the United States government and its agencies and instrumentalities, which we refer to as U.S. Government Obligations, and notes, bonds and similar debt instruments of corporations, commercial paper, certificates of deposit and time deposits, bankers acceptances, supranational and sovereign debt obligations (including obligations of foreign government sub-divisions), asset-backed securities, master notes, promissory notes, funding agreements, variable and indexed interest notes and repurchase agreements. SAFT may invest in Short-Term Investment Products so long as the average weighted days to maturity of all such investments does not exceed 120 days.
As discussed above, SAFT invests in Traditional Investment Contracts issued by insurance companies, banks and financial institutions. Traditional Investment Contracts are investment contracts pursuant to which the issuer agrees to pay stated interest over its term and repay principal at the end of its term. All such Traditional Investment Contracts are benefit responsive, meaning they are responsive to qualifying withdrawal, transfer and benefit payment requests, which we refer to as Benefit Responsive Withdrawals, at book value and will satisfy any other conditions as may be required so that each such contract can be accounted for and valued at book value under GAAP. SAFT also invests in Synthetic GICs issued by banks, insurance companies or other financial institutions. A Synthetic GIC is an arrangement comprised of (i) an investment in one or more underlying securities or collective investment funds and (ii) a separate contract, which we refer to as a Benefit Responsive Contract, issued for a fee, typically asset-based, by a bank, insurance company or other financial institution that allows the Fund to account for the assets of SAFT subject to such Benefit Responsive Contracts at book value and permits such assets to be credited with interest at a crediting rate agreed to with the issuer of the Benefit Responsive Contract (which rate is adjusted periodically, but not below zero, to reflect the performance of the underlying securities of the Synthetic GIC) for purposes of permitting the contract to be benefit responsive. The underlying securities of Synthetic GIC arrangements generally consist of high quality, fixed-income debt instruments held directly or indirectly through collective investment funds.
Benefit Responsive Contracts generally specify that a cash buffer be maintained to fund participant withdrawal, transfer and benefit payment requests prior to liquidating any less liquid and/or longer dated fixed-income investments that might need to be sold at other than their contract values in order to satisfy Benefit Responsive Withdrawals. As a general rule, the Short-Term Fund provides the necessary cash buffer for SAFT, although SAFT may also invest cash in other State Street Bank short-term investment funds and directly into high quality short-term debt instruments. The Benefit Responsive Contracts do not guarantee the performance of the underlying securities or collective investment funds in which SAFT invests and do not protect against issuer defaults with respect to securities held by SAFT directly or indirectly through collective investment funds. Instead, the Benefit Responsive Contracts are designed to reimburse SAFT, to the extent necessary and subject to various limitations and conditions, if SAFT has insufficient assets to pay qualifying Benefit Responsive Withdrawals from the Stable Asset Return Fund, such as might result from losses on the sale of securities that are not offset, over time, by a reduced crediting rate or by gains on the sale of other securities. Traditional Investment Contracts also include comparable benefit responsive provisions. As a general matter, certain withdrawal, transfer and benefit payment requests, including withdrawals that are directly invested in competing funds by the withdrawing participant, as such term is defined in the Benefit
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Responsive Contract or Traditional Investment Contract, are not protected under the Benefit Responsive Contract applicable to a Synthetic GIC arrangement or under the terms of a Traditional Investment Contract. The Collective Trust does not offer such competing funds.
The average weighted maturity of investments of the Stable Asset Return Fund cannot exceed 2.25 years. As of December 31, 2009, the Stable Asset Return Funds assets as invested through SAFT were approximately 34% invested in Short-Term Investment Products, 4% invested in Traditional Investment Contracts and 62% invested in fixed-income securities held directly or indirectly through collective investment funds as part of Synthetic GIC arrangements. The 36% invested in Short-Term Investment Products at December 31, 2009 represents a significant increase from the 22% invested in Short-Term Investment Products at December 31, 2008. This increase resulted in large part from (i) the repayment of most of the Traditional Investment Contracts by the issuers of such contracts and (ii) the freeze imposed by the existing Benefit Responsive Providers on the maximum level of wrap coverage under the Benefit Responsive Contracts as discussed below (which freeze precluded the investment of additional cash into investments subject to the Benefit Responsive Contracts). This increase in Short-Term Investment Products can be expected to reduce the income earned by the Stable Asset Return Fund and the overall crediting rate of the Stable Asset Return Fund.
As of December 31, 2009, the duration of the Stable Asset Return Fund as derived from its investment in SAFT was 1.88 years, which is up from 1.66 years as of December 31, 2008. The portfolio in which the Stable Asset Return Fund invests is structured to provide cash flow to assist liquidity management and to mitigate interest rate volatility while seeking to maximize rate of return, subject to the overall objective of the preservation of principal. The overall objective for the preservation of principal is likely to result in lower current returns being experienced by the Stable Asset Return Fund than other fixed-income investment funds that assume greater investment and credit risk and that hold fixed-income investments with a relatively longer average weighted maturity and duration. It is also likely to result in the Stable Asset Return Fund receiving a lower crediting rate under the Benefit Responsive Contracts than other stable value funds that have longer weighted average maturity and duration or assume greater credit and investment risk.
Investment Guidelines and Restrictions. U.S. Government Obligations. The Fund may invest in a variety of U.S. Government Obligations, including bills and notes issued by the U.S. Department of the Treasury and securities issued by agencies of the U.S. government, such as the Farmers Home Administration, the Export-Import Bank of the United States, the Small Business Administration, the Government National Mortgage Association, the General Services Administration and the Maritime Administration.
Repurchase Agreements. The Stable Asset Return Fund may enter into repurchase agreements with a variety of banks and broker-dealers. In a repurchase agreement transaction, the Fund acquires securities (usually U.S. Government Obligations) for cash and obtains a simultaneous commitment from the seller to repurchase the securities at an agreed upon price and date. The resale price is in excess of the acquisition price and reflects an agreed upon market rate of interest unrelated to the stated rate of interest on the purchased security. The difference between the sale and the repurchase price is, in effect, interest for the period of the agreement. In such transactions, the securities purchased by the Stable Asset Return Fund will, at the time of purchase, have a total value at least equal to the amount of the repurchase price and will be held by State Street Bank until repurchased.
Instruments Issued by Foreign Entities. The Stable Asset Return Fund may invest in U.S. dollar-denominated instruments issued by foreign banks and foreign branches of U.S. banks. See Stable Asset Return FundRisk Factors below. The Stable Asset Return Fund may also invest in U.S. dollar-denominated instruments issued by foreign governments, their political subdivisions, governmental authorities, agencies and instrumentalities and supranational organizations. A supranational organization is an entity designated or supported by the national government of one or more countries
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to promote economic reconstruction or development. Examples of supranational organizations include, among others, the European Investment Bank, the International Bank for Reconstruction and Development (World Bank) and the Nordic Investment Bank.
When-Issued Securities. The Stable Asset Return Fund may commit to purchasing securities on a when-issued basis, such that payment for and delivery of a security will occur after the date that the Fund commits to purchase the security. The payment obligation and the interest rate on the security are each fixed at the time of the purchase commitment. Prior to payment and delivery, however, the Stable Asset Return Fund will not receive interest on the security, and will be subject to the risk of a loss if the value of the when-issued security is less than the purchase price at the time of delivery.
Asset-Backed Securities. The Stable Asset Return Fund is permitted to invest in asset-backed securities (including collateralized mortgage obligations, which we refer to as CMOs, and other derivative mortgage-backed securities), subject to the rating and quality requirements specified for the Fund. Asset-backed securities are issued by trusts and special purpose entities that securitize various types of assets, such as automobile and credit card receivables.
Credit Quality. Except with respect to U.S. Government Obligations, the Stable Asset Return Fund may invest in a Short-Term Investment Product only if at the time of purchase, the instrument is (i) rated in one of the two highest rating categories applicable to corporate bonds (including the subcategories such as AA+ and AA- within such rating categories) by at least two nationally recognized statistical rating organizations, at least one of which must be Standard & Poors Corp., which we refer to as S&P, or Moodys Investors Service, Inc., which we refer to as Moodys, (ii) rated in the highest rating category applicable to commercial paper by at least two nationally recognized statistical rating organizations, at least one of which must be S&P or Moodys, or (iii) if unrated, issued or guaranteed by an issuer that has other comparable outstanding instruments that are so rated or is itself rated in one of the two highest rating categories (including the subcategories such as AA+ and AA- within such rating categories) by at least two nationally recognized statistical rating organizations, at least one of which must be S&P or Moodys. For purposes of this restriction, an investment in a repurchase agreement will be considered to be an investment in the securities that are the subject of the repurchase agreement.
The Stable Asset Return Fund may not invest in any Traditional Investment Contract unless, at the time of purchase, the Traditional Investment Contract or the issuer of the Traditional Investment Contract is rated in one of the two highest rating categories (including the sub-categories within such categories) by at least two nationally recognized statistical rating organizations, at least one of which must be S&P or Moodys. With respect to Synthetic GIC arrangements, however, the credit quality is dependent upon the credit quality of the underlying securities, each of which must meet the same credit quality standards as described above at the time of purchase. Notwithstanding the foregoing, the Stable Asset Return Fund will not enter into a Benefit Responsive Contract with any Benefit Responsive Provider unless, at that time, such Benefit Responsive Provider is rated in one or more of the four highest rating categories (including the subcategories within such rating categories) by at least two nationally recognized statistical rating organizations, at least one of which must be S&P or Moodys.
Diversification. Except for Traditional Investment Contracts and U.S. Government Obligations, the Fund may not invest more than 5% of its assets in securities of a single issuer, determined at the time of purchase. For purposes of this 5% limitation, investments in collective investment funds maintained by State Street Bank are considered to be investments in the underlying securities held by such collective investment funds, and investments in repurchase agreements are considered to be investments in the securities that are the subject of such repurchase agreements. Other than Traditional Investment Contracts, the Fund may not invest more than 10% of its net assets in illiquid securities, including repurchase agreements with maturities of greater than seven days or portfolio securities that are not readily marketable or redeemable, determined at the time of purchase. The proportion of the assets of
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the Fund invested in Traditional Investment Contracts of any one insurance company, bank or financial institution may generally not be greater than 15% of the aggregate value of Traditional Investment Contracts included in the Funds portfolio, and in no event greater than 20%, in each case determined at the time of purchase. These requirements do not apply to the issuers of the Benefit Responsive Contracts in connection with Synthetic GIC arrangements.
For temporary defensive purposes or by reason of the unavailability of sufficient Benefit Responsive Providers, the Fund may invest without limitation in U.S. Government Obligations, short-term commercial paper and other short-term instruments. The Fund would invoke this right only in extraordinary circumstances, such as war, the closing of equity markets, an extreme financial calamity, or the threat of any such event. If the Fund invokes this right, the Fund may be less likely to achieve its investment objective. To the extent the Fund is invested in U.S. Government Obligations, short-term commercial paper and other short-term instruments, the Fund is also subject to the risks associated with such investments, as more fully described under Stable Asset Return FundRisk Factors.
Risk Factors. U.S. Government Obligations. Not all U.S. Government Obligations are backed by the full faith and credit of the United States. For example, securities issued by the Federal Farm Credit Bank or by the Federal National Mortgage Association are supported by the agencys right to borrow money from the U.S. Department of the Treasury under certain circumstances, and securities issued by the Federal Home Loan Banks are supported only by the credit of the issuing agency. There is no guarantee that the U.S. government will support these securities, and, therefore, they involve more risk than U.S. Government Obligations that are supported by the full faith and credit of the United States.
Foreign Investments. Foreign banks may not be required to maintain the same financial reserves or capital that are required of U.S. banks. Restrictions on loans to single borrowers, prohibitions on certain self-dealing transactions and other regulations designed to protect the safety and solvency of U.S. banks may not be applicable to foreign banks. Furthermore, investments in foreign banks may involve additional risks similar to those associated with investments in foreign securities described in the following paragraph. Foreign branches of U.S. banks generally are subject to U.S. banking laws, but obligations issued by a branch, which sometimes are payable only by the branch, may be subject to country risks relating to actions by foreign governments that may restrict or even shut down the operations of some or all the countrys banks.
Investments in foreign securities may involve risks in addition to the risks associated with domestic securities generally. These include risks relating to political or economic conditions in foreign countries, potentially less stringent investor protection, disclosure standards and settlement procedures of foreign markets, potentially less liquidity in foreign markets, potential applicability of withholding or other taxes imposed by these countries, and currency exchange fluctuations. These factors could make foreign investments more volatile.
When-Issued Securities. The payment obligation and the interest rate on a when-issued security are each fixed at the time of the purchase commitment. Prior to payment and delivery, however, the Stable Asset Return Fund will not receive interest on the security, and will be subject to the risk of a loss if the value of the when-issued security is less than the purchase price at the time of delivery.
Asset-Backed Securities. Asset-backed securities may involve credit risks resulting primarily from the fact that asset-backed securities are issued by trusts or special purpose entities with no other assets and do not usually have the benefit of a complete security interest in the securitized assets. For example, credit card receivables generally are unsecured and the debtors are entitled to the protection of a number of state and Federal consumer credit laws, some of which may reduce the ability to obtain full payment. CMO residuals and other mortgage- related securities may be structured in classes with rights to receive varying proportions of principal and interest. The yield to maturity on an interest only class is
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extremely sensitive to the rate at which principal payments (including prepayments) are made on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the Funds yield to maturity from these securities.
Risk of Reliance on Industry Research. The Fund is dependent to a significant extent on information and data obtained from a wide variety of sources, such as financial publications that monitor markets and investments, industry research materials, ratings issued by one or more nationally recognized credit rating agencies to assess the credit quality of securities in which it proposes to invest, and other materials prepared by others. There may be limitations on the quality of such information, data, publications, research and ratings, and the Funds Investment Advisor generally does not independently verify any of the same. For instance, the credit ratings of certain asset-backed securities such as sub-prime CMOs and securities backed by bond insurance that previously received relatively high credit ratings were, in connection with the credit markets turbulence that began in 2007, subsequently significantly downgraded as the investment community came to realize that there were previously unanticipated risks associated with such securities. There is a risk of loss associated with securities even if initially perceived by the investment community as of relatively low risk, such as in the case of collateralized debt obligations and other structured-finance investments that are often highly complex.
Credit Risk. Except with respect to U.S. Government Obligations backed by the full faith and credit of the United States, each Short-Term Investment Product purchased by the Fund will be subject to the risks of default by the issuer and the non-payment of interest or principal that are usually associated with unsecured borrowings.
Traditional Investment Contracts. Although the Stable Asset Return Fund may not invest in any Traditional Investment Contract unless certain rating standards are satisfied at the time that the Traditional Investment Contract is issued, the financial condition of an issuer may change prior to maturity. SAFT will generally be unable to dispose of a Traditional Investment Contract prior to its maturity in the event of the deterioration of the financial condition of the issuer. In addition, to the extent that a higher percentage of assets of the Stable Asset Return Fund are committed to Traditional Investment Contracts of a single issuer, the Fund will be subject to a greater risk that the deterioration of the financial condition or a default by that issuer will have a material adverse effect on the Fund.
Benefit Responsive Contracts. In order for the Stable Asset Return Fund, as currently configured, to use book value accounting and not utilize fair market valuations of its assets, it must be able to secure sufficient Benefit Responsive Contracts from insurance companies, banks or other financial institutions, which we refer to as Benefit Responsive Providers, in connection with Synthetic GIC arrangements. Under the terms of the Benefit Responsive Contracts, a material deterioration in the credit quality of securities underlying a Synthetic GIC arrangement and/or a specified credit downgrade of such securities may result in such securities no longer being covered by the Benefit Responsive Contracts, and thus require that such securities be reported at market value rather than book value. In addition, certain of the traditional Benefit Responsive Providers recently have stopped issuing, or expressed an intention to stop issuing, Benefit Responsive Contracts. If there are insufficient Benefit Responsive Providers or the cost of obtaining Benefit Responsive Contracts increases sufficiently, then the Stable Asset Return Fund may, among other actions, limit additional contributions to the Fund, reduce the size of the Fund or liquidate the Fund, change the mix of investments undertaken by the Fund, such as by increasing the percentage of Traditional Investment Contracts, convert the Fund to a fixed-income fund that fluctuates in value without any benefit responsive protection on withdrawals, or restructure the Fund as a short-term investment fund similar to a Rule 2a-7 short-term investment fund registered under the Investment Company Act of 1940 that utilizes amortized cost pricing (although any such restructured money market fund would not be subject to the provisions of the Investment Company Act of 1940).
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Effective February 9, 2009, Bank of America, N.A., which we refer to as Bank of America, one of the four Benefit Responsive Providers to SAFT, excluded from coverage within the Synthetic GIC arrangement any net increases in the amount subject to the Synthetic GIC arrangement (other than increases in the value of underlying securities and any interest earned thereon). This action by Bank of America has resulted in the other current Benefit Responsive Providers not covering their respective shares (25% each) of any such net increases.
UBS AG, one of the other Benefit Responsive Providers, had previously agreed with State Street Bank that UBS AG would not terminate its Benefit Responsive Contract with SAFT until on or after October 26, 2009, but UBS AG has nevertheless advised State Street Bank that UBS AG would be exiting the business of issuing Benefit Responsive Contracts to stable value funds. State Street Bank has been engaging in discussions with UBS AG over the last 18 months to postpone any termination of the Benefit Responsive Contract and has also been seeking to identify a qualified replacement Benefit Responsive Provider over this period. Because of the withdrawal of several large Benefit Responsive Providers from the Synthetic GIC market and the dearth of qualified financial institutions with the willingness to act as a Benefit Responsive Provider, State Street Bank has not been able to secure a replacement Benefit Responsive Provider for SAFT, notwithstanding the high level of liquidity held by SAFT and a fair market value to book value ratio of the instruments subject to the Benefit Responsive Contracts in excess of 1.00. No assurances can be given that one or more replacement Benefit Responsive Providers can be identified to replace UBS AG or any other Benefit Responsive Provider that could, in the future, elect to terminate its Benefit Responsive Contract.
State Street Bank has advised State Street that UBS AG will terminate its Benefit Responsive Contract with SAFT in the near future, although no such termination has yet occurred. State Street Bank has engaged in negotiations with UBS AG to conclude a supplemental agreement to effect a controlled liquidation of the SAFT investments that relate to such Benefit Responsive Contract over a period not to exceed two years upon terms that are beneficial to SAFT, in lieu of such termination. Upon receipt of a notice of termination from UBS AG, which is not otherwise withdrawn, SAFT intends to exercise its rights under the existing Benefit Responsive Contract with UBS AG to provide for an orderly liquidation of the investments related to such Benefit Responsive Contract over an approximate two-year period in accordance with the terms of the existing Benefit Responsive Contract. Throughout any such liquidation process, SAFT will continue to seek a replacement Benefit Responsive Provider, although no assurances can be given that such effort will be successful in light of the dearth of qualified financial institutions willing to act as a Benefit Responsive Provider. If a replacement Benefit Responsive Provider cannot be secured for SAFT in connection with any termination of a Benefit Responsive Contract, SAFT will ultimately be required to sell the investments allocable to such terminated Benefit Responsive Contract and reinvest net sale proceeds in Short-Term Investment Products, resulting in lower income for SAFT and the Stable Asset Return Fund and an overall lower crediting rate for SAFT and the Stable Asset Return Fund in the current interest rate environment.
The Stable Asset Return Fund and SAFT have evaluated various options to address the impact of the loss of one or more Benefit Responsive Providers and have sought to preserve SAFTs ability to continue to utilize book value accounting for its assets, including the possibility of utilizing a higher percentage of Traditional Investment Contracts to provide the requisite level of benefit responsive protection on withdrawals, increasing the level of the Short-Term Investment Products in relation to the total amount of the Synthetic GIC arrangement, obtaining one or more additional Benefit Responsive Providers to provide additional and/or substitute Benefit Responsive Contracts, and other similar measures to mitigate the impact of the loss of any Benefit Responsive Contracts. On an interim basis, SAFT has increased its allocations to Short-Term Investment Products because of the uncertainty in the market for Benefit Responsive Contracts, and such allocations to Short-Term Investment Products are likely to increase if one or more Benefit Responsive Contracts are terminated, which is likely to be the case for the Benefit Responsive Contract of UBS AG. No assurances can be given that the Stable Asset Return
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Fund and SAFT will be successful in implementing any of the potential options described above, including the generally preferred option of obtaining additional or substitute Benefit Responsive Contracts, because of the current uncertainty with respect to Benefit Responsive Providers and the absence of any demonstrated capacity by new and existing Benefit Responsive Providers to issue Benefit Responsive Contracts.
Liquidity. The Stable Asset Return Fund utilizes a tiered liquidity structure to satisfy withdrawal and transfer requests. In the unlikely event that the amount of liquid assets held by the Fund is insufficient to satisfy all withdrawal and transfer requests immediately, the Fund may limit or suspend withdrawals and transfers. For more information on these restrictions, including the priority to be given to withdrawals and transfers in such circumstances, see Transfers Among Investment Options and WithdrawalsFrequent Trading; Restrictions on Transfers.
Valuation of Assets. The methods used to value assets of the Stable Asset Return Fund described below under Stable Asset Return FundRisk FactorsValuation of Units provide certainty in valuation but can result in the overvaluation or undervaluation of a particular instrument or investment contract when compared to its market value, and the longer the maturity of a particular instrument or investment contract, the greater the exposure to the risk of such overvaluation or undervaluation. Also, the yield of the Stable Asset Return Fund will differ from market interest rates, and the yield of the Stable Asset Return Fund will tend to change more slowly than market interest rates. If a holder of Units in the Stable Asset Return Fund were to receive a distribution from, or make a transfer out of, the Stable Asset Return Fund at a time when the market value of the assets of the Stable Asset Return Fund was less than the value used to compute its Unit value, the holder would be overpaid (based on market price) and the market value of the Units in the Fund held by the remaining holders of Units in the Fund would be diluted. Conversely, if a holder were to receive a distribution from, or make a transfer out of, the Stable Asset Return Fund at a time when the market value of the assets of the Stable Asset Return Fund was more than the value used to compute its Unit value, the holder would be underpaid (based on market price) and the value of interests in the Fund of the remaining holders of Units in the Fund would be increased. Along the same lines, if a purchaser of Units in the Stable Asset Return Fund were to acquire such Units at a time when the market value of the assets of the Stable Asset Return Fund was less than (more than) the value used to compute its Unit value, the purchaser would overpay (underpay) (based on market price) and the market value of the Units in the Fund held by the remaining holders of Units in the Fund would be enhanced (diluted). Such differences will occur to the extent market interest rates differ from the interest rates on the instruments and investment contracts held by the Fund. Also, if the financial condition of an issuer of an investment contract (whether traditional or synthetic) were to seriously deteriorate, the contract might no longer qualify for contract (or book) value accounting. State Street Bank monitors the market value of the investment contracts, investment securities subject to Synthetic GIC arrangements and Short-Term Investment Products held by the Fund. If State Street Bank were to determine that the per Unit net asset value of the Fund has deviated from the net asset value determined by using available market quotations or market equivalents (market value) for investment contracts, investment securities subject to Synthetic GIC arrangements and Short-Term Investment Products to a large enough extent that it might result in a material dilution or other unfair result to holders of Units, State Street Bank might adjust the per Unit net asset value of the Fund or take other action that it deems appropriate to eliminate or reduce, to the extent reasonably practicable, the dilution or other unfair result.
Valuation of Units. Unlike the other Funds, assets of the Stable Asset Return Fund are not valued at fair market value. The values of Short-Term Investment Products held by the Fund are determined according to Amortized Cost Pricing. Under Amortized Cost Pricing, when an instrument is acquired by the Fund, it is valued at its cost, and thereafter that value is increased or decreased by amortizing any discount or premium on a constant basis over the instruments remaining maturity. Traditional Investment Contracts and Synthetic GICs held by the Fund are benefit responsive (that is, responsive to
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withdrawal, transfer and benefit payment requests) and, hence, under generally accepted accounting principles applicable to Benefit Responsive Contracts, are valued at their contract values (book values). Any fluctuations in the market value of the assets covered by Benefit Responsive Contracts are not taken into account in determining the Funds Unit value. The Funds Unit value is increased each Business Day by the amount of net income accrued for that day, and such accrued income is reinvested in the Fund. In accordance with accounting rules applicable to the methods used by the Fund to value its assets, no additional assets of defined benefit plans may be contributed or transferred to the Fund. However, any assets of defined benefit plans invested in the Fund prior to January 15, 2006 may remain so invested, including any earnings thereon.
Performance Information. The Stable Asset Return Fund may, from time to time, report its performance in terms of its yield and effective yield. The Funds yield is determined based upon historical earnings and is not intended to indicate future performance. The yield of the Fund refers to the income return for a day multiplied by the number of days in a year to show the one day return on an annualized basis. The effective yield is calculated similarly but, when annualized, the income earned by an investment in the Fund is assumed to be reinvested. The effective yield will be slightly higher than the yield because of the compounding effect of this assumed reinvestment.
Investment Advisor. State Street Bank manages the Stable Asset Return Fund. State Street may, in the future, at its discretion and generally in consultation with Northern Trust, employ other investment advisors to provide investment advice with respect to the Fund or portions thereof. The assets of the Fund are currently invested in units of SAFT, which in turn invests in the assets and collective investment funds described above that are managed by State Street Bank.
Investment Objective. The investment objective of the Bond Core Plus Fund, which until July 6, 2009 was named the Intermediate Bond Fund, is to achieve a total return from current income and capital appreciation by investing primarily in a diversified portfolio of fixed-income securities. There can be no assurance that the Bond Core Plus Fund will achieve its investment objective.
Strategy. The Bond Core Plus Fund seeks to achieve, over an extended period of time, total returns comparable or superior to broad measures of the domestic bond market. The Bond Core Plus Fund invests its assets in fixed-income securities of varying maturities with a portfolio duration generally from three to six years. The level of investments in fixed-income securities will vary, depending upon many factors, including economic conditions, interest rates and other relevant considerations. In selecting securities, economic forecasting, interest rate anticipation, credit and call risk analysis, foreign currency exchange rate forecasting and other security selection techniques will be taken into account.
Duration is a measure of the expected life of a fixed-income security that combines a bonds yield, coupon interest payments, final maturity and call features into one measure. Traditionally, a debt securitys term to maturity has been used as a reference to the sensitivity of the securitys price to changes in interest rates (which is the interest rate risk or volatility of the security). However, term to maturity takes into account only the time until a debt security provides its final payment, without regard to the timing and frequency of the securitys payments prior to maturity. Duration is a measure of the expected life of a fixed-income security based on a present value of all the payments of the security. In general, all other things being equal, the lower the stated or coupon rate of interest of a fixed-income security, the longer the duration of the security; conversely, the higher the stated or coupon rate of interest of a fixed-income security, the shorter the duration of the security.
The portion of the Bond Core Plus Funds assets committed to investment in debt securities with particular characteristics (such as maturity, type and coupon rate) will vary based on the outlook for the
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United States and foreign economies, the financial markets and other factors. The portfolio holdings will be concentrated in areas of the bond market (based on quality, sector, coupon or maturity) that are believed to be relatively undervalued.
Investment Guidelines and Restrictions. The Bond Core Plus Fund will invest primarily in the following types of securities, which may be issued by domestic or foreign entities and denominated in U.S. dollars or foreign currencies (subject to a 20% limit on foreign securities): U.S. Government Obligations; corporate debt securities; corporate commercial paper; mortgage-backed securities; asset-backed securities; variable and floating rate debt securities; bank certificates of deposit, fixed time deposits and bankers acceptances; repurchase agreements; obligations of foreign governments or their subdivisions, agencies and instrumentalities, international agencies or supranational entities; and foreign currency denominated securities. The securities of foreign issuers may be held by the Fund directly or indirectly through American Depositary Receipts or European Depositary Receipts. The Bond Core Plus Fund also invests in convertible securities, preferred stock, common stock acquired through conversions or exchange offers, inflation-indexed bonds issued by both governments and corporations, structured notes, including hybrid or indexed securities, catastrophe bonds, and loan participations, delayed funding loans and revolving credit facilities, reverse repurchase agreements, and debt securities issued by states or local governments and their agencies, authorities and other instrumentalities. The Bond Core Plus Fund may hold different percentages of the assets in these various types of securities. The Fund will seek to maintain a minimum average credit quality rating of AA. At least 90% of the Funds total fixed-income portfolio will consist of bonds rated investment grade by at least one nationally recognized rating agency. No more than 1% of the fixed-income portfolios non-investment grade investments will be securities of a single issuer, and all such non-investment grade investments will have a credit quality rating of at least B (or be determined by the Investment Advisor to be of comparable quality) at the time of purchase.
For the purpose of realizing income, the Bond Core Plus Fund may enter into repurchase agreements, but may not invest more than 15% of its total assets in repurchase agreements maturing more than seven days after purchase. In a repurchase agreement transaction, the Fund acquires securities (usually U.S. Government Obligations) for cash and obtains a simultaneous commitment from the seller to repurchase the securities at an agreed upon price and date. The resale price is in excess of the acquisition price and reflects an agreed upon market rate of interest unrelated to the coupon rate on the purchased security. The difference between the sale and the repurchase price is, in effect, interest for the period of the agreement. In such transactions, the securities purchased by the Fund will, at the time of purchase, have a total value at least equal to the amount of the repurchase price and will be held by State Street until repurchased. State Street monitors the value of the underlying securities to verify that their value, including accrued interest, always equals or exceeds the repurchase price.
The Fund may invest in derivative instruments such as futures, forwards, swaps, options, collateralized mortgage obligations (CMOs) and interest-only (IO) and principal-only (PO) stripped mortgage-backed securities to the extent that they are used in a manner that does not materially increase total portfolio volatility or relate to speculative activities. The Fund may invest up to 40% of its assets in CMOs at any time. Interest-only and principal-only stripped mortgage-backed securities are mortgage-backed bonds that are separated into the interest or principal portion of a pool of mortgage-backed bonds. The Fund may invest up to 5% of the Funds assets in interest-only and principal-only stripped mortgage-backed securities at any time, in addition to the investments in CMOs referred to above.
The Bond Core Plus Fund will limit its foreign investments to securities of issuers based in developed countries (including newly industrialized countries, such as Taiwan, South Korea and Mexico); provided that the Bond Core Plus Fund may invest up to 10% of its total assets in securities of issuers located in countries with emerging economies, as from time to time identified by the World Bank. Currently, these countries are located primarily in the Asia Pacific Region, Eastern Europe, Central and South America and Africa.
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Risk Factors. Interest Rate Risk. The Bond Core Plus Fund, to the extent invested in longer-term fixed-income securities, is subject to the risks associated with investing in such instruments. Fixed-income securities such as bonds are issued to evidence loans that investors make to corporations and governments, either foreign or domestic. Over time, interest rates on debt securities change. If prevailing interest rates fall, the market value of fixed-income securities that trade on a yield basis tend to rise. On the other hand, if prevailing interest rates rise, the market value of fixed-income securities generally will fall. In general, the longer the maturity of a fixed-income security, the higher its yield and greater its price volatility. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. These factors may have an effect on the Unit price of the Fund. A change in the level of interest rates will tend to cause the net asset value per Unit of the Fund to change. If such interest rate changes are sustained over time, the yield of the Fund will fluctuate accordingly.
Credit Risk. Fixed-income securities also are subject to credit risk. When a security is purchased, its anticipated yield is dependent on the timely payment by the borrower of each interest and principal installment. Credit analysis and bond ratings take into account the relative likelihood that such timely payment will result. Bonds with a lower credit rating tend to have higher yields than bonds of similar maturity with a better credit rating. Furthermore, as economic, political and business developments unfold, lower quality bonds, which possess more risk of failure of timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity.
TBA Commitments. The Bond Core Plus Fund may enter into to be announced commitments, which we refer to as TBA commitments, to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price for the security that is subject of a TBA commitment has been established at the time of commitment, the principal amount has not been finalized. However, the amount of the TBA commitment will not fluctuate more than 1.0% from the principal amount. The Fund holds, and maintains until the settlement date, cash or liquid securities in an amount sufficient to meet the purchase price. TBA commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date. Risks may also arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts. During the period prior to settlement, the Fund will not be entitled to accrue interest or receive principal payments. Unsettled TBA commitments are valued at the current market value of the underlying securities. The Fund may dispose of a commitment prior to settlement if the Funds Investment Advisor deems it appropriate to do so. Upon settlement date, the Fund may take delivery of the securities or defer the delivery to the next month. The Bond Core Plus Fund may also purchase or sell securities on a when-issued or delayed delivery basis. For information regarding risks involved in these activities, see Stable Asset Return FundRisk Factors.
Mortgage-Related Securities. Mortgage-related securities include securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property, such as collateralized mortgage obligation residuals or stripped mortgage-backed securities, and may be structured in classes with rights to receive varying proportions of principal and interest. The yield to maturity on an interest-only class is extremely sensitive to the rate at which principal payments (including prepayments) are made on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on an investors yield to maturity from these securities. Early repayment of principal on some mortgage-related securities (arising from prepayments of principal due to the sale of the underlying property, refinancing or foreclosure, net of fees and costs which may be incurred) may expose the Bond Core Plus Fund to a lower rate of return upon reinvestment of principal. Moreover, the Fund is dependent to a significant extent on information and data obtained from a wide variety of sources, such as financial publications that monitor markets and investments, industry research materials, ratings issued by one or more nationally recognized credit rating agencies to assess the credit quality of securities in which it proposes to invest, and other materials prepared by others. There may be limitations on the quality of such information, data, publications, research and ratings, and the Funds Investment Advisor generally does
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not independently verify any of the same. For instance, certain asset-backed securities such as sub-prime CMOs and securities backed by bond insurance that initially received relatively high credit ratings were, in connection with the credit markets turbulence that began in 2007, subsequently significantly downgraded as the investment community came to realize that there were previously unanticipated risks associated with such securities. There is a risk of loss associated with securities even if initially considered by the investment community as of relatively low risk, such as in the case of collateralized debt obligations and other structured-finance investments that often are highly complex.
Short-Term Debt Instruments. The risk factors with respect to investing in various short-term instruments are similar to those applicable to short-term investments held by the Stable Asset Return Fund. See Stable Asset Return FundRisk Factors.
Foreign Investing. Investing in the securities of issuers in any foreign country involves special risks and considerations not typically associated with investing in U.S. companies. These include risks relating to political or economic conditions in foreign countries, potentially less stringent investor protection, disclosure standards and settlement procedures of foreign markets, potentially less liquidity of foreign markets, potential applicability of withholding or other taxes imposed by these countries, and currency exchange fluctuations. These factors could make foreign investments more volatile.
Emerging Markets Investing. Political and economic structures in many emerging market countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of more developed countries. Governments in many emerging market countries participate to a significant degree in the countries economics and securities markets. As a result, the risks of investing in the securities of foreign issuers generally, including the risks of nationalization or expropriation, may be heightened. The small size and inexperience of the securities markets, and a more limited volume of trading in securities, in certain of these countries may also make the Funds investments in securities of issuers located in such countries illiquid and more volatile than investments in more developed countries, and the Fund may be required to establish special custody or other arrangements before making certain investments in these countries. There may be little financial or accounting information available with respect to issuers located in certain of such countries, and it may be difficult as a result to assess the value or prospects of an investment in such issuers. Emerging markets often have provided significantly higher or lower rates of return than developed markets, and significantly greater risks, to investors.
Risks of Securities Lending Undertaken by the Bond Core Plus Fund. The Bond Core Plus Fund is subject to the risks associated with the lending of securities, including the risks associated with defaults by the borrowers of such securities and the credit, liquidity and other risks arising out of the investment of cash collateral received from the borrowers. See Item 1A, Risk FactorsRisks Related to Securities Lending.
Risks of Investment in Derivative Instruments, Including Swaps Agreements. The Bond Core Plus Fund is subject to the risks associated with use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments. A swap transaction is an individually negotiated, non-standardized agreement between two parties to exchange cash flows (and sometimes principal amounts) measured by different interest rates, exchange rates, indices or prices, with payments generally calculated by reference to a principal, which we refer to as notional, amount or quantity. Swap contracts are not traded on exchanges; rather, banks and dealers act as principals in these markets. Because swap agreements are two-party contracts and may have terms of greater than seven days, such agreements may be considered to be illiquid. Moreover, an investor bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The swaps market is a relatively new market and is largely unregulated by the United States or any foreign governmental authority, and it is possible that developments in the swaps market, including potential government regulation, could adversely affect the Funds ability to terminate existing swap agreements or to realize amounts to be received under these agreements.
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Portfolio Turnover. As the level of portfolio turnover increases, transaction expenses incurred by the Bond Core Plus Fund increase, which may adversely affect the Funds performance. Portfolio turnover depends on the types and proportions of the Funds assets and may change frequently in accordance with market conditions. Portfolio turnover was 1,422% for the twelve months ended December 31, 2009 and 806% for the twelve months ended December 31, 2008. The Funds portfolio turnover includes trades such as TBA rolls and buys/sells of commercial paper. The Fund believes that it is important to have the ability to seek higher returns using a diverse array of strategies and instruments, particularly in the highly sophisticated global market. Some of these strategies and instruments, particularly mortgages and derivatives, by their very nature necessitate a relatively high number of trades and trade entries.
Performance Information. The Bond Core Plus Funds total return is based on the overall dollar or percentage change in value of a hypothetical investment in the Fund. The total return produced by the Fund will consist of interest and dividends from underlying securities, as well as capital changes reflected in unrealized increases or decreases in value of portfolio securities or realized from the purchase and sale of securities and futures and options. The Funds yield is calculated by dividing its net investment income per Unit earned during the specified period by its net asset value per Unit on the last day of such period and annualizing the result.
Investment Advisor. State Street has retained Pacific Investment Management Company LLC, which we refer to as PIMCO, to serve as Investment Advisor to provide investment advice and arrange for the execution of purchases and sales of securities for the Bond Core Plus Fund. State Street may, in the future, at its discretion and generally in consultation with Northern Trust, employ other investment advisors to provide investment advice with respect to the Fund or portions thereof.
PIMCO is an investment management company founded in 1971. PIMCO is registered as an investment advisor with the Securities and Exchange Commission and as a commodity trading advisor with the Commodity Futures Trading Commission. Its principal place of business is 840 Newport Center Drive, Suite 100, Newport Beach, California 92660. PIMCO, a Delaware limited liability company, is a majority-owned subsidiary of Allianz Global Investors L.P., which we refer to as AllianzGI LP. Allianz AG, which we refer to as Allianz, is the indirect majority owner of AllianzGI LP. Allianz is a European-based, multinational insurance and financial services holding company. Pacific Life Insurance Company holds an indirect minority interest in AllianzGI LP. PIMCO had approximately $1.0 trillion in assets under management as of December 31, 2009.
Investment Objective. The investment objective of the Large Cap Equity Fund is to achieve long-term growth of capital. Any income received is incidental to this objective. There can be no assurance that the Large Cap Equity Fund will achieve its investment objective.
Strategy. The Large Cap Equity Fund seeks to outperform, over extended periods of time, broad measures of the U.S. stock market. The Fund invests primarily in common stocks and other equity-type securities of larger-capitalization U.S. companies with market capitalizations, at the time of purchase, of greater than $1 billion. The Fund uses a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. Each Investment Advisor acts independently from the others and uses its own distinct investment style in selecting securities. Each Investment Advisor must operate within the constraints of the Funds investment objective, strategies and restrictions and subject to the general supervision of State Street.
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When determining the allocations and reallocations to the Investment Advisors, State Street in consultation with Northern Trust will consider a variety of factors, including but not limited to the Investment Advisors style, historical performance and characteristics of allocated assets (including capitalization, growth and profitability measures, valuation metrics, economic sector exposures, and earnings and volatility statistics).
A portion of the Large Cap Equity Fund (approximately 15% as of December 31, 2009) is invested to replicate the Russell 1000 Index, which is comprised of the approximately 1,000 largest companies in the Russell 3000 Index. The remainder of the Fund is actively managed. The actively managed portfolio of the Large Cap Equity Fund seeks to achieve growth of capital through investing primarily in common stocks of larger capitalization companies believed to be attractively priced relative to their future earnings power. Frank Russell & Company, which maintains the Russell 1000® Index, does not sponsor the Large Cap Equity Fund, and is not affiliated in any way with the Large Cap Equity Fund or with State Street.
Investment Guidelines and Restrictions. Although the assets of the Large Cap Equity Fund are generally invested in common stocks and other equity-type securities, including convertible securities, the Fund may invest in non-equity securities, including investment grade bonds and debentures and high quality short-term instruments. The Fund will not invest more than 20% of its assets in non-equity securities or in companies that do not have large capitalizations, except for temporary defensive purposes.
The Large Cap Equity Fund may invest in securities of U.S. companies or foreign companies whose stocks are traded on U.S. stock exchanges or over-the-counter markets. Many foreign securities are available through dollar-denominated American Depositary Receipts, which we refer to as ADRs, which are issued by domestic banks and represent interests in foreign securities. ADRs are traded on U.S. stock exchanges or over-the-counter markets. The Fund may invest in foreign securities directly or through ADRs. The Fund may not make an investment if that investment would cause more than 20% of the portion of the Funds assets for which a particular Investment Advisors advice is obtained to be invested in foreign securities, including ADRs, determined at the time of purchase.
For temporary defensive purposes, the Fund may invest without limitation in U.S. Government Obligations, short-term commercial paper and other short-term instruments. The Fund would invoke this right only in extraordinary circumstances, such as war, the closing of equity markets, an extreme financial calamity, or the threat of any such event. If the Fund invokes this right, the Fund may be less likely to achieve its investment objective. To the extent the Fund is invested in U.S. Government Obligations, short-term commercial paper and other short-term instruments, the Fund is also subject to the risks associated with such investments, as more fully described under Stable Asset Return FundRisk Factors.
Risk Factors. Equity Markets Risk. By investing in the U.S. equity markets, the Large Cap Equity Fund is subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. The Unit price of the Large Cap Equity Fund could be volatile, and holders of Units in the Fund should be able to tolerate sudden, sometimes substantial, declines in the value of their investment. No assurance can be given that investors will be protected from the risks inherent in equity investing. The Fund is intended to be a long-term investment vehicle and is not designed to provide a means to speculate on short-term U.S. stock market movements.
Risks of Foreign Investing. Investments by the Large Cap Equity Fund in foreign securities may involve special risks in addition to the risks associated with domestic securities generally. These include risks
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relating to political or economic conditions in foreign countries, potentially less stringent investor protection, disclosure standards and settlement procedures of foreign markets, potentially less liquidity of foreign markets, potential applicability of withholding or other taxes imposed by these countries, and currency exchange fluctuations. These factors could make foreign investments more volatile.
Risks of Securities Lending Undertaken by the Large Cap Equity Fund. The Large Cap Equity Fund is subject to the risks associated with the lending of securities, including the risks associated with defaults by the borrowers of such securities and the credit, liquidity and other risks arising out of the investment of cash collateral received from the borrowers. See Item 1A, Risk FactorsRisks Related to Securities Lending.
Risks of Investment in Derivative Instruments. The Large Cap Equity Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
Portfolio Turnover. As the level of portfolio turnover increases, transaction expenses incurred by the Fund, such as brokerage commissions, increase, which may adversely affect the Funds performance. The portfolio turnover rate for the Fund may be higher than the rates for comparable funds with a single portfolio manager. Each of the Funds Investment Advisors makes recommendations to buy or sell securities independently from other Investment Advisors. Thus, one Investment Advisor for the Fund may be selling a security when another Investment Advisor for the Fund is purchasing that same security. Additionally, when the Fund replaces an Investment Advisor, the new Investment Advisor may restructure the investment portfolio, which may increase the Funds portfolio turnover rate. The Investment Advisors will not consider portfolio turnover a limiting factor in making investment decisions for the Fund. A high portfolio turnover rate (100% of more) is likely to involve higher brokerage commissions and other transaction costs, which could reduce the Funds return. Portfolio turnover of the Fund was 68% for the period from its inception to December 31, 2009. With respect to the indexed portion of the Fund, this turnover reflects purchases and sales by the Fund of shares of SSgA Russell Large Cap® Index Non-Lending Series Fund, the SSgA Russell Large Cap® Index Securities Lending Series Fund and the SSgA 1000® Index Non-Lending Fund, the collective investment funds through which the indexed portion of the Fund invests, rather than the turnover of the underlying portfolios of the collective investment funds. The portfolio turnover for the SSgA Russell Large Cap® Index Non-Lending Series Fund and the SSgA Russell Large Cap® Index Securities Lending Series Fund each was 51% for their fiscal years ended December 31, 2009. The portfolio turnover for the SSgA 1000® Index Non-Lending Fund was 54% for the twelve months ended December 31, 2009 and 25% for the twelve months ended December 31, 2008.
Investment Advisors. The Fund utilizes a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. Each Investment Advisor acts independently from the others and uses its own distinct style in selecting securities. Each Investment Advisor has investment discretion and makes all determinations with respect to the investment of assets of the Fund allocated to it, subject to the Funds objectives, guidelines and restrictions and the general supervision of State Street.
State Street, subject to consultation with Northern Trust, determines the percentage of the assets of the Fund to be allocated to each Investment Advisor. Income and gains attributable to the assets allocated to each Investment Advisor remain allocated to that portion unless and until reallocated by State Street, and any differences in relative investment performance of the Investment Advisors of the Fund can change the percentage of total assets of the Fund comprising each portion. State Street allocates contributions and transfers to, and withdrawals and transfers from, the Large Cap Equity Fund between the Investment Advisors of the Fund in a manner intended to achieve the targeted allocations of the Funds assets.
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State Street Bank manages the indexed portion of the Funds assets through the Funds investment in the SSgA Russell Large Cap® Index Securities Lending Series Fund (which engages in securities lending) and the SSgA Russell Large Cap® Index Non-Lending Series Fund (which does not engage in securities lending), each a collective investment fund maintained by State Street Bank and having the same investment objective, as well as the SSgA Russell 1000® Index Non-Lending Fund. Over time, the portion of the Large Cap Equity Fund invested in Russell Large Cap® Index Securities Lending Series Fund is being transitioned to the SSgA Russell Large Cap® Index Non-Lending Series Fund. Additionally, over time, some assets from the indexed portion may be reallocated to the actively managed portion of the Large Cap Equity Fund, subject to any limitations on the withdrawal from the indexed portion that may be in effect from time to time. State Street may, in the future at its discretion and subject to consultation with ABA Retirement Funds, employ an investment advisor to provide investment advice with respect to the indexed portion of the Funds assets. State Street determines the percentage of the assets of the Fund to be allocated to the actively managed and indexed portions of the Fund. Northern Trust has not made, and does not have authority to make, recommendations regarding management of the indexed portion of the Fund.
Since July 6, 2009, State Street has retained Jennison Associates LLC and C.S. McKee, L.P. to serve as Investment Advisors to provide investment advice and arrange for the execution of purchases and sales of securities for the actively managed portion of the Large Cap Equity Fund. Effective on or about January 19, 2010, the line-up of Investment Advisors to State Street with respect to the Large Cap Equity Fund was modified by the addition of two new Investment Advisors, Delaware Investment Advisers and Columbus Circle Investors. As of January 19, 2010, approximately 22%, 19%, 16%, 24% and 19% of the assets of the Large Cap Equity Fund were allocated to, respectively, Delaware Investment Advisers, Columbus Circle Investors, Jennison Associates LLC, C.S. McKee, L.P. and the indexed portion of the Fund.
Delaware Investment Advisers, which we refer to as Delaware Investments. Delaware Investments is located at 2005 Market Street, Philadelphia, Pennsylvania 19103 and was founded in 1929. Delaware Investments is a series of Delaware Management Business Trust, which is an indirect subsidiary of Macquarie Group Limited, an Australian bank holding company. Other entities in the corporate chain of control of which Delaware Investments is a direct or indirect subsidiary include Delaware Management Company, Inc., Delaware Investments U.S., Inc., DMH Corp., Delaware Management Holdings, Inc. and Macquarie Bank Limited. As of December 31, 2009, Delaware Investments had assets under management of approximately $131.5 billion.
Columbus Circle Investors, which we refer to as CCI. CCI is located at One Station Place, Stamford, Connecticut 06902 and was founded in 1975. In January 2005, Principal Global Investors acquired a 70% interest in CCI; the remainder of CCI is owned by employees of the firm. As of December 31, 2009, CCI had assets under management of approximately $15.6 billion.
Jennison Associates LLC, which we refer to as Jennison. Jennison is located at 466 Lexington Avenue, New York, New York 10017 and was founded in 1969. Jennison is an indirect wholly-owned subsidiary of Prudential Financial, Inc., a full-scale global financial services organization located at 751 Broad Street, Newark, New Jersey 07012. As of December 31, 2009, Jennison has approximately $93.3 billion in assets under management.
C.S. McKee, L.P., which we refer to as C.S. McKee. C.S. McKee is located at One Gateway Center, Pittsburgh, Pennsylvania 15222. Founded in 1931, C.S. McKee is an employee-owned institutional investment advisor. In 1987, C.S. McKee became a wholly-owned subsidiary of United Asset Management Corporation, which was purchased by London-based Old Mutual PLC in 2000. In 2001, the firm was repurchased by its employees. As of December 31, 2009, C.S. McKee had approximately $9.2 billion in assets under management.
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Investment Objective. The investment objective of the Small-Mid Cap Equity Fund is to achieve long-term growth of capital. Any income received is incidental to this objective. There can be no assurance that the Small-Mid Cap Equity Fund will achieve its investment objective.
Strategy. The Small-Mid Cap Equity Fund seeks to outperform, over extended periods of time, broad measures of the U.S. stock market. The Fund invests primarily in common stocks and other equity-type securities of U.S. companies with market capitalizations, at the time of purchase, of between $100 million and $20 billion. The Fund uses a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. Each Investment Advisor acts independently from the others and uses its own distinct investment style in selecting securities. Each Investment Advisor must operate within the constraints of the Funds investment objective, strategies and restrictions and subject to the general supervision of State Street.
When determining the allocations and reallocations to the Investment Advisors, State Street in consultation with Northern Trust will consider a variety of factors, including but not limited to the Investment Advisors style, historical performance and characteristics of allocated assets (including capitalization, growth and profitability measures, valuation metrics, economic sector exposures, and earnings and volatility statistics).
A portion of the Small-Mid Cap Equity Fund (approximately 2% as of December 31, 2009) is invested to replicate the Russell 2000 Index, which is comprised of the approximately 2,000 smallest companies in the Russell 3000 Index. The remainder of the Fund is actively managed. The actively managed portfolio of the Small-Mid Cap Equity Fund seeks to achieve growth of capital through investing primarily in common stocks of small to mid capitalization companies believed to be attractively priced relative to their future earnings power. Frank Russell & Company, which maintains the Russell 2000® Index, does not sponsor the Small-Mid Cap Equity Fund, and is not affiliated in any way with the Small-Mid Cap Equity or with State Street.
Investment Guidelines and Restrictions. Although the assets of the Small-Mid Cap Equity Fund generally will be invested in common stocks and other equity-type securities, including convertible securities, the Fund may invest in non-equity securities, including investment grade bonds and debentures and high quality short-term instruments. The Fund will not invest more than 20% of its assets (determined at the time of purchase) in non-equity securities or in companies with capitalizations outside the small-mid cap range, except for temporary defensive purposes.
The Small-Mid Cap Equity Fund may invest in securities of U.S. companies or foreign companies whose stocks are traded on U.S. stock exchanges or over-the-counter markets. For many foreign securities, there are dollar-denominated ADRs, which are issued by domestic banks and represent interests in foreign securities. ADRs are traded on U.S. stock exchanges or over-the-counter markets. The Fund may invest in foreign securities directly and through ADRs. The Fund may not make an investment if that investment would cause more than 20% of the portion of the Funds assets for which a particular Investment Advisors advice is obtained to be invested in foreign securities, including ADRs, determined at the time of purchase.
For temporary defensive purposes, the Fund may invest without limitation in U.S. Government Obligations, short-term commercial paper and other short-term instruments. The Fund would invoke this right only in extraordinary circumstances, such as war, the closing of equity markets, an extreme financial calamity, or the threat of any such event. If the Fund invokes this right, the Fund may be less likely to achieve its investment objective. To the extent the Fund is invested in U.S. Government
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Obligations, short-term commercial paper and other short-term instruments, the Fund is also subject to the risks associated with such investments, as more fully described under Stable Asset Return FundRisk Factors.
Risk Factors. Equity Markets Risk. By investing in the U.S. equity markets, the Small-Mid Cap Equity Fund is subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. The Unit price of the Small-Mid Cap Equity Fund could be volatile, and holders of Units in the Fund should be able to tolerate sudden, sometimes substantial, declines in the value of their investment. No assurance can be given that investors will be protected from the risks inherent in equity investing. The Fund is intended to be a long-term investment vehicle and is not designed to provide a means to speculate on short-term U.S. stock market movements.
Generally, the Small-Mid Cap Equity Fund poses a greater risk to principal than the other domestic equity Funds. Investors should consider their investments in the Fund as relatively long-term and involving high risk to principal commensurate with potential for substantial gains. There is no certainty regarding which companies and industries will in fact experience capital growth, and such companies and industries may lose their potential for capital growth at any time.
Risk of Investing in Medium-Sized and Smaller Companies. Typically, investments in medium-sized and smaller companies have greater market and financial risk than larger, more diversified companies. These companies are often dependent on one or two products in rapidly changing industries and may be more vulnerable to competition from larger companies with greater resources and to economic conditions that affect their market sectors. Consistent earnings for such companies may not be as likely as they would be for more established companies. These companies may not have adequate resources to react optimally to change or to exploit opportunities. Smaller companies may also be more dependent on access to equity markets to raise capital than larger companies that have a greater ability to support relatively larger debt burdens. The securities of smaller companies may be held primarily by insiders or institutional investors, which may have an impact on their marketability. These securities may be more volatile than the overall market. Relatively new companies and companies that have recently made an initial public offering may be perceived by the market as unproven. The Small-Mid Cap Equity Funds focus on appreciation potential will result in an emphasis on securities of companies that may pay little or no dividends and reinvest all or a significant portion of their earnings. The low expected dividend level may also contribute to greater than average volatility.
Risks of Foreign Investing. Investments by the Small-Mid Cap Equity Fund in foreign securities may involve special risks in addition to the risks associated with domestic securities generally. These include risks relating to political or economic conditions in foreign countries, potentially less stringent investor protection, disclosure standards and settlement procedures of foreign markets, potentially less liquidity of foreign markets, potential applicability of withholding or other taxes imposed by these countries, and currency exchange fluctuations. These factors could make foreign investments more volatile.
Risks of Securities Lending Undertaken by the Small-Mid Cap Equity Fund. The Small-Mid Cap Equity Fund is subject to the risks associated with the lending of securities, including the risks associated with defaults by the borrowers of such securities and the credit, liquidity and other risks arising out of the investment of cash collateral received from the borrowers. See Item 1A, Risk FactorsRisks Related to Securities Lending.
Risks of Investment in Derivative Instruments. The Small-Mid Cap Equity Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
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Portfolio Turnover. As the level of portfolio turnover increases, transaction expenses incurred by the Fund, such as brokerage commissions, increase, which may adversely affect the Small-Mid Cap Equity Funds performance. The portfolio turnover rate for the Fund may be higher than the rates for comparable funds with a single portfolio manager. Each of the Funds Investment Advisors makes recommendations to buy or sell securities independently from other Investment Advisors. Thus, one Investment Advisor for the Fund may be selling a security when another Investment Advisor for the Fund is purchasing that same security. Additionally, when the Fund replaces an Investment Advisor, the new Investment Advisor may restructure the investment portfolio, which may increase the Funds portfolio turnover rate. The Investment Advisors will not consider portfolio turnover a limiting factor in making investment decisions for the Fund. A high portfolio turnover rate (100% of more) is likely to involve higher brokerage commissions and other transaction costs, which could reduce the Funds return. Portfolio turnover of the Fund was 61% for the period from its inception to December 31, 2009. With respect to the indexed portion of the Fund, this turnover reflects purchases and sales by the Fund of shares of the SSgA Russell Small Cap® Index Securities Lending Series Fund and the SSgA S&P MidCap® Index Non-Lending Series Fund, the collective investment funds through which the indexed portion of the Fund invests, rather than the turnover of the underlying portfolios of the collective investment funds. The portfolio turnover for the SSgA Russell Small Cap® Index Securities Lending Series Fund and the SSgA S&P MidCap® Index Non-Lending Series Fund was 103% and 70%, respectively, for the twelve months ended December 31, 2009 and 15% and 17%, respectively, for the twelve months ended December 31, 2008.
Investment Advisors. The Fund utilizes a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. Each Investment Advisor has investment discretion and makes all determinations with respect to the investment of assets of the Fund allocated to it, subject to the Funds objective, guidelines and restrictions and the general supervision of State Street.
State Street, after consultation with Northern Trust, determines the percentage of the assets of the Fund to be allocated to each Investment Advisor. Income and gains attributable to the assets allocated to each Investment Advisor remain allocated to that portion unless and until reallocated by State Street, and any differences in relative investment performance of the Investment Advisors of the Fund can change the percentage of total assets of the Fund comprising each portion. State Street allocates contributions and transfers to, and withdrawals and transfers from, the Small-Mid Cap Equity Fund between the Investment Advisors of the Fund in a manner intended to achieve the targeted allocations of the Funds assets.
State Street Bank manages the indexed portion of the Funds assets through the Funds investment in the SSgA Russell Small Cap® Index Securities Lending Series Fund (which engages in securities lending) and the SSgA S&P MidCap® Index Non-Lending Series Fund (which does not engage in securities lending), each a collective investment fund maintained by State Street Bank. Over time, the portion of the Small-Mid Cap Equity Fund invested in the SSgA Russell Small Cap® Index Securities Lending Series Fund is being transitioned to the SSgA S&P MidCap® Index Non-Lending Series Fund. Additionally, over time, some assets from the indexed portion may be reallocated to the actively managed portion of the Small-Mid Cap Equity Fund, subject to any limitations on the withdrawal from the indexed portion that may be in effect from time to time. State Street may, in the future at its discretion and subject to consultation with ABA Retirement Funds, employ an investment advisor to provide investment advice with respect to the indexed portion of the Funds assets. State Street determines the percentage of the assets of the Fund to be allocated to the actively managed and indexed portions of the Fund. Northern Trust has not made, and does not have authority to make, recommendations regarding management of the indexed portion of the Fund.
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State Street has retained the following organizations initially to serve as Investment Advisors to provide investment advice and arrange for the execution of purchases and sales of securities for the actively managed portion of the Small-Mid Cap Equity Fund. As of December 31, 2009, approximately 14%, 10%, 15%, 14%, 10%, 10%, 15%, 10% and 2% of the assets of the Small-Mid Cap Equity Fund were allocated to, respectively, Denver Investment Advisors LLC, Frontier Capital Management Co. LLC, LSV Asset Management, OFI Institutional Asset Management, Inc., Oppenheimer Capital LLC, Riverbridge Partners, Systematic Financial Management, L.P., TCW Investment Management Company and the indexed portion of the Fund.
Denver Investment Advisors LLC (d/b/a Denver Investments), which we refer to as DIA. DIA is located at 1225 17th Street, Denver, Colorado 80202 and was founded in 1958. The firm is 100% employee owned. Ownership in the firm is divided among 27 investment professionals, with no one person owning greater than 10.3%. As of December 31, 2009, DIA had assets under management of approximately $8.0 billion.
Frontier Capital Management Co. LLC, which we refer to as Frontier. Frontier is located at 99 Summer Street, Boston, Massachusetts 02110. Founded in 1980, the firm has managed growth-oriented portfolios since its inception. Frontier largely serves institutional clients, which represent approximately 90% of the firms assets under management. The remaining 10% is comprised largely of non-institutional clients, primarily high net-worth individuals. In 2000, Frontier became an affiliate of Affiliated Managers Group, Inc. As of December 31, 2009, Frontier had assets under management of approximately $6.8 billion.
LSV Asset Management, which we refer to as LSV. LSV is located at 155 North Wacker Drive, Suite 4600, Chicago, Illinois 60606 and was founded in 1994. LSV is a Delaware general partnership. The general partnership is 58% collectively owned by the sixteen employee-partners of LSV. SEI Funds, Inc. owns the remaining 42% of the firm. As of December 31, 2009, LSV had assets under management of approximately $56.0 billion. LSV also serves as an Investment Advisor to the International All Cap Equity Fund.
OFI Institutional Asset Management, Inc., which we refer to as OFII. OFII is located at 2 World Financial Center, New York, New York 10281 and was founded in 2001. OFII is a wholly owned subsidiary of OppenheimerFunds, Inc. OppenheimerFunds is wholly owned by Oppenheimer Acquisition Corporation, which is indirectly owned by Massachusetts Mutual Life Insurance Company, a provider of life insurance, money management and asset accumulation services for individuals and institutions. As of December 31, 2009, OFII had assets under management of approximately $7.9 billion.
Oppenheimer Capital LLC, which we refer to as Oppenheimer. Oppenheimer is located at 1345 Avenue of the Americas, New York, New York 10105. Oppenheimer was founded in 1969 as the investment management division of what was then Oppenheimer & Co. Oppenheimer has been wholly-owned and operated as an independently operated investment unit of Allianz Global Investors since 2000. As of December 31, 2009, Oppenheimer had assets under management of approximately $8.5 billion.
Riverbridge Partners, which we refer to as Riverbridge. Riverbridge is located at 801 Nicollet Mall, Suite 600, Minneapolis, Minnesota 55402. Riverbridge was founded in 1987 and is an investment manager for institutions and high net worth individuals. Throughout its history, Riverbridge has remained an employee owned firm. As of December 31, 2009, Riverbridge had assets under management of approximately $1.7 billion.
Systematic Financial Management, L.P., which we refer to as Systematic. Systematic is located at 300 Frank W. Burr Blvd., Glenpointe E. Teaneck, New Jersey 07666 and was founded in 1982. In 1995, a
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majority stake in the firm was sold to Affiliated Managers Group, Inc., a holding company and publicly traded company. As of December 31, 2009, Systematic had assets under management of approximately $7.7 billion.
TCW Investment Management Company, which we refer to as TCW. TCW is located at 865 South Figueroa Street, Los Angeles, California 90017 and was founded in 1971. In July 2001, TCW became an indirect subsidiary of Société Generale Asset Management, the asset management division of Société Generale, S.A. (SG). SG indirectly owns 80% of the equity interest in TCW. The remaining 20% is held by Amundi Group. As of December 31, 2009, TCW had assets under management of approximately $101.0 billion.
INTERNATIONAL ALL CAP EQUITY FUND
Investment Objective. The investment objective of the International All Cap Equity Fund, which prior to on or about July 6, 2009 was named the International Equity Fund, is to provide long-term capital appreciation through a diversified portfolio of primarily non-U.S. equity securities. Any income received is incidental to this objective. There can be no assurance that the International All Cap Equity Fund will achieve its investment objective.
Strategy. The International All Cap Equity Fund seeks to achieve, over an extended period of time, total returns comparable to or superior to broad measures of the international (non-U.S.) stock market. The Fund will invest at least 80% of its assets in equity securities of issuers domiciled outside the United States. The Fund may invest in companies of any size located in a number of countries throughout the world. Investing abroad increases the opportunities available to investors. Common stocks of foreign companies offer a way to seek long-term growth of capital. Many foreign countries may have greater potential for economic growth than the United States. Foreign investments also provide effective diversification for an all-U.S. portfolio, since historically their returns have not moved together with U.S. stocks over long time periods. Investing a portion of a portfolio in foreign stocks may enhance diversification while providing the potential to increase long-term capital appreciation. The International All Cap Equity Fund seeks to diversify investments broadly among developed and emerging countries and generally to have at least three different countries represented in the portfolio. The Fund uses a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. Each Investment Advisor acts independently from the others and uses its own distinct investment style in recommending securities. Each Investment Advisor must operate within the constraints of the Funds investment objective, strategies and restrictions and subject to the general supervision of State Street.
When determining the allocations and reallocations to the Investment Advisors, State Street in consultation with Northern Trust will consider a variety of factors, including but not limited to the Investment Advisors style, historical performance and the characteristics of each Investment Advisors allocated assets (including capitalization, growth and profitability measures, valuation metrics, economic sector exposures, and earnings and volatility statistics).
As of December 31, 2009, the International All Cap Equity Fund was invested in securities of issuers domiciled in approximately 44 countries. Under exceptional economic or market conditions abroad, the International All Cap Equity Fund may temporarily invest all or a major portion of its assets in U.S. Government Obligations or debt obligations of U.S. companies of the type described under Stable Asset Return Fund. The Fund would invoke this right only in extraordinary circumstances, such as war, the closing of equity markets, an extreme financial calamity, or the threat of any such event. If the Fund invokes this right, the Fund may be less likely to achieve its investment objective. To the extent the Fund
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is invested in U.S. Government Obligations, short-term commercial paper and other short-term instruments, the Fund is also subject to the risks associated with such investments, as more fully described under Stable Asset Return FundRisk Factors.
Investment Guidelines and Restrictions. In seeking to accomplish its objective, the International All Cap Equity Fund will invest primarily in common stocks of non-U.S. domiciled companies and in a variety of other equity-related securities, such as preferred stocks, warrants and convertible securities of such foreign companies, as well as foreign corporate and governmental debt securities (when considered consistent with its investment objective). The securities of non-U.S. companies may be held by the Fund directly or indirectly through ADRs, Global Depositary Receipts or European Depositary Receipts. The International All Cap Equity Fund may invest in fixed income securities when, in light of economic conditions and the general level of stock prices, dividend rates, prices of fixed income securities and the level of interest rates, it appears that the International All Cap Equity Funds investment objective will not be met by buying equity securities. Under normal conditions, the International All Cap Equity Funds investments in securities other than common stocks and other equity-related securities are limited to no more than 20% of total assets. Within this limitation, the Fund will also maintain a small cash reserve which will be invested in Short-Term Investment Products or a collective investment fund maintained by State Street Bank which is designed to replicate the MSCI ACWI ex-US Index. See Stable Asset Return Fund.
The International All Cap Equity Fund will normally conduct its foreign currency exchange transactions, if any, either on a cash basis at the spot rate prevailing in the foreign currency exchange market or through entering into forward contracts to purchase or sell foreign currencies. See Derivative Instruments.
Risk Factors. Equity Markets Risk. The Funds Unit price can fall because of weakness in one or more of its primary equity markets, a particular industry, or specific holdings. Equity markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, the investment assessment of companies held in the Fund may prove incorrect, resulting in losses or poor performance even in rising markets.
Currency Risk. Currency risk refers to a decline in the value of a foreign currency versus the value of the U.S. dollar, which reduces the U.S. dollar value of securities denominated in that currency. The overall impact on the Funds holdings can be significant, unpredictable and long-lasting, depending on the currencies represented in the Funds portfolio and how each one appreciates or depreciates in relation to the U.S. dollar and whether currency positions are hedged. Under normal conditions, the Fund will not engage in extensive foreign currency hedging programs. Exchange rate movements are unpredictable and it is not possible to effectively hedge the currency risks of many developing countries.
Political and Economic Factors. The economic and political structures of developing nations, in most cases, do not compare favorably with the United States or other developed countries in terms of wealth and stability and their financial markets often lack liquidity. Therefore, investments in these emerging countries are riskier, and may be subject to erratic and abrupt price movements. Even investments in countries with highly developed economies are subject to risk. For example, prices of Japanese stocks suffered a steep decline during much of the 1990s. Moreover, while some countries have made progress in economic growth, liberalization, fiscal discipline and political and social stability, there is no assurance these trends will continue. Investment in these markets is, therefore, significantly riskier than investment in other markets.
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The economies of some of the countries in which the Fund may invest may rely heavily on particular industries and be more vulnerable to the ebb and flow of international trade, trade barriers and other protectionist or retaliatory measures. Some countries have legacies of hyperinflation and currency devaluations versus the U.S. dollar, particularly Russia, many Latin American nations and several Asian countries. Investments in countries that have recently begun moving away from central planning and state-owned industries toward free markets should be regarded as speculative.
Some of the countries in which the Fund may invest have histories of instability and upheaval that could cause their governments to act in a detrimental or hostile manner toward private enterprise or foreign investment. Governmental actions such as capital or currency controls, nationalization of an industry or company, expropriation of assets, or imposition of high taxes could have an adverse effect on security prices and impair the International All Cap Equity Funds ability to repatriate capital or income. Significant external risks currently affect some emerging countries. Governments in many emerging market countries participate to a significant degree in the countries economies and securities markets.
Other Risks of Foreign Investing. Some of the countries in which the Fund may invest lack uniform accounting, auditing and financial reporting standards, have less governmental supervision of financial markets than in the United States, do not honor legal rights enjoyed in the United States and have settlement practices which may subject the International All Cap Equity Fund to risks of loss not customary in U.S. markets. In addition, securities markets in some countries have substantially lower trading volumes than U.S. markets, resulting in less liquidity and more volatility than experienced in the United States.
Pricing. Portfolio securities may be listed on foreign exchanges that are open on days (such as Saturdays or U.S. legal holidays) when the International All Cap Equity Fund does not compute its prices. As a result, the Funds net asset value may be significantly affected by trading on days when transactions in Units of the Fund do not occur.
Risks of Securities Lending Undertaken by the International All Cap Equity Fund. The International All Cap Equity Fund is subject to the risks associated with the lending of securities, including the risks associated with defaults by the borrowers of such securities and the credit, liquidity and other risks arising out of the investment of cash collateral received from the borrowers. See Item 1A, Risk FactorsRisks Related to Securities Lending.
Investing in International Stocks. Like U.S. stock investments, common stocks of foreign companies offer investors a way to build capital over time. Nevertheless, the long-term rise of foreign stock prices as a group has been punctuated by periodic declines. Share prices of all companies, even the best managed and most profitable, whether U.S. or foreign, are subject to market risk, which means they can fluctuate widely. The volatility of emerging markets may be heightened by actions of a few major investors. For example, substantial increases or decreases in cash flows of mutual funds investing in these markets could significantly affect stock prices and, therefore, the Funds Unit price. For this reason, investors in foreign stocks should have a long-term investment horizon and be willing to wait out declining markets. The International All Cap Equity Fund should not be relied upon as a complete investment program or used as a means to speculate on short-term swings in the stock or foreign exchange markets.
The values of foreign fixed-income securities fluctuate in response to changes in U.S. and foreign interest rates. Income received by the International All Cap Equity Fund from sources within foreign countries may also be reduced by withholding and other taxes imposed by those countries, although tax conventions between some countries and the United States may reduce or eliminate these taxes. Any taxes paid by the International All Cap Equity Fund will reduce the net income earned by the Fund. The Funds Investment Advisors will consider available yields, net of any required taxes, in selecting foreign dividend paying securities.
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In addition, short-term movements in currency exchange rates could adversely impact the availability of funds to pay for redemptions of Units of the International All Cap Equity Fund. For example, if the exchange rate for a currency declines after a security has been sold to provide funds for a redemption from the Fund but before those funds are translated into U.S. dollars, it could be necessary to liquidate additional portfolio securities in order to finance the redemption.
Risks of Investment in Derivative Instruments. The International All Cap Equity Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
Restriction on Transfer into Fund. The International All Cap Equity Fund restricts a participants ability to make more than one transfer into the Fund within any 45 calendar day period. See Transfers Among Investment Options and WithdrawalsFrequent Trading; Restrictions on Transfer.
Portfolio Turnover. As the level of portfolio turnover increases, transaction expenses incurred by the International All Cap Equity Fund, such as brokerage commissions, increase, which may adversely affect the Funds performance. The portfolio turnover rate for the Fund may be higher than the rates for comparable funds with a single portfolio manager. Each of the Funds Investment Advisors makes recommendations to buy or sell securities independently from other Investment Advisors. Thus, one Investment Advisor for the Fund may be selling a security when another Investment Advisor for the Fund is purchasing that same security. Additionally, when the Fund replaces an Investment Advisor, the new Investment Advisor may restructure the investment portfolio, which may increase the Funds portfolio turnover rate. The Investment Advisors will not consider portfolio turnover a limiting factor in making investment decisions for the Fund. A high portfolio turnover rate (100% or more) is likely to involve higher brokerage commissions and other transaction costs, which could reduce the Funds return. Portfolio turnover for the Fund was 160% for the twelve months ended December 31, 2009 and 33% for the twelve months ended December 31, 2008. With respect to the indexed portion of the Fund, this turnover reflects purchases and sales by the Fund of shares of the SSgA Global Equity ex U.S. Index Non-Lending Series Fund, the collective investment fund through which the indexed portion of the Fund invests, rather than the turnover of the underlying portfolio of the collective investment fund. The portfolio turnover for the SSgA Global Equity ex U.S. Index Non-Lending Series Fund was 4% for the approximate six month period from the collective investment funds inception date to December 31, 2009.
Investment Advisors. The Fund utilizes a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street subject to consultation with Northern Trust. Each Investment Advisor has investment discretion and makes all determinations with respect to the investment of assets of the Fund allocated to it, subject to the Funds objectives, guidelines and restrictions and the general supervision of State Street.
State Street, after consultation with Northern Trust, determines the percentage of the assets of the Fund to be allocated to each Investment Advisor. Income and gains attributable to the assets allocated to each Investment Advisor remain allocated to that portion unless and until reallocated by State Street, and any differences in relative investment performance of the Investment Advisors of the Fund can change the percentage of total assets of the Fund comprising each portion. State Street allocates contributions and transfers to, and withdrawals and transfers from, the International All Cap Equity Fund between the Investment Advisors of the Fund in a manner intended to achieve the targeted allocations of the Funds assets.
State Street Bank manages the indexed portion of the Funds assets through the Funds investment in the SSgA Global Equity ex U.S. Index Non-Lending Series Fund, a collective investment fund maintained by State Street Bank. Over time, some assets from the indexed portion may be reallocated to the actively managed portion of the International All Cap Equity Fund, subject to any limitations on the
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withdrawal from the indexed portion that may be in effect from time to time. State Street may, in the future at its discretion and subject to consultation with ABA Retirement Funds, employ an investment advisor to provide investment advice with respect to the indexed portion of the Funds assets. State Street determines the percentage of the assets of the Fund to be allocated to the actively managed and indexed portions of the Fund. Northern Trust has not made, and does not have authority to make, recommendations regarding management of the indexed portion of the Fund.
Since July 6, 2009, State Street has retained Altrinsic Global Advisors, LLC, Eagle Global Advisors LLC, Martin Currie Inc. and First State Investments International Limited to serve as Investment Advisors to provide investment advice and arrange for the execution of purchases and sales of securities for the International All Cap Equity Fund. Effective on or about January 19, 2010, the line-up of Investment Advisors to State Street with respect to the International All Cap Equity Fund was modified by the addition of a new Investment Advisor, LSV Asset Management. As of January 19, 2010, approximately 25%, 17%, 17%, 17% and 25% of the assets of the International All Cap Equity Fund were allocated to, respectively, Altrinsic Global Advisors, LLC, Eagle Global Advisors LLC, First State Investments International Limited, Martin Currie Inc. and LSV Asset Management.
Altrinsic Global Advisors, LLC, which we refer to as Altrinsic. Altrinsic is located at 100 First Stamford Place, Stamford, Connecticut 06902. Altrinsic is a 100% employee owned firm that was established in 2000 to focus solely on global and international investment management on behalf of institutional investors around the world. As of December 31, 2009, Altrinsic had assets under management of approximately $9.3 billion.
Eagle Global Advisors LLC, which we refer to as Eagle. Eagle is located at 5847 San Felipe, Houston, Texas 77057. Eagle is an independent, employee owned investment management firm offering global, U.S. equity and international equity investment management services. The firm is 100% employee owned. As of December 31, 2009, Eagle had assets under management of approximately $4.2 billion.
First State Investments International Limited, which we refer to as First State. First State is located at 23 St. Andrew Square, Edinburgh, Scotland. First State is the international asset management division of Commonwealth Bank of Australia. As of December 31, 2009, First State had assets under management of approximately $38.8 billion.
LSV Asset Management, which we refer to as LSV. LSV, located at 155 North Wacker Drive, Suite 4600, Chicago, Illinois 60606, was founded in 1994. LSV is a Delaware general partnership. The general partnership is 58% collectively owned by the sixteen employee-partners of LSV. SEI Funds, Inc. owns the remaining 42% of the firm. As of December 31, 2009, LSV had assets under management of approximately $56.0 billion. LSV also serves as an Investment Advisor to the Small-Mid Cap Equity Fund.
Martin Currie Inc., which we refer to as Martin Currie. Martin Currie is located at 20 Castle Terrace, Edinburgh, Scotland. Martin Currie manages a variety of international equity strategies for clients around the world. The firm is independent and majority employee owned. As of December 31, 2009, Martin Currie had assets under management of approximately $19.1 billion.
Transfer Restrictions. The International All Cap Equity Fund maintains a transfer policy that restricts a Participants ability to make more than one transfer into the International All Cap Equity Fund within any 45 calendar day period. There is no restriction on a Participants ability to make transfers out of the Fund. State Street has adopted this policy for the International All Cap Equity Fund to prevent disruptions to the Fund that could potentially affect the investment performance of the Fund. For more information regarding this policy, see Transfers Among Investment Options and WithdrawalsFrequent Trading; Restrictions on Transfers.
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Assets contributed or held under the Program are also eligible for investment in the following six Index Funds, each of which is designed to replicate a specific securities index. The All Cap Index Equity Fund, which prior to July 2, 2009 was named the Index Equity Fund, was established in September 1995. The Collective Trust established the other five Index Funds as investment options in early 2009.
Investment Objective. The investment objective of the Bond Index Fund is to replicate, after taking into account Fund expenses, the total rate of return of the Barclays Capital U.S. Aggregate Bond Index by investing generally in securities which are representative of the domestic investment grade bond market as included in such Index. There can be no assurance that the Bond Index Fund will achieve its investment objective of replicating the total return of the Barclays Capital U.S. Aggregate Bond Index.
Strategy. The Fund invests in U.S. Government Obligations and U.S. dollar-denominated corporate debt securities, mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities. The Fund is managed duration-neutral to the Barclays Capital U.S. Aggregate Bond Index. The overall sector and quality weightings of the Fund are matched to those of the benchmark, with individual security selection based upon security availability and State Street Banks analysis of the securitys impact on the portfolios weightings. The Fund may seek to gain securities exposure by entering into TBA commitments. Barclays Capital and Barclays Bank PLC, which sponsor the Barclays Capital U.S. Aggregate Bond Index, do not sponsor the Bond Index Fund, and are not affiliated in any way with the Bond Index Fund or with State Street.
Investment Guidelines and Restrictions. The Bond Index Fund invests primarily in securities representative of the investment grade bond market in the U.S. However, the Bond Index Fund may invest temporarily and without limitation for defensive purposes in short-term fixed-income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for redemptions. State Street Bank will not cause the Bond Index Fund to make any investment that is inconsistent with the restrictions applicable to the Bond Index Fund described under Information with Respect to the FundsInvestment Prohibitions. The Bond Index Fund concentrates in particular industries to the extent the Barclays Capital U.S. Aggregate Bond Index concentrates in those industries, and the Bond Index Fund may engage in transactions in derivatives, including, but not limited to, CMOs and other derivative instruments to the extent included in the Barclays Capital U.S. Aggregate Bond Index. The Bond Index Fund will not borrow money except as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions (not for leveraging or investment).
Risk Factors. Interest Rate Risk Applicable to Investment in Fixed-Income Securities. The Bond Index Fund, to the extent invested in longer-term fixed-income securities, is subject to the risks associated with investing in such instruments. Fixed-income securities such as bonds are issued to evidence loans that investors make to corporations and governments, either foreign or domestic. If prevailing interest rates fall, the market value of fixed-income securities that trade on a yield basis tends to rise. On the other hand, if prevailing interest rates rise, the market value of fixed-income securities generally will fall. In general, the shorter the maturity, the lower the yield but the greater the price stability. These factors may have an effect on the Unit price of the Bond Index Fund. A change in the level of interest rates will tend to cause the net asset value per Unit of the Bond Index Fund to change. If such interest rate changes are sustained over time, the yield of the Bond Index Fund will fluctuate accordingly.
Credit Risk Applicable to Investment in Fixed-Income Securities. Fixed-income securities, including corporate bonds, also are subject to credit risk. When a security is purchased, its anticipated yield is dependent on the timely payment by the borrower of each interest and principal installment. Credit
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analysis and bond ratings take into account the relative likelihood that such timely payment will result. Bonds with a lower credit rating tend to have higher yields than bonds of similar maturity with a better credit rating. However, to the extent the Bond Index Fund should hold securities with medium or lower credit qualities, they are subject to a higher level of credit risk than investments that invest only in investment-grade securities. In addition, the credit quality of noninvestment-grade securities is considered speculative by recognized ratings agencies with respect to the issuers continuing ability to pay interest and principal. Lower-grade securities may have less liquidity and a higher incidence of default than higher-grade securities. Furthermore, as economic, political and business developments unfold, lower-quality bonds, which possess lower levels of protection with respect to timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity.
Risks of Investment in Derivative Instruments. The Bond Index Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
TBA Commitments. The Bond Index Fund may enter into TBA commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price for the security that is the subject of a TBA commitment has been established at the time of commitment, the principal amount has not been finalized. However, the amount of the TBA commitment will not fluctuate more than 1.0% from the principal amount. The Fund holds, and maintains until the settlement date, cash or liquid securities in an amount sufficient to meet the purchase price. TBA commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date. Risks may also arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts. During the period prior to settlement, the Fund will not be entitled to accrue interest or receive principal payments. Unsettled TBA commitments are valued at the current market value of the underlying securities. The Fund may dispose of a commitment prior to settlement if deemed appropriate to do so. Upon settlement date, the Fund may take delivery of the securities or defer the delivery to the next month. The Bond Index Fund may also purchase or sell securities on a when-issued or delayed delivery basis. For information regarding risks involved in these activities, see Stable Asset Return FundRisk Factors.
Risks Associated with Short-Term Debt Instruments. For information and risk factors associated with investing in stable assets or cash-equivalent instruments, see Stable Asset Return FundRisk Factors.
Tracking Error Risk and Risks Associated with Index Investing. Deviation of the performance of the Bond Index Fund from the performance of the Barclays Capital U.S. Aggregate Bond Index, known as tracking error, can result from various factors, including purchases and redemptions of Units of the Bond Index Fund or the underlying State Street Bank collective investment fund in which the Fund invests, as well as from the fees and expenses borne by the Bond Index Fund or such underlying fund. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the Bond Index Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the Bond Index Fund or the underlying State Street Bank collective investment fund in which the Fund invests, changes made in the securities included in the Barclays Capital U.S. Aggregate Bond Index or the manner in which the performance of the Barclays Capital U.S. Aggregate Bond Index is calculated.
Portfolio Turnover. Ordinarily, the Bond Index Fund will sell securities only to reflect changes in the Barclays Capital U.S. Aggregate Bond Index or to accommodate cash flows into or out of the Fund. The Bond Index Fund seeks to create a portfolio which substantially replicates the total return of the Barclays Capital U.S. Aggregate Bond Index. The Bond Index Fund is not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for the Bond Index Fund may be lower than those incurred by non-index, actively managed funds.
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Portfolio turnover of the Bond Index Fund was 158% for the period from the Funds inception date, February 3, 2009, to December 31, 2009. This turnover reflects purchases and sales by the Fund of shares of the SSgA U.S. Bond Index Non-Lending Series Fund, the collective investment fund through which the Fund invests, rather than the turnover of the underlying portfolio of the collective investment fund. The portfolio turnover for the SSgA U.S. Bond Index Non-Lending Series Fund was 174% for the twelve months ended December 31, 2009 and 19% for the twelve months ended December 31, 2008.
Investment Advisor. State Street Bank manages the Bond Index Fund. For its services, State Street Bank receives a fee payable from the Bond Index Funds assets at an annual rate of .04% of the total assets of the Bond Index Fund. The assets of the Bond Index Fund are invested indirectly through the SSgA U.S. Bond Index Non-Lending Series Fund, which is a collective investment fund maintained by State Street Bank and which in turn invests its assets indirectly through other collective investment funds maintained by State Street Bank, including the Long U.S. Government Index Non-Lending Fund, the Intermediate U.S. Government Index Non-Lending Fund, the Long-Credit Index Non-Lending Fund, the Intermediate Credit Index Non-Lending Fund, the Mortgage Backed Index Non-Lending Fund, the Asset Backed Index Non-Lending Fund, and the Commercial Mortgage Backed Index Non-Lending Fund. The aggregate exposure of the Passive Bond Market Index Non-Lending Series Fund to medium term notes which are not component securities of the Barclays Capital U.S. Aggregate Bond Index will not exceed 5% of the assets of the Passive Bond Market Index Non-Lending Series Fund. In the future, State Street may employ other investment advisors for the Bond Index Fund, at its discretion and subject to consultation with Northern Trust.
The Barclays Capital U.S. Aggregate Bond Index is a trademark of Barclays Capital, a division of Barclays Bank, PLC.
Investment Objective. The investment objective of the Large Cap Index Equity Fund is to replicate, after taking into account Fund expenses, the total rate of return of the S&P 500 by investing generally in securities included in such Index. There can be no assurance that the Large Cap Index Equity Fund will achieve its investment objective of replicating the total return of the S&P 500.
Strategy. The Large Cap Index Equity Fund invests in securities of U.S. companies included in the S&P 500. The Large Cap Index Equity Fund may also hold U.S. Government Obligations, short-term fixed-income securities, equity index futures, exchange traded funds and other similar derivative instruments as deemed appropriate by State Street Bank. The Large Cap Index Equity Fund, in addition to its equity investments, also maintains a position of generally less than 5% in unleveraged S&P 500 stock index futures contracts. The S&P 500 represents approximately 75% of the U.S. equity market based on the market capitalization of the companies in the S&P 500. As of December 31, 2009, the largest company in the S&P 500 had a market capitalization of approximately $323.72 billion and the smallest such company had a market capitalization of approximately $1.06 billion. The S&P 500 is reconstituted on a periodic basis by the sponsor of the Index. Standard & Poors Company, a McGraw-Hill Company, which sponsors the S&P 500®, does not sponsor the Large Cap Index Equity Fund, and is not affiliated in any way with the Large Cap Index Equity Fund or with State Street.
The Large Cap Index Equity Fund, in addition to its specified equity investments, may also engage in transactions in derivatives, including, but not limited to, financial futures (including interest rate futures), swap contracts and foreign currency forwards, options and futures instruments, CMOs and other derivative mortgage-backed securities or other investments as State Street Bank deems appropriate under the circumstances.
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Investment Guidelines and Restrictions. The Large Cap Index Equity Fund invests primarily in units of common stocks of U.S. companies in the same capitalization weights as they appear in the S&P 500. However, the Large Cap Index Equity Fund may invest temporarily and without limitation for defensive purposes in short-term fixed-income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for redemptions. State Street Bank will not cause the Large Cap Index Equity Fund to make an investment if that investment would cause the Large Cap Index Equity Fund to purchase warrants or make any other investment that is inconsistent with the restrictions applicable to the Large Cap Index Equity Fund described under Information with Respect to the FundsInvestment Prohibitions. The Large Cap Index Equity Fund concentrates in particular industries to the extent the S&P 500 concentrates in those industries. The Large Cap Index Equity Fund will not borrow money except as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions (not for leveraging or investment).
Risk Factors. Equity Markets Risk. By investing in the U.S. equity market, the Large Cap Index Equity Fund is subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. The Unit price of the Large Cap Index Equity Fund will fluctuate, and the holders of Units in the Large Cap Index Equity Fund should be able to tolerate declines, sometimes sudden or substantial, in the value of their investment. The Large Cap Index Equity Fund is intended to be a long-term investment vehicle and is not designed to provide a means to speculate on short-term U.S. stock market movements.
Risks of Investment in Derivative Instruments. The Large Cap Index Equity Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
Risks Associated with Short-Term Debt Instruments. For information and risk factors associated with investing in stable assets or cash-equivalent instruments, see Stable Asset Return FundRisk Factors.
Tracking Error Risk and Risks Associated with Index Investing. Deviation of the performance of the Large Cap Index Equity Fund from the performance of the S&P 500, known as tracking error, can result from various factors, including purchases and redemptions of Units of the Large Cap Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, as well as from the fees and expenses borne by the Large Cap Index Equity Fund or such underlying fund. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the Large Cap Index Equity Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the Large Cap Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, changes made in the securities included in the S&P 500 or the manner in which the performance of the S&P 500 is calculated.
Portfolio Turnover. Ordinarily, the Large Cap Index Equity Fund will sell securities only to reflect changes in the S&P 500 or to accommodate cash flows into or out of the Fund. The Large Cap Index Equity Fund seeks to create a portfolio which substantially replicates the total return of the S&P 500. The Large Cap Index Equity Fund is not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for the Large Cap Index Equity Fund may be lower than those incurred by non-index, actively managed funds.
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Portfolio turnover of the Large Cap Index Equity Fund was 159% for the period from the Funds inception date, February 9, 2009, to December 31, 2009. This turnover reflects purchases and sales by the Fund of shares of the SSgA S&P 500® Index Non-Lending Series Fund, the collective investment fund through which the Fund invests, rather than the turnover of the underlying portfolio of the collective investment fund. The portfolio turnover for the SSgA S&P 500® Index Non-Lending Series Fund was 10% for its fiscal year ended December 31, 2009.
Investment Advisor. State Street Bank manages the Large Cap Index Equity Fund. For its services, State Street Bank receives a fee payable from the Large Cap Index Equity Funds assets at an annual rate of .02% of the total assets of the Large Cap Index Equity Fund. The assets of the Large Cap Index Equity Fund are invested indirectly through the SSgA S&P 500® Index Non-Lending Series Fund, which is a collective investment fund maintained by State Street Bank. In the future, State Street may employ other investment advisors for the Large Cap Index Equity Fund, at its discretion and subject to consultation with Northern Trust.
S&P 500® is a registered trademark of Standard & Poors, a division of The McGraw-Hill Companies, Inc. The Large Cap Index Equity Fund is not sponsored, endorsed, sold or promoted by Standard & Poors and Standard & Poors makes no representation regarding the advisability of investing in the Large Cap Index Equity Fund.
Investment Objective. The investment objective of the All Cap Index Equity Fund, which prior to July 6, 2009 was named the Index Equity Fund, is to replicate, after taking into account Fund expenses, the total return of the Russell 3000 Index by investing in stocks included in the Russell 3000 Index, with the overall objective of achieving long-term growth of capital. There can be no assurance that the All Cap Index Equity Fund will achieve its investment objective of replicating the total return of the Russell 3000 Index.
Strategy. The All Cap Index Equity Fund invests in all of the common stocks included in the Russell 3000 Index with the possible exception of the companies in the Russell 3000® Index with the smallest capitalization. The Russell 3000 Index represents approximately 98% of the U.S. equity market based on the market capitalization of the companies in the Russell 3000 Index. As of December 31, 2009, the largest company had a market capitalization of approximately $322 billion and the smallest company had a market capitalization of approximately $3 million. The Russell 3000 Index is reconstituted on a periodic basis by the sponsor of the Index. Frank Russell & Company, which sponsors the Russell 3000® Index, does not sponsor the All Cap Index Equity Fund, and is not affiliated in any way with the All Cap Index Equity Fund or with State Street.
For the purpose of achieving income, the All Cap Index Equity Fund may lend a portion of its portfolio securities to brokers, dealers and other financial institutions, subject to the limitations and on the terms described in Information with Respect to the FundsLoans of Portfolio Securities.
Investment Guidelines and Restrictions. The All Cap Index Equity Fund invests predominantly in common stocks of U.S. companies. However, the All Cap Index Equity Fund may invest temporarily and without limitation for defensive purposes in short-term fixed-income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for redemptions. State Street Bank will not cause the All Cap Index Equity Fund to make an investment if that investment would cause the Fund to purchase warrants or make any other investment that is inconsistent with the restrictions applicable to the Fund described under Information with Respect to the FundsInvestment
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Prohibitions. The Fund concentrates in particular industries to the extent the Russell 3000 Index concentrates in those industries. The All Cap Index Equity Fund will not borrow money except as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions (not for leveraging or investment).
Risk Factors. Equity Markets Risk. By investing in the U.S. equity market, the All Cap Index Equity Fund is subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. The Unit price of the All Cap Index Equity Fund could be volatile, and holders of Units in the Fund should be able to tolerate sudden, sometimes substantial declines, in the value of their investment. No assurance can be given that investors will be protected from the risks inherent in equity investing. The Fund is intended to be a long-term investment vehicle and is not designed to provide a means to speculate on short-term U.S. stock market movements.
Companies with smaller capitalizations included in the Russell indices may have limited product lines, markets or financial resources, or may be dependent upon a small management group. Therefore, their securities may be subject to more abrupt or erratic market movements than larger, more established companies, both because their securities are typically traded in lower volume and because the issuers are typically subject to a greater degree of changes in their earnings and prospects.
Tracking Error Risk and Risks Associated with Index Investing. Deviation of the performance of the All Cap Index Equity Fund from the performance of the Russell 3000 Index, known as tracking error, can result from various factors, including purchases and redemptions of Units of the Fund or the underlying State Street Bank collective investment fund in which the Fund invests, as well as from the fees and expenses borne by the Fund or such underlying fund. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the All Cap Index Equity Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the All Cap Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, changes made in the securities included in the Russell 3000 Index or the manner in which the performance of the Russell 3000 Index is calculated.
Risks of Securities Lending Undertaken by the All Cap Index Equity Fund. The All Cap Index Equity Fund is subject to the risks associated with the lending of securities, including the risks associated with defaults by the borrowers of such securities and the credit, liquidity and other risks arising out of the investment of cash collateral received from the borrowers. See Item 1A, Risk FactorsRisks Related to Securities Lending.
Risks of Investment in Derivative Instruments. The All Cap Index Equity Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
Portfolio Turnover. Ordinarily, an index fund will sell securities only to reflect changes in the index in which it invests or to accommodate cash flows into and out of the Fund. Portfolio turnover of the All Cap Index Equity Fund was 153% for the twelve months ended December 31, 2009 and 3% for the twelve months ended December 31, 2008. This turnover reflects purchases and sales by the Fund of shares of the SSgA Russell All Cap Index Non-Lending Series Fund and the SSgA Russell All Cap® Index Securities Lending Series Fund, the collective investment funds through which the Fund invests, rather than the turnover of the underlying portfolio of the collective investment funds. The portfolio turnover for the SSgA Russell All Cap Index Non-Lending Series Fund and the SSgA Russell All Cap® Index Securities Lending Series Fund each was 107% for the twelve months ended December 31, 2009 and 17% for the twelve months ended December 31, 2008.
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Index funds seek to create a portfolio which substantially replicates the total return of the applicable index. Index funds are not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for index funds may be lower than those incurred by non-index, actively managed funds.
Investment Advisor. State Street Bank manages the All Cap Index Equity Fund through the Funds investment in the SSgA Russell All Cap® Index Securities Lending Series Fund (which engages in securities lending) and SSgA Russell All Cap Index Non-Lending Series Fund (which does not engage in securities lending), each a collective investment fund maintained by State Street Bank and having the same investment objective. Over time, the assets of the All Cap Index Equity Fund are being transitioned from the SSgA Russell All Cap® Index Securities Lending Series Fund to the SSgA Russell All Cap Index Non-Lending Series Fund. State Street Bank receives a fee for its services payable from the All Cap Index Equity Funds assets at an annual rate of .05% of the total assets of the All Cap Index Equity Fund. State Street may, in the future at its discretion and subject to consultation with ABA Retirement Funds, employ investment advisors to provide investment advice with respect to the Fund or portions thereof.
Information about the Russell Indices. The criteria used by Frank Russell & Company to determine the initial list of securities eligible for inclusion in the Russell indices is total market capitalization adjusted for large private holdings and cross-ownership. Companies are not selected for inclusion in the Russell indices because they are expected to have superior stock price performance relative to the U.S. stock market in general or other stocks in particular. Frank Russell & Company makes no representation or warranty, implied or express, to any member of the public regarding the advisability of investing in the Russell 3000 Index or the ability of the Russell 3000 Index to track general market performance of large and small capitalization stocks.
Russell 3000® Index is a trademark of Frank Russell & Company. The Russell 3000 Index is not sponsored, endorsed, sold or promoted by Frank Russell & Company, nor does Frank Russell & Company guarantee the accuracy and/or completeness of the Russell 3000 Index or any data included therein. Frank Russell & Company makes no warranty, express or implied, as to the results to be obtained by the Fund, owners of the Fund, any person or any entity from the use of the Russell 3000 Index or any data included therein. Frank Russell & Company makes no express or implied warranties and expressly disclaims all such warranties of merchantability or fitness for a particular purpose for use with respect to the Russell 3000 Index or any data included therein.
Investment Objective. The investment objective of the Mid Cap Index Equity Fund is to replicate, after taking into account Fund expenses, the total rate of return of the S&P MidCap 400 by investing generally in securities included in such Index. There can be no assurance that the Mid Cap Index Equity Fund will achieve its investment objective of replicating the total return of the S&P MidCap 400.
Strategy. The Mid Cap Index Equity Fund invests in securities of U.S. companies included in the S&P MidCap 400. The Mid Cap Index Equity Fund may also hold U.S. Government Obligations, short-term fixed income securities, equity index futures, exchange-traded funds and other similar derivative instruments as deemed appropriate by State Street Bank. The Mid Cap Index Equity Fund, in addition to its equity investments, also maintains a position of generally less than 5% in unleveraged S&P MidCap 400 stock index futures contracts. The S&P MidCap 400 includes 400 companies and as of December 31, 2009, represented approximately 7% of the U.S. equity market based on the market capitalization of the companies in the S&P MidCap 400. As of December 31, 2009, the largest company in the S&P MidCap 400 had a market capitalization of approximately $8.26 billion and the smallest such company had a
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market capitalization of approximately $260 million. The S&P MidCap 400 is reconstituted on a periodic basis by the sponsor of the Index. Standard & Poors Company, a McGraw-Hill Company, which sponsors the S&P MidCap 400®, does not sponsor the Mid Cap Index Equity Fund, and is not affiliated in any way with the Mid Cap Index Equity Fund or with State Street.
The Mid Cap Index Equity Fund, in addition to its specified equity investments, may also engage in transactions in derivatives, including, but not limited to, financial futures (including interest rate futures), swap contracts and foreign currency forwards, options and futures instruments, CMOs and other derivative mortgage-backed securities or other investments as State Street Bank deems appropriate under the circumstances.
Investment Guidelines and Restrictions. The Mid Cap Index Equity Fund invests primarily in units of common stocks of U.S. companies in the same capitalization weights as they appear in the S&P MidCap 400. However, the Mid Cap Index Equity Fund may invest temporarily and without limitation for defensive purposes in short-term fixed income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for redemptions. State Street Bank will not cause the Mid Cap Index Equity Fund to make an investment if that investment would cause the Mid Cap Index Equity Fund to purchase warrants or make any other investment that is inconsistent with the restrictions applicable to the Mid Cap Index Equity Fund described under Information with Respect to the FundsInvestment Prohibitions. The Mid Cap Index Equity Fund concentrates in particular industries to the extent the S&P MidCap 400 concentrates in those industries. The Mid Cap Index Equity Fund will not borrow money except as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions (not for leveraging or investment).
Risk Factors. Equity Markets Risk. By investing in the U.S. equity market, the Mid Cap Index Equity Fund is subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. The Unit price of the Mid Cap Index Equity Fund will fluctuate, and the holders of Units in the Mid Cap Index Equity Fund should be able to tolerate declines, sometimes sudden or substantial, in the value of their investment. The Mid Cap Index Equity Fund is intended to be a long-term investment vehicle and is not designed to provide a means to speculate on short-term U.S. stock market movements.
Risk of Investing in Medium-Sized and Smaller Companies. Typically, investments in medium-sized and smaller companies have greater market and financial risk than larger, more diversified companies. These companies are often dependent on one or two products in rapidly changing industries and may be more vulnerable to competition from larger companies with greater resources and to economic conditions that affect their market sectors. Consistent earnings for such companies may not be as likely as they would be for more established companies. These companies may not have adequate resources to react optimally to change or to exploit opportunities. Smaller companies may also be more dependent on access to equity markets to raise capital than larger companies that have a greater ability to support relatively larger debt burdens. The securities of smaller companies may be held primarily by insiders or institutional investors, which may have an impact on their marketability. These securities may be more volatile than the overall market. Relatively new companies and companies that have recently made an initial public offering may be perceived by the market as unproven.
Risks of Investment in Derivative Instruments. The Mid Cap Index Equity Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
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Risks Associated with Short-Term Debt Instruments. For information and risk factors associated with investing in stable assets or cash-equivalent instruments, see Stable Asset Return FundRisk Factors.
Tracking Error Risk and Risks Associated with Index Investing. Deviation of the performance of the Mid Cap Index Equity Fund from the performance of the S&P MidCap 400, known as tracking error, can result from various factors, including purchases and redemptions of Units of the Mid Cap Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, as well as from the fees and expenses borne by the Mid Cap Index Equity Fund or such underlying fund. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the Mid Cap Index Equity Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the Mid Cap Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, changes made in the securities included in the S&P MidCap 400 or the manner in which the performance of the S&P MidCap 400 is calculated.
Portfolio Turnover. Ordinarily, the Mid Cap Index Equity Fund will sell securities only to reflect changes in the S&P MidCap 400 or to accommodate cash flows into or out of the Fund. The Mid Cap Index Equity Fund seeks to create a portfolio which substantially replicates the total return of the S&P MidCap 400. The MidCap Index Equity Fund is not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for the Mid Cap Index Equity Fund may be lower than those incurred by non-index, actively managed funds.
Portfolio turnover of the Mid Cap Index Equity Fund was 165% for the period from the Funds inception date, February 3, 2009, to December 31, 2009. This turnover reflects purchases and sales by the Fund of shares of the SSgA S&P MidCap® Index Non-Lending Series Fund, the collective investment fund through which the Fund invests, rather than the turnover of the underlying portfolio of the collective investment fund. The portfolio turnover for the SSgA S&P MidCap® Index Non-Lending Series Fund 70% for the twelve months ended December 31, 2009 and 17% for the twelve months ended December 31, 2008.
Investment Advisor. State Street Bank manages the Mid Cap Index Equity Fund. For its services, State Street Bank receives a fee payable from the Mid Cap Index Equity Funds assets at an annual rate of .05% of the total assets of the Mid Cap Index Equity Fund. The assets of the Mid Cap Index Equity Fund are invested indirectly through the SSgA S&P MidCap® Index Non-Lending Series Fund, which is a collective investment fund maintained by State Street Bank. In the future, State Street may employ other investment advisors for the Mid Cap Index Equity Fund, at its discretion and subject to consultation with Northern Trust.
S&P MidCap 400® is a registered trademark of Standard & Poors, a division of The McGraw-Hill Companies, Inc. The Mid Cap Index Equity Fund is not sponsored, endorsed, sold or promoted by Standard & Poors and Standard & Poors makes no representation regarding the advisability of investing in the Mid Cap Index Equity Fund.
Investment Objective. The investment objective of the Small Cap Index Equity Fund is to replicate, after taking into account Fund expenses, the total rate of return of the Russell 2000 Index by investing generally in securities included in such Index. There can be no assurance that the Small Cap Index Equity Fund will achieve its investment objective of replicating the total return of the Russell 2000 Index.
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Strategy. The Small Cap Index Equity Fund invests in securities of U.S. companies included in the Russell 2000 Index. The Russell 2000 Index is comprised of the approximately 2,000 companies in the Russell 3000 Index with the smallest market capitalization and represents approximately 10% of the Russell 3000 total market capitalization. The Small Cap Index Equity Fund may also hold U.S. Government Obligations, short-term fixed-income securities, equity index futures, exchange-traded funds and other similar derivative instruments as deemed appropriate by State Street Bank. The Small Cap Index Equity Fund, in addition to its equity investments, also maintains a position of generally less than 5% in Russell 2000 Index futures contracts. The Russell 2000 Index is reconstituted on a periodic basis by the sponsor of the Index. The Russell 2000 returns assume reinvestment of all dividends. Frank Russell & Company, which sponsors the Russell 2000® Index, does not sponsor the Small Cap Index Equity Fund, and is not affiliated in any way with the Small Cap Index Equity Fund or with State Street.
The Small Cap Index Equity Fund, in addition to its specified equity investments, may also engage in transactions in derivatives, including, but not limited to, financial futures (including interest rate futures), swap contracts and foreign currency forwards, options and futures instruments, CMOs and other derivative mortgage-backed securities or other investments as State Street Bank deems appropriate under the circumstances.
Investment Guidelines and Restrictions. The Small Cap Index Equity Fund invests primarily in units of common stocks of U.S. companies in the same capitalization weights as they appear in the Russell 2000 Index. However, the Small Cap Index Equity Fund may invest temporarily and without limitation for defensive purposes in short-term fixed-income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for redemptions. State Street Bank will not cause the Small Cap Index Equity Fund to make an investment if that investment would cause the Small Cap Index Equity Fund to purchase warrants or make any other investment that is inconsistent with the restrictions applicable to the Small Cap Index Equity Fund described under Information with Respect to the FundsInvestment Prohibitions. The Small Cap Index Equity Fund concentrates in particular industries to the extent the Russell 2000 Index concentrates in those industries. The Small Cap Index Equity Fund will not borrow money except as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions (not for leveraging or investment).
Risk Factors. Equity Markets Risk. By investing in the U.S. equity market, the Small Cap Index Equity Fund is subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. The Unit price of the Small Cap Index Equity Fund will fluctuate, and the holders of Units in the Small Cap Index Equity Fund should be able to tolerate declines, sometimes sudden or substantial, in the value of their investment. The Small Cap Index Equity Fund is intended to be a long-term investment vehicle and is not designed to provide a means to speculate on short-term U.S. stock market movements.
Risk of Investing in Small Companies. Most of the Small Cap Index Equity Funds investments will be indirectly invested in securities of small companies, which typically have greater market and financial risk than larger, more diversified companies. These companies are often dependent on one or two products in rapidly changing industries and may be more vulnerable to competition from larger companies with greater resources and to economic conditions that affect their market sector. Therefore, consistent earnings for such companies may not be as likely as they would be for more established companies. The smaller companies may not have adequate resources to react optimally to change or to exploit opportunities. Smaller companies may also be more dependent on access to equity markets to raise capital than larger companies that have a greater ability to support relatively larger debt burdens. The securities of small companies may be held primarily by insiders or institutional investors, which may
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have an impact on their marketability. These securities may be more volatile than the overall market. Relatively new companies and companies that have recently made an initial public offering may be perceived by the market as unproven. The Small Cap Index Equity Funds focus on appreciation potential will result in an emphasis on securities of companies that may pay little or no dividends and reinvest all or a significant portion of their earnings. The low expected dividend level may also contribute to greater than average volatility.
Risks of Investment in Derivative Instruments. The Small Cap Index Equity Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
Risks Associated with Short-Term Debt Instruments. For information and risk factors associated with investing in stable assets or cash-equivalent instruments, see Stable Asset Return FundRisk Factors.
Tracking Error Risk and Risks Associated with Index Investing. Deviation of the performance of the Small Cap Index Equity Fund from the performance of the Russell 2000 Index, known as tracking error, can result from various factors, including purchases and redemptions of Units of the Small Cap Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, as well as from the fees and expenses borne by the Small Cap Index Equity Fund or such underlying fund. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the Small Cap Index Equity Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the Small Cap Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, changes made in the securities included in the Russell 2000 Index or the manner in which the performance of the Russell 2000 Index is calculated.
Portfolio Turnover. Ordinarily, the Small Cap Index Equity Fund will sell securities only to reflect changes in the Russell 2000 Index or to accommodate cash flows into or out of the Fund. The Small Cap Index Equity Fund seeks to create a portfolio which substantially replicates the total return of the Russell 2000 Index. The Small Cap Index Equity Fund is not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for the Small Cap Index Equity Fund may be lower than those incurred by non-index, actively managed funds.
Portfolio turnover of the Small Cap Index Equity Fund was 192% for the period from the Funds inception date, February 3, 2009, to December 31, 2009. This turnover reflects purchases and sales by the Fund of shares of the SSgA Russell Small Cap Index Non-Lending Series Fund, the collective investment fund through which the Fund invests, rather than the turnover of the underlying portfolio of the collective investment fund. The portfolio turnover for the SSgA Russell Small Cap Index Non-Lending Series Fund was 103% for the twelve months ended December 31, 2009 and 15% for the twelve months ended December 31, 2008.
Investment Advisor. State Street Bank manages the Small Cap Index Equity Fund. For its services, State Street Bank receives a fee payable from the Small Cap Index Equity Funds assets at an annual rate of .05% of the total assets of the Small Cap Index Equity Fund. The assets of the Small Cap Index Equity Fund are invested indirectly through the SSgA Russell Small Cap® Index Non-Lending Series Fund, which is a collective investment fund maintained by State Street Bank. In the future, State Street may employ other investment advisors for the Small Cap Index Equity Fund, at its discretion and subject to consultation with Northern Trust.
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Russell 2000® Index is a trademark of Frank Russell & Company. The Russell 2000 Index is not sponsored, endorsed, sold or promoted by Frank Russell & Company, nor does Frank Russell & Company guarantee the accuracy and/or completeness of the Russell 2000 Index or any data included therein. Frank Russell & Company makes no warranty, express or implied, as to the results to be obtained by the Fund, owners of the Fund, any person or any entity from the use of the Russell 2000 Index or any data included therein. Frank Russell & Company makes no express or implied warranties and expressly disclaims all such warranties of merchantability or fitness for a particular purpose for use with respect to the Russell 2000 Index or any data included therein.
INTERNATIONAL INDEX EQUITY FUND
Investment Objective. The investment objective of the International Index Equity Fund is to replicate, after taking into account Fund expenses, the total rate of return of the MSCI ACWI ex-US Index by investing generally in securities included in such Index. There can be no assurance that the International Index Equity Fund will achieve its investment objective of replicating the total return of the MSCI ACWI ex-US Index.
Strategy. The International Index Equity Fund invests in securities of foreign companies included in the MSCI ACWI ex-US Index. The International Index Equity Fund may invest in securities in country or regional collective investment funds maintained by State Street Bank which together are designed to replicate the MSCI ACWI ex-US Index. These country and regional funds seek to replicate their respective sub-indexes by owning securities in approximately the same capitalization weights as they appear in their respective sub-indexes. In markets that contain liquid securities and few foreign ownership restrictions, the International Index Equity Fund seeks to hold every security in its approximate index weight. In emerging markets that impose significant restrictions on non-local investors, the International Index Equity Fund seeks to supplement investment in local securities by holding alternatives such as ADRs, Global Depository Receipts, which we refer to as GDRs, closed-end country funds, and equity swaps. The International Index Equity Fund, in addition to its equity investments, also maintains a position of generally less than 5% in unleveraged futures contracts. The MSCI ACWI ex-US Index consists of approximately 1,800 securities in 45 markets, with securities of emerging markets representing approximately 20% of the index. The MSCI ACWI ex-US Index is reconstituted on a periodic basis by the sponsor of the Index. Morgan Stanley Capital International, which sponsors the MSCI ACWI ex-US Index, does not sponsor the International Index Equity Fund, and is not affiliated in any way with the International Index Equity Fund or with State Street.
The International Index Equity Fund, in addition to its specified equity investments, may also engage in transactions in derivatives, including, but not limited to, financial futures (including interest rate futures), swap contracts and foreign currency forwards, options and futures instruments or other investments as State Street Bank deems appropriate under the circumstances.
Investment Guidelines and Restrictions. The International Index Equity Fund invests primarily in securities of foreign companies in the same capitalization weights as they appear in the MSCI ACWI ex-US Index. However, the International Index Equity Fund may invest temporarily and without limitation for defensive purposes in short-term fixed income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for redemptions. State Street Bank will not cause the International Index Equity Fund to make an investment if that investment would cause the International Index Equity Fund to purchase warrants or make any other investment that is inconsistent with the restrictions applicable to the International Index Equity Fund described under Information with Respect to the FundsInvestment Prohibitions. The International Index Equity Fund concentrates in particular industries to the extent the MSCI ACWI ex-US Index concentrates in those industries. The International Index Equity Fund will not borrow money except as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions (not for leveraging or investment).
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Risk Factors. Equity Markets Risk. The International Index Equity Funds Unit price can fall because of weakness in one or more of its primary equity markets, a particular industry, or specific holdings. Equity markets can decline for many reasons, including adverse political or economic developments, changes in investor psychology, or heavy institutional selling. The prospects for an industry or company may deteriorate because of a variety of factors, including disappointing earnings or changes in the competitive environment. In addition, the investment assessment of companies held in the International Index Equity Fund may prove incorrect, resulting in losses or poor performance even in rising markets.
Currency Risk. Currency risk refers to a decline in the value of a foreign currency versus the value of the U.S. dollar, which reduces the U.S. dollar value of securities denominated in that currency. The overall impact on the International Index Equity Funds holdings can be significant, unpredictable and long-lasting, depending on the currencies represented in the International Index Equity Funds portfolio and how each one appreciates or depreciates in relation to the U.S. dollar and whether currency positions are hedged. Under normal conditions, the International Index Equity Fund will not engage in foreign currency hedging programs other than in connection with settlements of purchases or sales of securities for the Fund. Exchange rate movements are unpredictable and it is not possible to effectively hedge the currency risks of many developing countries.
Political and Economic Factors. The economic and political structures of developing nations, in most cases, do not compare favorably with the United States or other developed countries in terms of wealth and stability and their financial markets often lack liquidity. Therefore, investments in these emerging countries are riskier, and may be subject to erratic and abrupt price movements. Even investments in countries with highly developed economies are subject to risk. For example, prices of Japanese stocks suffered a steep decline during much of the 1990s. Moreover, while some countries have made progress in economic growth, liberalization, fiscal discipline and political and social stability, there is no assurance these trends will continue. Investment in these markets is, therefore, significantly riskier than investment in other markets.
The economies of some of the countries in which the International Index Equity Fund may invest may rely heavily on particular industries and be more vulnerable to the ebb and flow of international trade, trade barriers and other protectionist or retaliatory measures. Some countries have legacies of hyperinflation and currency devaluations versus the U.S. dollar, particularly Russia, many Latin American nations and several Asian countries. Investments in countries that have recently begun moving away from central planning and state-owned industries toward free markets should be regarded as speculative.
Some of the countries in which the International Index Equity Fund may invest have histories of instability and upheaval that could cause their governments to act in a detrimental or hostile manner toward private enterprise or foreign investment. Governmental actions such as capital or currency controls, nationalization of an industry or company, expropriation of assets, or imposition of high taxes could have an adverse effect on security prices and impair the International Index Equity Funds ability to repatriate capital or income. Significant external risks currently affect some emerging countries. Governments in many emerging market countries participate to a significant degree in the countries economies and securities markets.
Other Risks of Foreign Investing. Some of the countries in which the International Index Equity Fund may invest lack uniform accounting, auditing and financial reporting standards, have less governmental supervision of financial markets than in the United States, do not honor legal rights enjoyed in the United States and have settlement practices which may subject the International Index Equity Fund to risks of loss not customary in U.S. markets. In addition, securities markets in some countries have substantially lower trading volumes than U.S. markets, resulting in less liquidity and more volatility than experienced in the United States.
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Pricing. The underlying portfolio securities may be listed on foreign exchanges that are open on days (such as Saturdays or U.S. legal holidays) when the International Index Equity Fund does not compute its prices. As a result, the International Index Equity Funds net asset value may be significantly affected by trading on days when transactions in Units of the International Index Equity Fund do not occur.
Investing in International Stocks. Like U.S. stock investments, common stocks of foreign companies offer investors a way to build capital over time. Nevertheless, the long-term rise of foreign stock prices as a group has been punctuated by periodic declines. Share prices of all companies, even the best managed and most profitable, whether U.S. or foreign, are subject to market risk, which means they can fluctuate widely. The volatility of emerging markets may be heightened by actions of a few major investors. For example, substantial increases or decreases in cash flows of mutual funds investing in these markets could significantly affect stock prices and, therefore, the Funds Unit price. For this reason, investors in foreign stocks should have a long-term investment horizon and be willing to wait out declining markets. The International Index Equity Fund should not be relied upon as a complete investment program or used as a means to speculate on short-term swings in the stock or foreign exchange markets.
The values of foreign fixed-income securities fluctuate in response to changes in U.S. and foreign interest rates. Income received by the International Index Equity Fund from sources within foreign countries may also be reduced by withholding and other taxes imposed by those countries, although tax conventions between some countries and the United States may reduce or eliminate these taxes. Any taxes paid by the International Index Equity Fund will reduce the net income earned by the International Index Equity Fund. State Street Bank will consider available yields, net of any required taxes, in selecting foreign dividend paying securities.
In addition, short-term movements in currency exchange rates could adversely impact the availability of funds to pay for redemptions of Units of the International Index Equity Fund. For example, if the exchange rate for a currency declines after a security has been sold to provide funds for a redemption from the International Index Equity Fund but before those funds are translated into U.S. dollars, it could be necessary to liquidate additional portfolio securities in order to finance the redemption.
Risks of Investment in Derivative Instruments. The International Index Equity Fund is subject to the risks associated with the use of derivatives to the extent the Fund is permitted to use them. See Derivative Instruments.
Restriction on Transfer into Fund. The International Index Equity Fund restricts a participants ability to make more than one transfer into the International Index Equity Fund within any 45 calendar day period. See Transfers Among Investment Options and WithdrawalsFrequent Trading; Restrictions on Transfers.
Tracking Error Risk and Risks Associated with Index Investing. Deviation of the performance of the International Index Equity Fund from the performance of the MSCI ACWI ex-US Index, known as tracking error, can result from various factors, including purchases and redemptions of Units of the International Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, as well as from the fees and expenses borne by the International Index Equity Fund or such underlying fund. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the International Index Equity Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the International Index Equity Fund or the underlying State Street Bank collective investment fund in which the Fund invests, changes made in the securities included in the MSCI ACWI ex-US Index or the manner in which the performance of the MSCI ACWI ex-US Index is calculated.
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Portfolio Turnover. Ordinarily, the International Index Equity Fund will sell securities only to reflect changes in the MSCI ACWI ex-US Index or to accommodate cash flows into or out of the Fund. The International Index Equity Fund seeks to create a portfolio which substantially replicates the total return of the MSCI ACWI ex-US Index. The International Index Equity Fund is not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for the International Index Equity Fund may be lower than those incurred by non-index, actively managed funds.
Portfolio turnover of the International Index Equity Fund was 147% for the period from the Funds inception date, March 3, 2009, to December 31, 2009. This turnover reflects purchases and sales by the Fund of shares of the SSgA Global Equity ex U.S. Index Non-Lending Series Fund, the collective investment fund through which the Fund invests, rather than the turnover of the underlying portfolio of the collective investment fund. The portfolio turnover for the SSgA Global Equity ex U.S. Index Non-Lending Series Fund was 4% for the approximate six month period from the collective investment funds inception date to December 31, 2009.
Investment Advisor. State Street Bank manages the International Index Equity Fund. For its services, State Street Bank receives a fee payable from the International Index Equity Funds assets at an annual rate of .10% of the total assets of the International Index Equity Fund. The assets of the International Index Equity Fund are invested indirectly through the SSgA Global Equity ex U.S. Index Non-Lending Series Fund, which is a collective investment fund maintained by State Street Bank. In the future, State Street may employ other investment advisors for the International Index Equity Fund, at its discretion and subject to consultation with Northern Trust.
Transfer Restrictions. The International Index Equity Fund maintains a transfer policy that restricts a Participants ability to make more than one transfer into the International Index Equity Fund within any 45 calendar-day period. There is no restriction on a Participants ability to make transfers out of the Fund. State Street has adopted this policy for the International Index Equity Fund to prevent disruptions to the International Index Equity Fund that could potentially affect the investment performance of the International Index Equity Fund. For more information regarding this policy, see Transfers Among Investment Options and WithdrawalsFrequent Trading; Restrictions on Transfers.
MSCI ACWI Ex-US IndexSM is a trademark of Morgan Stanley Capital International (MSCI). The financial products described herein are indexed to an MSCI index. The financial products referred to herein are not sponsored, endorsed, or promoted by MSCI, and MSCI bears no liability with respect to any such financial products or any index on which such financial products are based.
Investment Objective. The investment objective of the Real Asset Return Fund is to provide capital appreciation in excess of inflation as measured by the All Items Less Food and Energy Consumer Price Index for All Urban Consumers for the U.S. City Average, 1982-84 = 100, which we refer to as the Core Consumer Price Index or Core CPI (which excludes food and energy). There can be no assurance that the Real Asset Return Fund will achieve its investment objective.
Strategy. The Fund invests in a diversified portfolio of primarily Treasury Inflation Protected Securities, which we refer to as U.S. TIPS, commodity futures and real estate investment trusts, which we refer to as REITs, with the objective of achieving a total return in excess of inflation as measured by the Core CPI (which excludes food and energy).
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Exposure to asset classes is obtained by investing indirectly in various index or other collective investment funds maintained by State Street Bank. These funds include the following collective investment funds maintained by State Street Bank:
· | SSgA/Tuckerman REIT Index Non-Lending Series Fund, which we refer to as the REIT Index Fund; |
· | SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund, which we refer to as the TIPS NL Fund; and |
· | SSgA Dow Jones UBS-Commodity IndexSM Non-Lending Series Fund, which we refer to as the Commodity Index NL Fund. |
The REIT Index Fund seeks to match the returns and characteristics of the Dow Jones U.S. Select REIT Index. The fund seeks to match the return of the index by investing in a portfolio that holds the same securities as the index.
The Dow Jones U.S. Select REIT IndexSM is calculated and distributed by Dow Jones Indexes. The Dow Jones U.S. Select IndexesSM are calculated and distributed by Dow Jones Indexes. The Dow Jones service mark has been licensed for use by SSgA. SSgAs REIT Index Fund based on the Dow Jones U.S. Select Indexes, is not sponsored, endorsed, sold, or promoted by Dow Jones and Dow Jones makes no representation regarding the advisability of investing in the Real Asset Return Fund. Inclusion of a company in the Dow Jones U.S. Select Indexes does not in any way reflect an opinion of Dow Jones on the investment merits of the product.
The TIPS NL Fund seeks to match the total rate of return of the Barclays Capital U.S. Treasury Inflation Protected Securities Index by investing in a portfolio of U.S. Treasury inflation protected securities. It is managed duration neutral to the Barclays Capital U.S. Treasury Inflation Protected Securities Index at all times. Overall sector and security weightings are also managed to match the U.S. Treasury Inflation Protected Securities Index.
Barclays Capital and Barclays Bank PLC, which sponsor the Barclays U.S. TIPS Index, do not sponsor the Real Asset Return Fund, and are not affiliated in any way with the Real Asset Return Fund or with State Street. The Barclays U.S. TIPS Index is a trademark of Barclays Capital, a division of Barclays Bank, PLC.
The Commodity Index NL Fund seeks to match the returns and characteristics of the Dow Jones-UBS Commodity Index, which is composed of future contracts on physical commodities. The Commodity Index NL Fund provides daily, low-cost access to the returns of the commodities futures market by investing in a combination of Dow Jones-UBS Commodity futures contracts, individual commodity futures, and total return swaps.
UBS, Dow Jones-UBS Commodity IndexSM and DJ-UBSCISM are service marks of Dow Jones & Company, Inc. and American International Group, Inc. (American International Group), as the case may be, and have been licensed for use for certain purposes by SSgA. SSgAs Enhanced Dow Jones-UBS Commodities Index Strategy based on the Dow Jones-UBS Commodity Index is not sponsored, endorsed, sold or promoted by Dow Jones, UBS AG or any of their respective subsidiaries or affiliates, and none of Dow Jones, UBS AG, or any of their respective subsidiaries or affiliates, and none of Dow Jones, UBS AG, or any of their respective subsidiaries or affiliates makes any representation regarding the advisability of investing in such product(s).
These collective investment funds, in addition to their specified investments, may also engage in transactions in derivatives, including, but not limited to, futures, swaps, options and other derivative
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instruments (including but not limited to equity index futures, foreign currency forwards and other similar derivatives) or other investments as State Street Bank deems appropriate under the circumstances.
Assets in the Real Asset Return Fund are currently allocated as follows:
REIT Index Fund |
10% to 40% | |
TIPS NL Fund |
20% to 60% | |
Commodity Index NL Fund |
10% to 40% | |
Cash |
0% to 20% |
Allocations of the funds underlying the Real Asset Return Fund are readjusted by State Street Bank on a regular basis to maintain the appropriate asset mix given State Streets forecasts for inflation and long-term asset class forecasts for return and risk, taking into account various macro-economic factors affecting the long-term outlook for capital markets, inflation and other factors.
Investment Guidelines and Restrictions. The Real Asset Return Fund invests in varying degrees, as described above, in U.S. TIPS, commodity futures and REITs. However, the Real Asset Return Fund may invest temporarily and without limitation for defensive purposes in short-term fixed-income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for investor redemptions.
Risk Factors. Risks of Investing in REITs. REITs in the REIT Index Fund tend to be medium-size and small companies. Like small-capitalization stocks in general, REIT stocks can be more volatile thanand at times will perform differently fromthe large capitalization stocks such as those found in the S&P 500. In addition, because small-capitalization stocks are typically less liquid than large capitalization stocks, REIT stocks may sometimes experience greater share-price fluctuations than the stocks of larger companies. Because the REIT Index Fund invests in equity REITs, the Real Asset Return Fund is also subject to all the risks associated with the ownership of real estate. These risks include: declines in the value of real estate, adverse changes in the economic conditions applicable to real estate, risks related to general and local economic conditions, over-building and increased competition, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, leveraging of interests in real estate, increases in prevailing interest rates and costs resulting from clean-up of environmental problems or liability to third parties for damages arising from environmental problems. In addition, equity REITs may be affected by changes in the value of the underlying property owned by them, are dependent upon management skill, may not be diversified and can be subject to the risk of investing in a single or a limited number of projects. Such REITs also are very dependent on the availability of significant cash flow, defaults by borrowers, self liquidation and the possibility of failing to qualify for special tax treatment under Subchapter M of the Internal Revenue Code and to maintain an exemption under the Investment Company Act of 1940. Finally, certain REITs may be self-liquidating in that a specific term of existence is provided for in the trust document. Such REITs run the risk of liquidating at an economically inopportune time.
Risks of U.S. TIPS. The Real Asset Return Fund is also subject to interest rate risk to the extent invested in U.S. TIPS. Generally, when interest rates rise, the value of inflation-indexed securities will fall, although not necessarily as significantly as other longer-term bonds. U.S. TIPS are also subject to deflation risk. Deflation risk is the possibility that prices throughout the economy decline over timethe opposite of inflation. If inflation is negative, the principal and income of an inflation-protected bond will decline and could result in losses. The greatest risk for the Real Asset Return Fund to the extent invested in U.S. TIPS, occurs when interest rates rise and inflation declines.
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Risks Associated with Commodity Investments. The Real Asset Return Fund, to the extent invested in commodities, commodity futures or related instruments, are subject to special investment risks. Investments in commodity-linked derivative instruments may subject the investor to greater volatility than investments in traditional securities. The value of these instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. Commodity prices fluctuate for myriad reasons, including changes in market and economic conditions, the impact of weather on demand, levels of domestic production and imported commodities, energy conservation, domestic and foreign governmental regulation and taxation and the availability of local, intrastate and interstate transportation systems. Volatility of commodity prices, which may lead to a reduction in production or supply, may also negatively impact the performance of companies in natural resources industries that are solely involved in the transportation, processing, storing, distribution or marketing of commodities. Volatility of commodity prices may also make it more difficult for companies in natural resources industries to raise capital to the extent the market perceives that their performance may be directly or indirectly tied to commodity prices. In addition, the regulation of commodities is extensive and variable, and regulatory or political events could have an adverse effect on the performance of commodity-linked investments. Furthermore, the restrictions on insider trading are not generally applicable to the commodities markets. Consequently, the Real Asset Return Fund may be trading at a material disadvantage to other market participants with better market access or information sources.
Counterparty Risks. Many of the protections afforded to participants on some organized exchanges, such as the performance guarantee of an exchange clearing house, are not available in connection with over-the-counter, or OTC, derivatives transactions. Therefore, in those instances in which the Real Asset Return Fund enters into OTC derivatives transactions, the Fund will be subject to the risk that its direct counterparty will not perform its obligations under the transactions and that the Fund will sustain losses and be less likely to achieve its investment objective.
Risks Related to Investment in Derivatives. The Real Asset Return Fund may use futures, forwards, warrants, options, swaps and other derivative instruments to hedge or protect the Fund from adverse movements in underlying securities prices and interest rates or as an investment strategy to help attain the Funds investment objective. The Real Asset Return Fund may also use a variety of currency hedging techniques, including foreign currency contracts, to attempt to hedge exchange rate risk or to gain exposure to a particular currency. The Funds use of derivatives could reduce returns, may not be liquid and may not correlate precisely to the underlying securities or index. Derivative securities are subject to market risk, which could be significant for those derivatives that have a leveraging effect that could increase the volatility of the Fund and may reduce returns for the Fund. Derivatives are also subject to the risk of material and prolonged deviations between the theoretical and realizable value of a derivative (e.g., due to non-conformance to anticipated or historical correlation patterns). Derivatives are also subject to credit risks related to the counterpartys ability to perform, and any deterioration in the counterpartys creditworthiness could adversely affect the instrument. A risk of using derivatives for hedging purposes is that the an advisor might imperfectly judge the markets direction, which could render a hedging strategy ineffective or have an adverse effect on the value of the derivative. Furthermore, in privately negotiated transactions the risk of the negotiated price deviating materially from fair value is substantial, particularly when there is no active market available from which to derive benchmark prices. Many derivatives are valued on the basis of dealers pricing of these instruments. However, the price at which dealers value a particular derivative should the Real Asset Return Fund wish or be forced to sell such position may be materially different.
There has been substantial disruption in the derivatives markets related to the recent bankruptcies of major financial institutions and market participants and uncertainty relating to the government bailout of certain market participants as well as uncertainty relating to various government interventions.
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Such disruption and uncertainty can cause substantial losses to the Fund if its derivatives transactions are prematurely terminated, especially due to default when payment may be delayed or completely lost.
Risk of Reliance on Industry Research. The Real Asset Return Fund is dependent to a significant extent on information and data obtained from a wide variety of sources, such as financial publications that monitor markets and investments, industry research materials, ratings issued by one or more nationally recognized credit rating agencies to assess the credit quality of securities in which it proposes to invest, and other materials prepared by others. There may be limitations on the quality of such information, data, publications, research and ratings, and the Real Asset Return Funds Investment Advisor generally does not independently verify any of the same. There is a risk of loss associated with securities even if initially perceived by the investment community as of relatively low risk, such as in the case of collateralized debt obligations and other structured-finance investments that are often highly complex.
Risks Associated with Short-Term Debt Instruments. For information and risk factors associated with investing in stable assets or cash-equivalent instruments, see Stable Asset Return FundRisk Factors.
Tracking Error Risk. Deviation of the performance of the Real Asset Return Fund from the performance of its related composite benchmark or the respective benchmarks for the underlying collective investment funds of State Street Bank in which it invests, known as tracking error, can result from various factors, including purchases and redemptions of Units of the Real Asset Return Fund or the Funds underlying collective investment funds, as well as from the fees and expenses borne by the Real Asset Return Fund or such underlying funds. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the Real Asset Return Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the Real Asset Return Fund or the Funds underlying collective investment funds, changes made in the securities included in the indices underlying the benchmarks or the manner in which the performance of the indices is calculated.
Portfolio Turnover. Ordinarily, an index fund, such as those in which the Real Asset Return Fund invests its assets, will sell securities only to reflect changes in the index in which it invests or to accommodate cash flows into or out of the fund. Index funds seek to create a portfolio which substantially replicates the total return of the applicable index. Index funds are not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for index funds may be lower than those incurred by non-index, actively managed funds.
Portfolio turnover of the Real Asset Return Fund was 14% for the period from the Funds inception date, July 7, 2009, to December 31, 2009. This turnover reflects purchases and sales by the Fund of shares of the REIT Index Fund, the TIPS NL Fund and the Commodity Index NL Fund, the collective investment funds through which the Fund invests, rather than the turnover of the underlying portfolio of such collective investment funds. The portfolio turnover for the REIT Index Fund was 29% for its fiscal year ended December 31, 2009. The portfolio turnover for the TIPS NL Fund and the Commodity Index NL Fund was 112% and 41%, respectively, for the twelve months ended December 31, 2009 and 24% and 90%, respectively, for the twelve months ended December 31, 2008.
Investment Advisor. The Fund utilizes a passive approach whereby the Funds assets are allocated to one or more index funds, in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. Income and gains attributable to the assets allocated to each index fund remain allocated to that portion unless and until re-allocated by State Street, and any differences in relative investment performance of the index funds can change the percentage of total assets of the
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Fund comprising each portion. State Street allocates contributions and transfers to, and withdrawals and transfers from, the Real Asset Return Fund between the index funds of the Fund in a manner intended to achieve the targeted allocations of the Funds assets.
State Street Bank manages the indexed portion of the Funds assets through the Funds investment in the REIT Index Fund, the TIPS NL Fund and the Commodity Index NL Fund, all of which are collective investment funds maintained by State Street Bank. For its services, State Street Bank receives a fee payable from the Real Asset Return Funds assets at an annual rate of .09% of the total assets of the Fund. In the future State Street may employ other investment advisors for the Real Asset Return Fund at its discretion and subject to consultation with Northern Trust.
Investment Objective. The Retirement Date Funds provide a series of balanced investment funds each of which is designed by State Street Bank to correspond to a particular time horizon to retirement. The five Retirement Date Funds, designated as the Lifetime Income Retirement Date Fund, 2010 Retirement Date Fund, 2020 Retirement Date Fund, 2030 Retirement Date Fund and 2040 Retirement Date Fund, respectively, offer five separate target retirement date strategies, each with a distinct asset mix. With the exception of the Lifetime Income Retirement Date Fund, which is designed for those currently retired, each Retirement Date Funds asset mix will, over time, become progressively more conservative as the specified target retirement date draws nearer. The Retirement Date Funds utilize a broad range of asset classes and an annual rebalancing process to provide diversification of returns and risks consistent with the stated time horizon to retirement. Investment in each such asset class is obtained by investing in index strategies or other pooled strategies designed for low tracking error.
Each Retirement Date Fund has a different initial investment strategy representing different risk and reward characteristics that reflect the remaining time horizon to the most conservative investment mix. The longer the time horizon to the year in which a Retirement Date Fund will reach its most conservative investment mix, the greater is the Retirement Date Funds initial risk and potential reward profile. As now constituted, each Retirement Date Fund will reach its most conservative investment mix five years after the target retirement date. The target retirement date for each Retirement Date Fund, other than the Lifetime Income Retirement Date Fund, is the year specified in the Retirement Date Funds name.
The Lifetime Income Retirement Date Fund seeks to avoid significant loss of principal for investors who have reached or are beyond their retirement date and is comprised primarily of bonds and shorter-term high-quality debt instruments to provide stability and income (although such Fund also has a target equity exposure of 30%). The 2010 Retirement Date Fund currently seeks to provide a blend of capital appreciation and stability of principal for participants planning to retire in or around the year 2010. The 2020 Retirement Date Fund currently seeks to provide long-term capital appreciation and more limited stability of principal for participants planning to retire in or around the year 2020. The 2030 Retirement Date Fund currently seeks to provide long-term capital appreciation for participants planning to retire in or around the year 2030 and is comprised mainly of stocks for higher growth potential. The 2040 Retirement Date Fund currently seeks to provide long-term capital appreciation for participants planning to retire in or around the year 2040 and is comprised mainly of stocks for maximum growth potential. There can be no assurance that any Retirement Date Fund will achieve its investment objective.
Effective May 1, 2007, the Retirement Date Funds implemented a number of changes, including (i) a deferral of the year in which each Retirement Date Fund (other than the Lifetime Income Retirement Date Fund) will reach its most conservative investment mix until five years after the target
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retirement date, and (ii) changes in certain of the asset classes to which the Retirement Date Funds maintain exposure and the weightings of exposures to asset classes at various time horizons to most conservative investment mix. For instance, aggregate exposure to equity asset classes generally increased at any given time horizon. Effective December 31, 2009, the Retirement Date Funds implemented certain additional changes, including (i) incorporating a wider range of asset classes and (ii) adjusting the weightings of exposures to asset classes at various time horizons to most conservative investment mix.
Strategy. The Retirement Date Funds generally seek to replicate the total return of respective composite benchmarks, in percentages determined from time to time with respect to each Retirement Date Fund. Effective from and after December 31, 2009, the composite benchmarks for the Retirement Date Funds have included some or all of the Barclays Capital U.S. Long Government Bond Index, the Barclays Capital U.S. Aggregate Bond Index, the Barclays Capital US High Yield Very Liquid Index, the Barclays Capital 1-3 Year Government/Credit Index, the Barclays Capital U.S. Treasury Inflation Protected Securities, which we refer to as U.S. TIPS, Index, the S&P 500, the MSCI ACWI ex-US Index, the S&P MidCap 400, the Russell 2000 Index and the FTSE EPRA/NAREIT Global Developed Liquid Index. The Retirement Date Funds also seek to maintain a level of volatility (measured as standard deviation of returns) that approximates that of their respective composite benchmarks.
Exposure to equity, fixed-income and other asset classes is obtained by investing indirectly in various index or other collective investment funds maintained by State Street Bank. These funds include, in varying allocations for the respective Retirement Date Funds, some or all of the following collective investment funds maintained by State Street Bank:
· | SSgA U.S. Long Government Bond Index Securities Lending Series Fund and SSgA U.S. Long Government Bond Index Non-Lending Series Fund, which we refer to collectively as the Long Government Bond Fund; |
· | SSgA U.S. Bond Index Securities Lending Series Fund and SSgA U.S. Bond Index Non-Lending Series Fund, which we refer to collectively as the Bond Market Index Fund; |
· | SSgA U.S. High Yield Bond Index Non-Lending Series Fund, which we refer to as the High Yield Bond Fund; |
· | SSgA U.S. Short-Term Government/Credit Bond Index Non-Lending Series Fund, which we refer to as the Intermediate Bond Fund; |
· | SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund, which we refer to as the TIPS Fund; |
· | SSgA S&P 500® Index Securities Lending Series Fund and SSgA S&P 500® Index Non-Lending Series Fund, which we refer to collectively as the S&P 500 Index Fund; |
· | SSgA Global Equity ex U.S. Index Securities Lending Series Fund and SSgA Global Equity ex U.S. Index Non-Lending Series Fund, which we refer to collectively as the MSCI ACWI ex-US Index Fund; |
· | SSgA S&P MidCap Index Securities Lending Series Fund and SSgA S&P MidCap® Index Non-Lending Series Fund, which we refer to collectively as the S&P MidCap Index Fund; |
· | SSgA Russell Small Cap® Index Securities Lending Series Fund and SSgA Russell Small Cap Index Non-Lending Series Fund, which we refer to collectively as the Russell 2000 Index Fund; and |
· | SSgA/Tuckerman Global Real Estate Securities Index Non-Lending Series Fund, which we refer to as the Real Estate Fund. |
The Long Government Bond Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance record of the Barclays Capital U.S. Long Government
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Bond Index over the long term. The Barclays Capital U.S. Long Government Bond Index consists of U.S. Treasury and U.S. agency securities with maturities greater than ten years. The fund may invest in the securities comprising the Index in the same proportions as they are represented in the Index. However, due to the large number of securities in the Index and the fact that many of the securities comprising the Index may be unavailable for purchase, it may not be possible for the fund to purchase some of the securities included in the Index. In such case, the fund will select securities are believed to track the characteristics of the Index.
The Bond Market Index Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance record of the Barclays Capital U.S. Aggregate Bond Index over the long term. The Barclays Capital U.S. Aggregate Bond Index is representative of well-diversified exposure to the overall U.S. bond market, investing in U.S. Government Obligations and U.S. dollar-denominated corporate debt securities, mortgage-backed securities, commercial mortgage-backed securities and asset-backed securities. The fund may invest in the securities comprising the Index in the same proportions as they are represented in the Index. However, due to the large number of securities in the Index and the fact that many of the securities comprising the Index may be unavailable for purchase, it may not be possible for the fund to purchase some of the securities comprising the Index. In such a case, the fund will select securities which are believed to track the characteristics of the Index.
The High Yield Bond Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance record of the Barclays Capital US High Yield Very Liquid Index over the long term. The Barclays Capital US High Yield Very Liquid Index includes U.S. dollar denominated, non-investment grade, fixed-rate, taxable corporate bonds that have a remaining maturity of at least one year, are rated high-yield (Ba1/BB+/BB+ or below) using the middle rating of Moodys, S&P, and Fitch, respectively, and have $600 million or more of outstanding face value. The fund may invest in the securities comprising the Index in the same proportions as they are represented in the Index. However, due to the diverse composition of securities in the Index and the fact that many securities comprising the Index may be unavailable for purchase, it may not be possible for the fund to purchase some of the securities comprising the Index. In such a case, the fund will select securities comprising a portfolio is expected to provide a return comparable to that of the Index.
The Intermediate Bond Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the Barclays Capital U.S. 1-3 Year Government/Credit Bond Index over the long term. The Barclays Capital U.S. 1-3 Year Government/Credit Bond Index includes U.S. Treasury securities, U.S. agency securities, publicly issued U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity, and quality requirements. The fund may invest in the securities comprising the Index in the same proportions as they are represented in the Index. However, due to the diverse composition of securities in the Index and the fact that many securities comprising the Index may be unavailable for purchase, it may not be possible for the fund to purchase some of the securities comprising the Index. In such a case, the fund will select securities comprising a portfolio is expected to provide a return comparable to that of the Index.
The TIPS Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance record of the Barclays Capital U.S. TIPS Index over the long term. The Barclays Capital U.S. TIPS Index invests in U.S. Treasury inflation protected securities. The coupon payments and underlying principal are automatically increased to compensate for inflation as measured by the consumer price index. The maturities of the bonds in the Index are more than one year. The fund may invest in the securities included the Index in the same proportions as they are represented in the Index. However, it may not be possible for the fund to purchase some of the securities included in the Index. In such a case, the fund will select securities believed to track the characteristics of the Index.
The S&P 500 Index Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance record of the S&P 500 over the long term. The S&P 500 represents
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approximately 75% of the U.S. equity market based on the market capitalization of the companies in the S&P 500. As of December 31, 2009, the largest company in the S&P 500 had a market capitalization of approximately $323.72 billion and the smallest such company had a market capitalization of approximately $1.06 billion. The S&P 500 is reconstituted on a periodic basis by the sponsor of the Index. The fund will typically invest in the securities included in the Index in the same proportions as they are represented in the Index.
The MSCI ACWI ex-US Index Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the MSCI ACWI Ex-US Index over the long term. The MSCI ACWI ex-US Index consists of approximately 1,800 securities in 45 markets, with securities of emerging markets representing approximately 20% of the index. The MSCI ACWI ex-US Index is reconstituted on a periodic basis by the sponsor of the Index. The fund will typically invest in the securities comprising the Index in the same proportions as they are represented in the Index.
The S&P MidCap Index Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the S&P MidCap 400 over the long term. The S&P MidCap 400 includes 400 companies and as of December 31, 2009, represented approximately 7% of the U.S. equity market based on the market capitalization of the companies in the S&P MidCap 400. As of December 31, 2009, the largest company in the S&P MidCap 400 had a market capitalization of approximately $8.26 billion and the smallest such company had a market capitalization of approximately $260 million. The S&P MidCap 400 is reconstituted on a periodic basis by the sponsor of the Index. The fund will typically invest in the securities included in the Index in the same proportions as they are represented in the Index.
The Russell 2000 Index Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the Russell 2000 Index over the long term. The Russell 2000 Index is comprised of the approximately 2,000 companies in the Russell 3000 Index with the smallest market capitalization and represents approximately 10% of the Russell 3000 Index total market capitalization. The Russell 2000 Index is reconstituted on a periodic basis by the sponsor of the Index. The Russell 2000 Index returns assume reinvestment of all dividends. The fund seeks to invest in the securities included the Index in the same proportions as they are represented in the Index.
The Real Estate Fund seeks an investment return that approximates as closely as practicable, before expenses, the performance of the Dow Jones U.S. Select REIT Index over the long term, while providing participants the ability to purchase and redeem units on an as of basis. The Dow Jones U.S. Select REIT Index represents equity REITs and real estate operating companies traded in the U.S.
These collective investment funds, in addition to their specified equity, fixed-income and/or other investments, may also engage in transactions in derivatives, including, but not limited to, financial futures (including interest rate futures), swap contracts and foreign currency forwards, options and futures instruments, CMOs and other derivative mortgage-backed securities or other investments as State Street Bank deems appropriate under the circumstances. For the purpose of achieving income, each of these collective investment funds that includes the words Lending Fund or Lending Series Fund in its name may lend a portion of its portfolio securities to brokers, dealers and other financial institutions, subject to the same limitations, and on the same terms, as are applicable to securities lending by the Funds as described in Information with Respect to the FundsLoans of Portfolio Securities.
The Lifetime Income Retirement Date Fund invests in a combination of fixed-income securities, U.S. stocks, non-U.S. stocks and global real estate securities, and allocates its assets among these investments according to a fixed strategic asset allocation strategy. The Lifetime Income Retirement Date Fund is the most conservative strategy among the Retirement Date Funds. The Lifetime Income Retirement Date Fund is designed for investors who are past retirement age or otherwise are past initial withdrawal of substantial portions of their investments.
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Assets of the Lifetime Income Retirement Date Fund are allocated in 2010 as follows:
Fixed-Income |
65.0 | % | ||||
Long Government Bond Fund |
0.0 | % | ||||
Bond Market Index Fund |
20.0 | |||||
High Yield Bond Fund |
5.0 | |||||
Intermediate Bond Fund |
20.0 | |||||
TIPS Fund |
20.0 | |||||
Equity |
30.0 | % | ||||
S&P 500 Index Fund |
21.8 | % | ||||
MSCI ACWI ex-US Index Fund |
4.0 | |||||
S&P MidCap Index Fund |
2.5 | |||||
Russell 2000 Index Fund |
1.7 | |||||
Other |
5.0 | % | ||||
Real Estate Fund |
5.0 | % |
The 2010 Retirement Date Fund currently invests in a combination of fixed-income securities, U.S. stocks, non-U.S. stocks and global real estate securities, and allocates its assets among these investments according to an asset allocation strategy that varies generally on a pre-determined basis. On a regular basis, as often as annually, the 2010 Retirement Date Fund automatically will be rebalanced to a more conservative strategy until 2015, the year that is five years after the 2010 target retirement date. Over time, the equity allocations decrease and the fixed-income allocations increase. By the year 2015, the 2010 Retirement Date Fund is currently expected to (and is expected to remain) invested in its most conservative mix of fixed-income, equity and real estate securities, comparable to that of the Lifetime Income Retirement Date Fund.
Assets of the 2010 Retirement Date Fund are allocated in 2010 as follows:
Fixed-Income |
52.5 | % | ||||
Long Government Bond Fund |
15.0 | % | ||||
Bond Market Index Fund |
17.5 | |||||
High Yield Bond Fund |
5.0 | |||||
Intermediate Bond Fund |
2.5 | |||||
TIPS Fund |
12.5 | |||||
Equity |
42.5 | % | ||||
S&P 500 Index Fund |
28.8 | % | ||||
MSCI ACWI ex-US Index Fund |
8.0 | |||||
S&P MidCap Index Fund |
3.4 | |||||
Russell 2000 Index Fund |
2.3 | |||||
Other |
5.0 | % | ||||
Real Estate Fund |
5.0 | % |
The 2020 Retirement Date Fund currently invests in a combination of U.S. stocks, non-U.S. stocks and fixed-income securities, and allocates its assets among these investments according to an asset allocation strategy that varies generally on a pre-determined basis. On a regular basis, as often as annually, the 2020 Retirement Date Fund automatically will be rebalanced to a more conservative strategy until 2025, the year that is five years after the 2020 target retirement date. Over time, the equity allocations decrease and the fixed-income and real estate securities allocations increase. By the year 2025, the 2020 Retirement Date Fund is currently expected to (and is expected to remain) invested in its
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most conservative mix of fixed-income, equity and real estate securities, comparable to that of the Lifetime Income Retirement Date Fund.
Assets of the 2020 Retirement Date Fund are allocated in 2010 as follows:
Fixed-Income |
30.5 | % | ||||
Long Government Bond Fund |
20.0 | % | ||||
Bond Market Index Fund |
3.5 | |||||
High Yield Bond Fund |
3.5 | |||||
Intermediate Bond Fund |
0.0 | |||||
TIPS Fund |
3.5 | |||||
Equity |
69.5 | % | ||||
S&P 500 Index Fund |
41.5 | % | ||||
MSCI ACWI ex-US Index Fund |
16.5 | |||||
S&P MidCap Index Fund |
6.5 | |||||
Russell 2000 Index Fund |
5.0 | |||||
Other |
0.0 | % | ||||
Real Estate Fund |
0.0 | % |
The 2030 Retirement Date Fund currently invests in a combination of U.S. stocks, non-U.S. stocks and fixed-income securities, and allocates its assets among these investments according to an asset allocation strategy that varies generally on a pre-determined basis. On a regular basis, as often as annually, the 2030 Retirement Date Fund automatically will be rebalanced to a more conservative strategy until 2035, the year that is five years after the 2030 target retirement date. Over time, the equity allocations decrease and the fixed-income and real estate securities allocations increase. By the year 2035, the 2030 Retirement Date Fund is currently expected to (and is expected to remain) invested in its most conservative mix of fixed-income, equity and real estate securities, comparable to that of the Lifetime Income Retirement Date Fund.
Assets of the 2030 Retirement Date Fund are allocated in 2010 as follows:
Fixed-Income |
17.0 | % | ||||
Long Government Bond Fund |
17.0 | % | ||||
Bond Market Index Fund |
0.0 | |||||
High Yield Bond Fund |
0.0 | |||||
Intermediate Bond Fund |
0.0 | |||||
TIPS Fund |
0.0 | |||||
Equity |
83.0 | % | ||||
S&P 500 Index Fund |
45.0 | % | ||||
MSCI ACWI ex-US Index Fund |
21.5 | |||||
S&P MidCap Index Fund |
8.25 | |||||
Russell 2000 Index Fund |
8.25 | |||||
Other |
0.0 | % | ||||
Real Estate Fund |
0.0 | % |
The 2040 Retirement Date Fund currently invests in a combination of U.S. stocks, non-U.S. stocks and fixed-income securities, and allocates its assets among these investments according to an asset allocation strategy that varies generally on a pre-determined basis. On a regular basis, as often as annually, the 2040 Retirement Date Fund automatically will be rebalanced to a more conservative strategy until 2045, the year that is five years after the 2040 target retirement date. Over time, the equity
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allocations decrease and the fixed-income and real estate securities allocations increase. By the year 2045, the 2040 Retirement Date Fund is currently expected to (and is expected to remain) invested in its most conservative mix of fixed-income, equity and real estate securities, comparable to that of the Lifetime Income Retirement Date Fund.
Assets of the 2040 Retirement Date Fund are allocated in 2010 as follows:
Fixed-Income |
10.0 | % | ||||
Long Government Bond Fund |
10.0 | % | ||||
Bond Market Index Fund |
0.0 | |||||
High Yield Bond Fund |
0.0 | |||||
Intermediate Bond Fund |
0.0 | |||||
TIPS Fund |
0.0 | |||||
Equity |
90.0 | % | ||||
S&P 500 Index Fund |
45.0 | % | ||||
MSCI ACWI ex-US Index Fund |
25.0 | |||||
S&P MidCap Index Fund |
10.0 | |||||
Russell 2000 Index Fund |
10.0 | |||||
Other |
0.0 | % | ||||
Real Estate Fund |
0.0 | % |
Allocations of the funds underlying the Retirement Date Funds are readjusted by State Street Bank on a quarterly basis to maintain the desired percentage allocations.
Each of the Retirement Date Funds is designed to minimize volatility for a given level of expected return. The mix of asset classes is evaluated based on long-term asset class forecasts for return and risk, as determined by State Street, subject to consultation with ABA Retirement Funds, and takes into account various macro-economic factors affecting the long-term outlook for the capital markets. While each portfolios asset allocation generally changes according to a predetermined schedule, State Street Bank will periodically re-evaluate this schedule to assess whether it remains consistent with the portfolios objective given any secular changes to the capital market environment.
Investment Guidelines and Restrictions. The Retirement Date Funds invest in varying degrees, as described above, in U.S. stocks, non-U.S. stocks, bonds and stable value investments. However, each Retirement Date Fund may invest temporarily and without limitation for defensive purposes in short-term fixed-income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for investor redemptions. State Street Bank will not cause a Retirement Date Fund to make an investment if that investment would cause that Retirement Date Fund to purchase warrants or make any other investment that is inconsistent with the investment prohibitions applicable to the Funds described under Information with Respect to the FundsInvestment Prohibitions, except that the prohibition with respect to short sales will not apply to the Retirement Date Funds to the extent that they may hold short positions in debt securities to reduce exposure to interest rate movements. The Retirement Date Funds will not borrow money except as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions (not for leveraging or investment).
Risk Factors. Equity Markets Risk. To the extent invested in the equity markets, the Retirement Date Funds are subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. In addition, investments in non-U.S. securities, including
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emerging markets equities, and in small capitalization and mid-capitalization equity securities, involve special risks. For risk factors associated with investing in these securities, see International All Cap Equity FundRisk Factors and Small-Mid Cap Equity FundRisk Factors. The Unit prices of the Retirement Date Funds to the extent so invested in the equity markets will fluctuate, and the holders of Units in the Retirement Date Funds should be able to tolerate changes, sometimes sudden or substantial, in the value of their investment.
Interest Rate Risk Applicable to Investment in Fixed-Income Securities. The Retirement Date Funds, to the extent invested in longer-term fixed-income securities, are subject to the risks associated with investing in such instruments. Fixed-income securities such as bonds are issued to evidence loans that investors make to corporations and governments, either foreign or domestic. If prevailing interest rates fall, the market value of fixed-income securities that trade on a yield basis tend to rise. On the other hand, if prevailing interest rates rise, the market value of fixed-income securities generally will fall. In general, the shorter the maturity, the lower the yield but the greater the price stability. These factors may have an effect on the Unit price of the Retirement Date Funds. A change in the level of interest rates will tend to cause the net asset value per Unit of the Retirement Date Fund to change. If such interest rate changes are sustained over time, the yield of the Retirement Date Funds will fluctuate accordingly.
Risks of U.S. TIPS. The Retirement Date Funds are also subject to interest rate risk to the extent invested in U.S. TIPS. Generally, when interest rates rise, the value of inflation-indexed securities will fall, although not necessarily as significantly as other longer-term bonds. U.S. TIPS are also subject to deflation risk. Deflation risk is the possibility that prices throughout the economy decline over timethe opposite of inflation. If inflation is negative, the principal and income of an inflation-protected bond will decline and could result in losses. The greatest risk for Retirement Date Funds investing in U.S. TIPS occurs when interest rates rise and inflation declines.
Credit Risk Applicable to Investment in Fixed-Income Securities. Fixed-income securities, including corporate bonds, also are subject to credit risk. When a security is purchased, its anticipated yield is dependent on the timely payment by the borrower of each interest and principal installment. Credit analysis and bond ratings take into account the relative likelihood that such timely payment will result. Bonds with a lower credit rating tend to have higher yields than bonds of similar maturity with a better credit rating. However, to the extent the Retirement Date Funds invest in securities with medium or lower credit qualities, they are subject to a higher level of credit risk than investments that invest only in investment-grade securities. In addition, the credit quality of noninvestment-grade securities is considered speculative by recognized ratings agencies with respect to the issuers continuing ability to pay interest and principal. Lower-grade securities may have less liquidity and a higher incidence of default than higher-grade securities. Furthermore, as economic, political and business developments unfold, lower-quality bonds, which possess lower levels of protection with respect to timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity.
Risk of Reliance on Industry Research. The Retirement Date Funds are dependent to a significant extent on information and data obtained from a wide variety of sources, such as financial publications that monitor markets and investments, industry research materials, ratings issued by one or more nationally recognized credit rating agencies to assess the credit quality of securities in which it proposes to invest, and other materials prepared by others. There may be limitations on the quality of such information, data, publications, research and ratings, and the Retirement Date Funds Investment Advisor generally does not independently verify any of the same. For instance, certain asset-backed securities such as sub-prime CMOs and securities backed by bond insurance that initially received relatively high credit ratings were, in connection with the credit markets turbulence that began in 2007, subsequently significantly downgraded as the investment community came to realize that there were previously unanticipated risks associated with such securities. There is a risk of loss associated with securities even if initially perceived by the investment community as of relatively low risk, such as in the
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case of collateralized debt obligations and other structured-finance investments that are often highly complex.
Risks of Emerging Markets Equity Investing. To the extent invested in emerging markets equity securities, the Retirement Date Funds will be subject to the special risks associated with investing in these securities. See International All Cap Equity FundRisk Factors.
Risks Associated with Short-Term Debt Instruments. For information and risk factors associated with investing in stable assets or cash-equivalent instruments, see Stable Asset Return FundRisk Factors.
Tracking Error Risk. Deviation of the performance of a Retirement Date Fund from the performance of its related composite benchmark, known as tracking error, can result from various factors, including purchases and redemptions of Units of the Retirement Date Fund or the Retirement Date Funds underlying collective investment funds, as well as from the fees and expenses borne by the Retirement Date Fund or such underlying funds. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the Retirement Date Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the Retirement Date Fund or the Retirement Date Funds underlying collective investment funds, changes made in the securities included in the indices underlying the benchmarks or the manner in which the performance of the indices is calculated.
Risks of Securities Lending Undertaken by the Retirement Date Funds. The Retirement Date Funds are subject to the risks associated with the lending of securities, including the risks associated with defaults by the borrowers of such securities and the credit, liquidity and other risks arising out of the investment of cash collateral received from the borrowers. See Item 1A, Risk FactorsRisks Related to Securities Lending.
Traditional Investment Contracts and Synthetic GICs. To the extent the Retirement Date Funds invest in Traditional Investment Contracts and Synthetic GICs, the Retirement Date Funds will be subject to the risks associated with investing in these arrangements. See Stable Asset Return FundRisk Factors.
Risks of Investing in REITs. To the extent invested in REITs, the Retirement Date Funds will be subject to the risks associated with investing in those securities. See Real Asset Return FundRisk FactorsRisks of Investing in REITs.
Risks of Investing in High Yield Bonds. To the extent invested in high yield bonds, the Retirement Date Funds will be subject to the risks associated with investing in those securities, including default risk, interest rate risk and liquidity risk. High yield bonds are fixed-income securities that are classified by statistical rating organizations as below investment grade at the time of purchase. The risk that an issuer will be unable to pay interest or principal when due, known as default risk, is greater for a high yield bond than for an investment grade bond. Default risk is also generally higher in periods of economic downturn. A default of an issuer on its obligations or the perceived deterioration of the ability of an issuer to meet its obligations will likely have an adverse effect on the value of that issuers bonds. In addition, high yield bonds are subject to interest rate risk, or the risk that prevailing interest rates will increase during the term of the bond. Interest rate risk is greater for bonds with longer durations. If prevailing interest rates rise during the term of the bond, the market value of the bond generally will fall. A change in the level of interest rates will tend to cause an inverse change in the net asset value per Unit of the Fund. Also, high yield bonds have a greater liquidity risk than investment grade bonds. When a bond experiences a decrease in liquidity, for example because the bond is in default, the Fund may have to accept a lower price for the bond or may not be able to sell the bond at all. An inability to sell a bond can adversely affect the net asset value per Unit of the Fund or prevent the Fund from being able to take advantage of other investment opportunities.
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Risks of Investing in Short- to Intermediate-Term Bonds. To the extent invested in short- to intermediate term bonds, the Retirement Date Funds will be subject to the risks associated with investing in those securities, including interest rate risk. Over time, interest rates on bonds change. If prevailing interest rates rise, the market value of bonds generally will fall. The risk that prevailing interest rates will increase during the term of the bond, known as interest rate risk, is greater for bonds with longer durations. A change in the level of interest rates will tend to cause an inverse change in the net asset value per Unit of the Fund.
Valuation of Units. The Unit value for each Retirement Date Fund is the value of all assets of the Retirement Date Fund, less all liabilities of the Retirement Date Fund, divided by the number of outstanding Units of the Retirement Date Fund prior to adjustment for any contributions, transfers or withdrawals with respect to the Retirement Date Fund. A recorded message providing per Unit values for the Retirement Date Funds as of the close of business on the previous Business Day is available at (800) 826-8905. For the reasons set forth in Item 1A, Risk FactorsRisks Related to Securities Lending, State Street Bank currently determines the value of Units of each Retirement Date Fund consistent with its utilization of the amortized cost price of $1.00 per unit for purchases and sales of interests in its cash collateral funds described therein notwithstanding that the mark-to-market values of the Retirement Date Funds interests in such cash collateral funds are less than $1.00 and may be less than $1.00 in the future.
Liquidity and Transfers. Transfers to or withdrawals from any of the Retirement Date Funds may be made on any Business Day prior to 4:00 p.m. Eastern time (or, if earlier, the close of regular market trading). For additional information relating to transfers to and withdrawals from the investment options, and special restrictions on transfers in some cases, see Transfers Among Investment Options and Withdrawals.
Portfolio Turnover. Ordinarily, an index fund, such as those in which the Retirement Date Funds invest a substantial portion of their assets, will sell securities only to reflect changes in the index in which it invests or to accommodate cash flows into or out of the fund. Index funds seek to create a portfolio which substantially replicates the total return of the applicable index. Index funds are not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for index funds may be lower than those incurred by non-index, actively managed funds.
Portfolio turnover of the Retirement Date Funds for the twelve months ended December 31, 2009 was 54% for the Lifetime Income Retirement Date Fund, 56% for the 2010 Retirement Date Fund, 51% for the 2020 Retirement Date Fund, 48% for the 2030 Retirement Date Fund and 50% for the 2040 Retirement Date Fund. Portfolio turnover of the Retirement Date Funds for the twelve months ended December 31, 2008 was 33% for the Lifetime Income Retirement Date Fund, 27% for the 2010 Retirement Date Fund, 17% for the 2020 Retirement Date Fund, 15% for the 2030 Retirement Date Fund and 14% for the 2040 Retirement Date Fund.
With respect to each Retirement Date Fund, portfolio turnover reflects purchases and sales by such Retirement Date Fund of shares of the State Street Bank collective investment funds through which such Retirement Date Fund invests, rather than the portfolio turnover of the underlying portfolios of such collective investment funds.
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Investment Advisor. State Street Bank manages each of the Retirement Date Funds. For its services, State Street Bank receives a fee payable from each Retirement Date Funds assets at an annual rate of 0.10% of the total assets of such Retirement Date Fund. The assets of the Retirement Date Funds are invested through the following collective investment funds maintained by State Street Bank:
Retirement Date Fund |
Collective Investment Fund | |
Lifetime Income Retirement Date Fund |
SSgA Target Retirement Income Non-Lending Series Fund | |
SSgA Target Retirement Income Securities Lending Series Fund | ||
2010 Retirement Date Fund |
SSgA Target Retirement 2010 Non-Lending Series Fund | |
SSgA Target Retirement 2010 Securities Lending Series Fund | ||
2020 Retirement Date Fund |
SSgA Target Retirement 2020 Non-Lending Series Fund | |
SSgA Target Retirement 2020 Securities Lending Series Fund | ||
2030 Retirement Date Fund |
SSgA Target Retirement 2030 Non-Lending Series Fund | |
SSgA Target Retirement 2030 Securities Lending Series Fund | ||
2040 Retirement Date Fund |
SSgA Target Retirement 2040 Non-Lending Series Fund | |
SSgA Target Retirement 2040 Securities Lending Series Fund |
Investment Objective. The Target Risk Funds provide a series of balanced investment funds each of which is designed to correspond to a particular investment risk level. The three Target Risk Funds, designated as the Conservative Risk Fund, the Moderate Risk Fund and the Aggressive Risk Fund offer three separate strategies, each with a distinct asset mix. The risk profile of each Fund will not automatically readjust over time. The asset mix may change based on changing market conditions as determined by the Trustee. The Target Risk Funds utilize a broad range of asset classes and a quarterly rebalancing process to provide diversification of returns and risks consistent with the Funds risk profile. Investment in each such asset class is obtained by investing in index strategies or other pooled strategies designed for low tracking error. Each Target Risk Fund has a different investment strategy representing different risk and reward characteristics.
The Conservative Risk Fund seeks to avoid significant loss of principal and is comprised primarily of bonds and shorter-term high-quality debt instruments to provide stability and income (although such Fund also has a target equity exposure of 29%). The Moderate Risk Fund seeks to provide long-term capital appreciation and more limited stability of principal for participants. The Aggressive Risk Fund seeks to provide long-term capital appreciation for participants and is comprised mainly of stocks for maximum growth potential. There can be no assurance that any Target Risk Fund will achieve its investment objective.
Strategy. The Target Risk Funds generally seek to replicate the total return of respective composite benchmarks, in percentages determined from time to time with respect to each Target Risk Fund. The composite benchmarks for the Target Risk Funds include some or all of the Russell 3000 Index, the Morgan Stanley Capital International, which we refer to as MSCI, EAFE Index, the MSCI ACWI Ex-US Index, the Dow Jones U.S. Select REIT Index, the Barclays Capital U.S. Aggregate Bond Index, the Barclays Capital Global Real: U.S. Treasury Inflation Protected Securities, which we refer to as U.S. TIPS, Index, the Citigroup 3-Month T-Bill and the Dow Jones-UBS Commodity Index. The Target Risk Funds also seek to maintain a level of volatility (measured as standard deviation of returns) that approximates that of their respective composite benchmarks.
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Exposure to equity, fixed-income and other asset classes is obtained by investing indirectly in various index or other collective investment funds maintained by State Street Bank. These funds include, in the case of some or all of the Target Risk Funds and in varying allocations, the following collective investment funds maintained by State Street Bank:
· | SSgA Russell All Cap Index Non-Lending Series Fund, which we refer to as the Russell 3000 Index NL Fund; |
· | SSgA International Index Non-Lending Series Fund, which we refer to as the Daily EAFE NL Fund; |
· | SSgA Global Equity ex U.S. Index Non-Lending Series Fund, which we refer to as the MSCI ACWI ex-US Index NL Fund; |
· | SSgA/Tuckerman REIT Index Non-Lending Series Fund, which we refer to as the REIT Index Fund; |
· | SSgA U.S. Bond Index Non-Lending Series Fund, which we refer to as the Bond Market Index NL Fund; |
· | SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund, which we refer to as the TIPS NL Fund; |
· | SSgA Short Term Investment Fund, which we refer to as the Short-Term Fund or STIF; and |
· | SSgA Dow Jones UBS-Commodity IndexSM Non-Lending Series Fund, which we refer to as Commodity Index NL Fund. |
These collective investment funds, in addition to their specified equity, fixed-income and/or cash-equivalent investments, may also engage in transactions in derivatives, including, but not limited to, financial futures (including interest rate futures), swap contracts and foreign currency forwards, options and futures instruments, CMOs and other derivative mortgage-backed securities or other investments as State Street Bank deems appropriate under the circumstances.
The Conservative Risk Fund invests in a combination of U.S. stocks, non-U.S. stocks, bonds and cash-equivalent investments, and allocates its assets among these investments according to a fixed strategic asset allocation strategy. The Conservative Risk Fund is the most conservative strategy among the Target Risk Funds. The Conservative Risk Fund is designed for investors who prefer lower volatility of returns and higher expected income. Assets in the Conservative Risk Fund are currently targeted to be allocated as follows:
Equity |
29.0 | % | ||||
Russell 3000 Index NL Fund |
17.5 | % | ||||
Daily EAFE NL Fund |
5.5 | |||||
REIT Index Fund |
6.0 | |||||
Fixed-Income |
71.0 | % | ||||
Bond Market Index NL Fund |
55.0 | % | ||||
TIPS NL Fund |
10.0 | |||||
STIF |
6.0 |
The Moderate Risk Fund invests in a combination of U.S. stocks, non-U.S. stocks, bonds or cash-equivalent investments, and allocates its assets among these investments according to a fixed strategic asset allocation strategy. The Moderate Risk Fund is designed for investors who seek a combination of capital appreciation and income. This Fund is expected to have higher volatility of returns than the
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Conservative Risk Fund but less than the Aggressive Risk Fund. Assets in the Moderate Risk Fund are currently targeted to be allocated as follows:
Equity |
57.0 | % | ||||
Russell 3000 Index NL Fund |
37.0 | % | ||||
MSCI ACWI ex-US Index NL Fund |
14.0 | |||||
REIT Index Fund |
6.0 | |||||
Fixed-Income |
41.0 | % | ||||
Bond Market Index NL Fund |
34.0 | % | ||||
TIPS NL Fund |
5.0 | |||||
STIF |
2.0 | |||||
Other |
2.0 | % | ||||
Commodity Index NL Fund |
2.0 | % |
The Aggressive Risk Fund invests in a combination of U.S. stocks, non-U.S. stocks, bonds or cash-equivalent investments, and allocates its assets among these investments according to a fixed strategic asset allocation strategy. The Aggressive Risk Fund is designed for investors want to maximize growth and capital appreciation. This Fund is expected to the highest volatility of returns among the Target Risk Funds. Assets in the Aggressive Risk Fund are currently targeted to be allocated as follows:
Equity |
83.0 | % | ||||
Russell 3000 Index NL Fund |
55.0 | % | ||||
MSCI ACWI ex-US Index NL Fund |
22.0 | |||||
REIT Index Fund |
6.0 | |||||
Fixed-Income |
14.0 | % | ||||
Bond Market Index NL Fund |
14.0 | % | ||||
Other |
3.0 | % | ||||
Commodity Index NL Fund |
3.0 | % |
Allocations of the funds underlying the Target Risk Funds are readjusted by State Street Bank on a quarterly basis to maintain the desired percentage allocations.
Each of the Target Risk Funds is designed to minimize volatility for a given level of expected return. The mix of asset classes is evaluated based on long-term asset class forecasts for return and risk, as determined by State Street, subject to consultation with Northern Trust, and takes into account various macro-economic factors affecting the long-term outlook for the capital markets. While each portfolios asset allocation remains generally consistent, State Street will periodically re-evaluate this allocation to assess whether it remains consistent with the portfolios objective given any secular changes to the capital market environment.
Investment Guidelines and Restrictions. The Target Risk Funds invest in varying degrees, as described above, in U.S. stocks and non-U.S. stocks (including those of REITs), bonds and commodity investments. However, each Target Risk Fund may invest temporarily and without limitation for defensive purposes in short-term fixed-income securities. These securities may be used to invest uncommitted cash balances or to maintain liquidity to provide for investor redemptions. State Street will not cause a Target Risk Fund to make an investment if that investment would cause that Target Risk Fund to purchase warrants or make any other investment that is inconsistent with the investment prohibitions applicable to the Funds described under Information with Respect to the FundsInvestment Prohibitions, The Target Risk Funds will not borrow money except as a temporary measure for extraordinary or emergency purposes or to facilitate redemptions (not for leveraging or investment).
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Risk Factors. Equity Markets Risk. To the extent invested in the equity markets, the Target Risk Funds are subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. In addition, investments in non-U.S. securities, including emerging markets equities, and in small capitalization and mid-capitalization equity securities, involve special risks. For risk factors associated with investing in these securities, see International All Cap Equity FundRisk Factors, and Small-Mid Cap Equity FundRisk Factors. The Unit prices of the Target Risk Funds to the extent invested in the equity markets will fluctuate, and the holders of Units in the Target Risk Funds should be able to tolerate declines, sometimes sudden or substantial, in the value of their investment.
Interest Rate Risk Applicable to Investment in Fixed-Income Securities. The Target Risk Funds, to the extent invested in longer-term fixed-income securities, are subject to the risks associated with investing in such instruments. Fixed-income securities such as bonds are issued to evidence loans that investors make to corporations and governments, either foreign or domestic. If prevailing interest rates fall, the market value of fixed-income securities that trade on a yield basis tend to rise. On the other hand, if prevailing interest rates rise, the market value of fixed-income securities generally will fall. In general, the shorter the maturity, the lower the yield but the greater the price stability. These factors may have an effect on the Unit price of the Target Risk Funds. A change in the level of interest rates will tend to cause the net asset value per Unit of the Target Risk Funds to change. If such interest rate changes are sustained over time, the yield of the Target Risk Funds will fluctuate accordingly.
Risks of U.S. TIPS. The Target Risk Funds are also subject to interest rate risk to the extent invested in U.S. TIPS. Generally, when interest rates rise, the value of inflation-indexed securities will fall, although not necessarily as significantly as other longer-term bonds. U.S. TIPS are also subject to deflation risk. Deflation risk is the possibility that prices throughout the economy decline over timethe opposite of inflation. If inflation is negative, the principal and income of an inflation-protected bond will decline and could result in losses. The greatest risk for Target Risk Funds investing in U.S. TIPS occurs when interest rates rise and inflation declines.
Credit Risk Applicable to Investment in Fixed-Income Securities. Fixed-income securities, including corporate bonds, also are subject to credit risk. When a security is purchased, its anticipated yield is dependent on the timely payment by the borrower of each interest and principal installment. Credit analysis and bond ratings take into account the relative likelihood that such timely payment will result. Bonds with a lower credit rating tend to have higher yields than bonds of similar maturity with a better credit rating. However, to the extent the Target Risk Funds invest in securities with medium or lower credit qualities, they are subject to a higher level of credit risk than investments that invest only in investment-grade securities. In addition, the credit quality of noninvestment- grade securities is considered speculative by recognized ratings agencies with respect to the issuers continuing ability to pay interest and principal. Lower-grade securities may have less liquidity and a higher incidence of default than higher-grade securities. Furthermore, as economic, political and business developments unfold, lower-quality bonds, which possess lower levels of protection with respect to timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity.
Risk of Reliance on Industry Research. The Target Risk Funds are dependent to a significant extent on information and data obtained from a wide variety of sources, such as financial publications that monitor markets and investments, industry research materials, ratings issued by one or more nationally recognized credit rating agencies to assess the credit quality of securities in which it proposes to invest, and other materials prepared by others. There may be limitations on the quality of such information, data, publications, research and ratings, and the Target Risk Funds Investment Advisor generally does not independently verify any of the same. For instance, certain asset-backed securities such as sub-prime CMOs and securities backed by bond insurance that initially received relatively high credit ratings were,
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in connection with the credit markets turbulence that began in 2007, subsequently significantly downgraded as the investment community came to realize that there were previously unanticipated risks associated with such securities. There is a risk of loss associated with securities even if initially perceived by the investment community as of relatively low risk, such as in the case of collateralized debt obligations and other structured-finance investments that are often highly complex.
Risks of Emerging Markets Equity Investing. To the extent invested in emerging markets equity securities, the Target Risk Funds will be subject to the special risks associated with investing in these securities. See International All Cap Equity FundRisk FactorsInvesting in International Stocks.
Risk of Investing in REITs. To the extent in REITs, the Target Risk Funds will be subject to the risks associated with investing in these securities. See Real Asset Return FundRisk FactorsRisks of Investing in REITs.
Risks Associated with Commodity Investments. To the extent invested in commodities, commodity futures or related instruments, the Target Risk Funds will be subject to the special risks associated with these investments. See Real Asset Return FundRisk FactorsRisks Associated with Commodity Investments.
Risks Associated with Short-Term Debt Instruments. For information and risk factors associated with investing in stable assets or cash-equivalent instruments, see Stable Asset Return FundRisk Factors.
Tracking Error Risk. Deviation of the performance of a Target Risk Fund from the performance of its related composite benchmark, known as tracking error, can result from various factors, including purchases and redemptions of Units of the Target Risk Fund or the Target Risk Funds underlying collective investment funds, as well as from the fees and expenses borne by the Target Risk Fund or such underlying funds. Such purchases and redemptions may necessitate the purchase or sale of securities by or on behalf of the Target Risk Fund and the resulting transaction costs may be substantial because of the number and the characteristics of the securities held. Tracking error may also occur due to factors such as the size of the Target Risk Fund or the Target Risk Funds underlying collective investment funds, changes made in the securities included in the indices underlying the benchmarks or the manner in which the performance of the indices is calculated.
Valuation of Units. The Unit value for each Target Risk Fund is the value of all assets of the Target Risk Fund, less all liabilities of the Target Risk Fund, divided by the number of outstanding Units of the Target Risk Fund prior to adjustment for any contributions, transfers or withdrawals with respect to the Target Risk Fund. A recorded message providing per Unit values for the Target Risk Funds as of the close of business on the previous Business Day is available at (800) 826-8905.
Liquidity and Transfers. Transfers to or withdrawals from any of the Target Risk Funds may be made on any Business Day prior to 4:00 p.m. Eastern time (or, if earlier, the close of regular market trading). For additional information relating to transfers to and withdrawals from the investment options, and special restrictions on transfers in some cases, see Transfers Among Investment Options and Withdrawals.
Portfolio Turnover. Ordinarily, an index fund, such as those in which the Target Risk Funds invest a substantial portion of their assets, will sell securities only to reflect changes in the index in which it invests or to accommodate cash flows into or out of the fund. Index funds seek to create a portfolio which substantially replicates the total return of the applicable index. Index funds are not managed through traditional methods of fund management, which typically involve frequent changes in a portfolio of securities on the basis of economic, financial and market analyses. Therefore, brokerage costs, transfer taxes and other transaction costs for index funds may be lower than those incurred by non-index, actively managed funds.
Portfolio turnover of the Target Risk Funds from the date of their inception, July 7, 2009, to December 31, 2009 was 5% for the Conservative Risk Fund, 7% for the Moderate Risk Fund and 9% for
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the Aggressive Risk Fund. With respect to each Target Risk Fund, the portfolio turnover reflects purchases and sales by such Target Risk Fund of shares of the State Street Bank collective investment funds through which such Target Risk Fund invests, rather than the portfolio turnover of the underlying portfolios of such collective investment funds.
Investment Advisor. The Funds utilize a passive approach whereby the Funds assets are allocated to one or more index funds in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. State Street determines the percentage of the assets of the Fund to be allocated to each index fund. Income and gains attributable to the assets allocated to each index fund remain allocated to that portion unless and until re-allocated by State Street, subject to consultation with Northern Trust, and any differences in relative investment performance of the index funds can change the percentage of total assets of the Fund comprising each portion. State Street allocates contributions and transfers to, and withdrawals and transfers from, the Target Risk Funds between the index funds of the Fund in a manner intended to achieve the targeted allocations of the Funds assets.
State Street Bank manages the Target Risk Funds. Assets of the Target Risk Funds are invested in the SSgA Russell All Cap Index Non-Lending Series Fund, the SSgA International Index Non-Lending Series Fund, the SSgA Global Equity ex U.S. Index Non-Lending Series Fund, the SSgA/Tuckerman REIT Index Non-Lending Series Fund, the SSgA U.S. Bond Index Non-Lending Series Fund, the SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund, State Street Bank and Trust Company Short Term Investment Fund; and the SSgA Dow Jones UBS Commodity IndexSM Non-Lending Series Fund; all of which are collective investment funds maintained by State Street Bank. For its services, State Street Bank receives a fee payable from each Target Risk Funds assets at an annual rate of .06% of the total assets of such Target Risk Fund.
Current Status. Certain assets contributed to the Program are held in the Balanced Fund. State Street continues to be responsible for the investment of such assets, and ING Services maintains the recordkeeping with respect to the Balanced Fund and provides notices to Investors, when appropriate. However, the Collective Trust no longer offers Units in the Balanced Fund, and the Balanced Fund is described in this Annual Report on Form 10-K for information purposes only. Additional information relating to assets held in the Balanced Fund may be obtained by writing or calling State Street. See Additional Information.
The assets under the Program invested in the Balanced Fund will remain so invested until they are transferred to another investment option available under the Program. Certain restrictions may apply to withdrawals and transfers from the Balanced Fund. See Item 1A, Risk FactorsRisks Related to Securities Lending. No transfers or contributions to the Balanced Fund are permitted.
Upon the termination of the Balanced Fund, which is expected to occur sometime in the second half of 2010, assets then invested in the Balanced Fund are expected to be transferred to the Moderate Risk Fund offered as an investment option under the Program.
Because Units in the Balanced Fund are no longer offered as an investment option, the following information is provided in this Annual Report on Form 10-K for information purposes only:
Investment Objective. The investment objective of the Balanced Fund is to achieve both current income and long-term capital appreciation. There can be no assurance that the Balanced Fund will achieve its investment objective.
Strategy. The Balanced Fund seeks to achieve, over an extended period of time, total returns comparable to or superior to an appropriate combination of broad measures of the domestic stock and
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bond markets. The Balanced Fund invests in publicly traded common stocks, other equity-type securities, medium- to long-term debt securities with varying maturities (including bonds, notes, debentures, equipment trust certificates, asset- backed securities and mortgage-related securities) and money market instruments. The Balanced Fund normally maintains at least 40%, but not more than 70%, of its total assets in common stocks and other equity-type instruments, including convertible securities, and at least 30%, but not more than 60%, of its total assets in nonconvertible debt securities and money market instruments. The Balanced Fund varies the portion of its assets invested in equity securities, debt securities and money market instruments to achieve the Balanced Funds investment objective based upon economic conditions, the general level of common stock prices, interest rates and other relevant considerations, including the risks associated with each investment medium.
Investment Guidelines and Restrictions. The Balanced Fund invests in equity securities of U.S. companies or foreign companies whose stocks are traded on U.S. stock exchanges or over-the-counter markets. Many foreign securities are available through dollar-denominated American Depositary Receipts, which we refer to as ADRs, which are issued by domestic banks and represent interests in foreign securities. ADRs are traded on U.S. stock exchanges or over-the-counter markets. The Balanced Fund may invest in foreign securities directly or through ADRs or European Depositary Receipts. The Balanced Fund also invests in high quality short-term instruments. The Balanced Fund may enter into to be announced, which we refer to as TBA, commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time.
For temporary defensive purposes, the Balanced Fund may invest without limitation in U.S. Government Obligations, commercial paper and other short-term instruments of the types purchased by the Stable Asset Return Fund. The Balanced Fund would invoke this right only in extraordinary circumstances, such as war, the closing of bond or equity markets, an extreme financial calamity or the threat of any such event. If the Balanced Fund invokes this right, the Balanced Fund may be less likely to achieve its investment objective.
State Street directs the allocation of the Balanced Funds assets between debt and equity securities consistent with the Balanced Funds strategy. It obtains investment advice from separate advisors for the equity portion of the Balanced Fund and for the debt portion of the Balanced Fund. Under normal circumstances, approximately 40% of the Balanced Funds assets are expected to be allocated to debt securities and approximately 60% are expected to be allocated to equity securities. Contributions and transfers to, and withdrawals and transfers from, the Balanced Fund are allocated so that the percentage of debt and equity securities will be as close to approximately 40% and 60%, respectively, as may be practical, taking into account the level of contributions, transfers and withdrawals and the Balanced Funds percentage of debt and equity securities at the time of each contribution, transfer or withdrawal. Income and gains attributable to the assets allocated to each portion remain allocated to that portion, and could change the percentage of total assets of the Balanced Fund which are allocated to, respectively, equity and debt securities. State Street may also, in its discretion, re-allocate assets in the Balanced Fund among equity and debt securities in order to avoid excessive deviation from the targeted allocation.
Risk Factors. Equity Markets Risk. To the extent invested in the equity markets, the Balanced Fund is subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. The Unit price of the Balanced Fund will fluctuate, and the holders of Units in the Balanced Fund should be able to tolerate sudden, sometimes substantial, declines in the value of their investment.
Interest Rate Risk Applicable to Investments in Fixed-Income Securities. The Balanced Fund, to the extent invested in longer-term fixed-income securities, is subject to the risks associated with investing in such
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instruments. Fixed-income securities such as bonds are issued to evidence loans that investors make to corporations and governments, either foreign or domestic. If prevailing interest rates fall, the market value of fixed-income securities that trade on a yield basis tend to rise. On the other hand, if prevailing interest rates rise, the market value of fixed-income securities generally will fall. In general, the longer the maturity of a fixed-income security, the higher its yield and greater its price volatility. Conversely, the shorter the maturity, the lower the yield but the greater the price stability. These factors may have an effect on the Unit price of the Balanced Fund. A change in the level of interest rates will tend to cause the net asset value per Unit of the Balanced Fund to change. If such interest rate changes are sustained over time, the yield of the Balanced Fund will fluctuate accordingly.
Credit Risk Applicable to Investments in Fixed-Income Securities. Fixed-income securities also are subject to credit risk. When a security is purchased, its anticipated yield is dependent on the timely payment by the borrower of each interest and principal installment. Credit analysis and bond ratings take into account the relative likelihood that such timely payment will result. Bonds with a lower credit rating tend to have higher yields than bonds of similar maturity with a better credit rating. Furthermore, as economic, political and business developments unfold, lower-quality bonds, which possess more risk of failure of timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity.
TBA Commitments. The Balanced Fund may enter into TBA commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price for the security that is the subject of TBA commitments has been established at the time of commitment, the principal amount has not been finalized. However, the amount of the TBA commitment will not fluctuate more than 1.0% from the principal amount. The Balanced Fund holds, and maintains until the settlement date, cash or liquid securities in an amount sufficient to meet the purchase price. TBA commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, and such risk is in addition to the risk of decline in the value of the Balanced Funds other assets. Risks may also arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts. During the period prior to settlement, the Balanced Fund will not be entitled to accrue interest or receive principal payments. Unsettled TBA commitments are valued at the current market value of the underlying securities. The Balanced Fund may dispose of a commitment prior to settlement if the Balanced Funds Investment Advisor deems it appropriate to do so. Upon settlement date, the Balanced Fund may take delivery of the securities or defer the delivery to the next month. The Balanced Fund may also purchase or sell securities on a when-issued or delayed delivery basis. For information regarding risks involved in these activities, see Stable Asset Return FundRisk Factors.
Mortgage-Related Securities. Mortgage-related securities include securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property, such as collateralized mortgage obligation residuals or stripped mortgage-backed securities, and may be structured in classes with rights to receive varying proportions of principal and interest. The yield to maturity on an interest-only class is extremely sensitive to the rate at which principal payments (including prepayments) are made on the related underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on an investors yield to maturity from these securities. Early repayment of principal on some mortgage-related securities (arising from prepayments of principal due to the sale of the underlying property, refinancing or foreclosure, net of fees and costs which may be incurred) may expose the Balanced Fund to a lower rate of return upon reinvestment of principal.
Short-Term Debt Instruments. The risk factors with respect to investing in various short-term instruments are similar to those applicable to the Stable Asset Return Fund. See Stable Asset Return FundRisk Factors.
Risks of Foreign Investing. Investments by the Balanced Fund in foreign securities may involve special risks in addition to the risks associated with domestic securities generally. These include risks relating to
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political or economic conditions in foreign countries, potentially less stringent investor protection, disclosure standards and settlement procedures of foreign markets, potentially less liquidity of foreign markets, potential applicability of withholding or other taxes imposed by these countries, and currency exchange fluctuations. These factors could make foreign investments more volatile.
Risks of Emerging Markets Investing. Political and economic structures in many emerging markets countries may be undergoing significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristic of more developed countries. Governments in many emerging market countries participate to a significant degree in the countries economies and securities markets. As a result, the risks of investing in the securities of foreign issuers generally, including the risks of nationalization or expropriation, may be heightened. The small size and inexperience of the securities markets, and a more limited volume of trading in securities, in certain of these countries may also make the Balanced Funds investments in securities of issuers located in such countries illiquid and more volatile than investments in more developed countries, and the Balanced Fund may be required to establish special custody or other arrangements before making certain investments in these countries. There may be little financial or accounting information available with respect to issuers located in certain of such countries, and it may be difficult as a result to assess the value or prospects of an investment in such issuers. Emerging markets often have provided significantly higher or lower rates of return than developed markets, and significantly greater risks, to investors.
Risks of Securities Lending Undertaken by the Balanced Fund. The Balanced Fund is subject to the risks associated with the lending of securities, including the risks associated with defaults by the borrowers of such securities and the credit, liquidity and other risks arising out of the investment of cash collateral received from the borrowers. See Item 1A, Risk FactorsRisks Related to Securities Lending.
Risks of Investment in Derivative Instruments. The Balanced Fund is subject to the risks associated with the use of derivatives and mortgage-backed securities to the extent the Balanced Fund is permitted to use them. See Derivative Instruments and Bond Core Plus FundRisk FactorsRisks of Investment in Derivative Instruments, Including Swaps Agreements.
Portfolio Turnover. As the level of portfolio turnover increases, transaction expenses incurred by the Balanced Fund, such as brokerage commissions, increase, which may adversely affect the Balanced Funds performance. Portfolio turnover depends on the types and proportions of the Balanced Funds assets and may change frequently in accordance with market conditions. Portfolio turnover was 38% for the twelve months ended December 31, 2009 and 32% for the twelve months ended December 31, 2008.
Investment Advisors. The portion of the Balanced Fund invested in equity securities is invested through the Large Cap Equity Fund, with respect to which State Street has retained Investment Advisors set forth in Large Cap Equity FundInvestment Advisors. The portion of the Balanced Fund invested in debt securities and money market instruments is invested through the Bond Core Plus Fund, with respect to which State Street has retained PIMCO to serve as Investment Advisor. For information regarding the investment objectives, guidelines and restrictions of the Large Cap Equity Fund and the Bond Core Plus Fund, see Large Cap Equity Fund and Bond Core Plus Fund.
Historical Return Information. The following table shows, with respect to the Balanced Fund, the total annual return, after expenses, over the one-year, five-year and ten-year periods ended December 31, 2009. The table also provides average annual returns for a comparative market index for the Balanced Fund. The market index shown does not include an allowance for fees and expenses that an investor would pay to invest in the securities that comprise the index. The Balanced Fund has had changes in fees and expenses applicable to it during and after the periods for which performance is shown, and performance shown would have been different had current fees and expenses been applicable for the entire period(s). The past performance of the Balanced Fund or the index shown is no guarantee of future performance.
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Periods Ended December 31, 2009 | |||||||||||
Average Annual Total Returns(1) |
1 Year | 5 Year | 10 Years | Inception Date | |||||||
Balanced Fund |
21.15 | % | 1.43 | % | 3.08 | % | 01/02/92 | ||||
60% Russell 1000 Index/40% Barclays Capital U.S. Aggregate Bond Index |
19.50 | % | 2.77 | % | 2.54 | % |
(1) | The Balanced Fund participates in the State Street Bank securities lending program as described under Information with Respect to the FundsLoans of Portfolio Securities. The cash collateral received by the Balanced Fund in connection with the securities lending program is invested in cash collateral funds that utilize constant ($1.00 per unit) amortized cost pricing although such cash collateral funds, at December 31, 2009, had an average value on a mark-to-market basis of a lower amount per unit. The returns shown in the table above are based on amortized cost pricing of these cash collateral funds because such funds have effected (and continue to effect) purchases and redemptions of interests therein at 100% of principal invested, and purchases and redemptions of Units of the Balanced Fund were effected (and continue to be effected) at net asset values that do not reflect mark-to-market valuations. See Item 1A, Risk FactorsRisks Related to Securities Lending. |
Summary of Deductions and Fees. The table below provides information regarding the various costs and expenses of the Collective Trust with respect to an investment in the Balanced Fund. These estimated annual expenses are stated as a percentage of the assets of the Balanced Fund. The Program Expense Fees and Trust, Management and Administration Fees are calculated based on the total assets of the Program as of December 31, 2009 and utilizing fee rates in effect on or about January 19, 2010, and Other Fees is calculated based on an estimate of expected expenses for 2010. For a discussion of the manner in which deductions and feeds are calculated and the portions of these deductions and fees paid to certain parties in connection with the Program, see Deductions and Fees.
Investment Advisor Fees(1)(2) |
Program Expense Fees(1) |
Trust, Management and Administration Fee and Other Fees(1)(3)(4) |
Acquired Fund Fees and Expenses(5) |
Total Fees |
Approximate Assets as of December 31, 2009 (in millions)(1) | ||||||||||||
Balanced Fund |
.274 | % | .601 | % | .223 | % | .004 | % | 1.075 | % | 285 |
(1) | This table is based on approximate assets of the Collective Trust on December 31, 2009, which totaled $3,412 million. For purposes of this table, Balanced Fund assets invested through, respectively, the Bond Core Plus Fund and the Large Cap Equity Fund are included under the Balanced Fund, and fees payable by the Bond Core Plus Fund and the Large Cap Equity Fund attributable to assets of the Balanced Fund invested therein are assumed to be payable by the Balanced Fund. The table is based on the approximate allocation of the Programs assets among the investment options and the Balanced Fund as of December 31, 2009, The table does not give effect to the changes to the Program expected to occur in connection with the substitution of Northern Trust as trustee of the Collective Trust as described in Recent and Expected Changes to the Program; Role of Northern Trust. |
(2) | Investment Advisor fees are payable based on a percentage of daily net assets. |
(3) | The Trust, Management and Administration Fee is 0.114% of the assets of the Balanced Fund. |
(4) | Includes the amortization of deductions and fees relating to recurring operational expenses, such as printing, legal, registration, consulting and auditing expense, including consulting fees payable to Northern Trust. The table does not include fees for the Self-Managed Brokerage Account. |
(5) | The Balanced Fund invests at least some of its assets directly or indirectly through collective investment funds maintained by State Street Bank. As a result, investors in the Balanced Fund indirectly bear expenses of those underlying collective investment funds, including audit, administration and legal fees. |
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As of July 2, 2009 the previously offered Large-Cap Value Equity Fund, Large-Cap Growth Equity Fund, Mid-Cap Value Equity Fund, Mid-Cap Growth Equity Fund and Small-Cap Equity Fund (the Terminated Funds) were eliminated. The Collective Trust no longer offers Units in the Terminated Funds, and performance of the Terminated Funds is presented for information purposes only.
State Street transferred all of the assets invested in the Terminated Funds in accordance with directions received from Participants with investments then invested in the Terminated Funds. Any assets not subject to a valid direction to be transferred to another investment option and hence remaining in these Funds were transferred, in the case of the Large-Cap Value Equity Fund and the Large-Cap Growth Equity Fund, to the Large Cap Equity Fund, and, in the case of the Mid-Cap Value Equity Fund, the Mid-Cap Growth Equity Fund or the Small-Cap Equity Fund, to the Small-Mid Cap Equity Fund. Any election to invest contributions in any of the Large-Cap Value Equity Fund, the Large-Cap Growth Equity Fund, the Mid-Cap Value Equity Fund, the Mid-Cap Growth Equity Fund or the Small-Cap Equity Fund, which was not amended or revoked by a Participant by July 1, 2009, was allocated to whatever Fund was designated by the Participants Employer as its default option in the adoption agreement pursuant to which such Employer adopted the Program or any amendment thereto.
INFORMATION WITH RESPECT TO THE FUNDS
Investment Prohibitions.
Except as otherwise described in this paragraph, no Managed Fund or Index Fund will:
· | trade in foreign currency, except for transactions incidental to the settlement of purchases or sales of securities for the Fund and derivatives transactions in foreign currency to the extent permitted under Derivative Instruments; |
· | make an investment in order to exercise control or management over a company; |
· | make short sales, unless the Fund has, by reason of ownership of other securities, the right to obtain securities of a kind and amount equivalent to the securities sold, which right will continue so long as the Fund is in a short position; |
· | issue senior securities or trade in commodities or commodity contracts, other than options or futures contracts (including options on futures contracts) with respect to securities or securities indices, and except as described under Derivative Instruments; |
· | write uncovered options; |
· | purchase real estate or mortgages, provided that a Fund may buy shares of real estate investment trusts listed on U.S. stock exchanges, and the International All Cap Equity Fund and the International Index Equity Fund may buy shares of comparable real estate investment vehicles traded on established foreign exchanges, if such purchases are consistent with the investment objective and restrictions set forth in the fund declaration for the respective Fund; |
· | invest in the securities of registered investment companies; |
· | invest in oil, gas or mineral leases; |
· | purchase any security on margin or borrow money, except for short-term credit necessary for clearance of securities transactions or, in the case of the Index Funds, for redemption purposes; |
· | make loans, except by (i) the purchase of marketable bonds, debentures, commercial paper and similar marketable evidences of indebtedness, (ii) engaging in repurchase agreement transactions and (iii) with respect to the Managed Funds and the All Cap Index Equity Fund, making loans of portfolio securities; or |
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· | underwrite the securities of any issuer. |
Notwithstanding the foregoing restrictions, assets of the Funds may be invested indirectly in exchange traded funds, money market funds or short-term registered mutual funds to the extent any investment funds maintained by State Street Bank underlying such Funds invest in such funds, and the Funds may invest in these funds in connection with their transition through the changes described under Recent and Expected Changes to the Program; Role of Northern Trust to the extent consistent with their respective investment objectives.
State Street has directed the Investment Advisors not to recommend an investment, and State Street will not cause any Fund to make an investment:
· | if that investment would cause (1) more than 5% of the portion of the Funds net assets allocated to the Investment Advisor to be invested in warrants generally, or more than 2% of the Funds net assets allocated to the Investment Advisor to be invested in warrants not listed on a nationally recognized U.S. securities exchange, or (2) more than 10% of the portion of the Funds net assets allocated to the Investment Advisor to be invested in illiquid securities, including repurchase agreements with maturities in excess of seven days or portfolio securities that are not readily marketable, in each case determined at the time of purchase; |
· | in an industry if that investment would cause more than 25% of the portion of the Funds net assets allocated to the Investment Advisor to be invested in that industry, determined at the time of purchase; or |
· | in the securities of an issuer (other than the U.S. government and its agencies and, with respect to certain Funds, other than short-term investment funds maintained by the Investment Advisor or State Street or its affiliates) if that investment would cause more than 5% of the portion of the Funds net assets allocated to the Investment Advisor to be invested in the securities of that issuer, determined at the time of purchase. |
The foregoing restrictions with respect to industry and issuer concentration do not apply to the Index Funds or the indexed portions of the Large Cap Equity Fund or Small-Mid Cap Equity Fund (to the extent that the replicated index is concentrated in a specific industry or issuer) or the International All Cap Equity Fund (to the extent it may invest in international index equity funds), nor do they apply to the Real Asset Return Fund, the Retirement Date Funds or the Target Risk Funds.
The foregoing restriction on issuer concentration does not apply to the portion of the International All Cap Equity Fund advised with the assistance of First State Investment International Limited, which we refer to as First State. In lieu of such issuer concentration restriction, State Street has directed First State not to recommend an investment, and State Street will not cause the International All Cap Equity Fund to make an investment, in the securities of an issuer (other than the U.S. government and its agencies and other than short-term investment funds maintained by First State or State Street or its affiliates) if that investment would cause more than 8% of the portion of the Funds net assets allocated to First State to be invested in the securities of that issuer, determined at the time of purchase.
Except as described under Derivative Instruments, State Street has no present intention of causing any Fund to invest in options and financial futures contracts and other derivatives, and will not do so without prior notification to investors.
The Funds that invest in fixed income securities may also purchase such securities for future delivery on a to be announced or TBA basis where the price and coupon are determined at the time of purchase but the collateral for such securities is not determined until immediately before the securities are delivered. Investing in TBA securities carries risks similar to investing in when-issued securities. See Stable Asset Return FundRisk Factors, Bond Core Plus FundRisk Factors, Bond Index FundRisk Factors and Balanced FundRisk Factors.
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Unless otherwise indicated herein, if a percentage restriction set forth in this Annual Report on Form 10-K is adhered to at the time of investment, a subsequent increase or decrease in a percentage resulting from a change in the values of assets will not constitute a violation of that restriction.
Loans of Portfolio Securities. For the purpose of achieving income, the Managed Funds, the All Cap Index Equity Fund and the Retirement Date Funds, as well as the Balanced Fund, may lend a portion of their portfolio securities to brokers, dealers and other financial institutions, provided that these activities are conducted in accordance with the applicable requirements of ERISA, including:
· | the loan is secured continuously by collateral consisting of cash, U.S. government securities or irrevocable letters of credit maintained in an amount at least equal to the daily mark-to-market value of the securities loaned; |
· | the Managed Funds, the All Cap Index Equity Fund, the Retirement Date Funds and the Balanced Fund may at any time call the loan and obtain the return of the securities loaned; and |
· | the Managed Funds, the All Cap Index Equity Fund, the Retirement Date Funds and the Balanced Fund will receive any interest or dividends paid on the loaned securities. |
When a Managed Fund, the All Cap Index Equity Fund, a Retirement Date Fund or the Balanced Fund lends portfolio securities, its investment performance will continue to reflect changes in the value of the securities loaned, and the Managed Fund, the All Cap Index Equity Fund, the Retirement Date Fund and the Balanced Fund will also receive income from lending their securities (which may include earnings on cash collateral). State Street Bank administers the securities lending activities of these Funds. A portion of the income generated upon investment of cash collateral is remitted to the borrowers of securities, and the remainder, if any, is allocated between the Fund lending the securities and State Street Bank in its capacity as lending agent. State Street Bank also receives fees for managing the cash collateral funds. See Item 1A, Risk FactorsRisks Related to Securities Lending. State Street has undertaken to use reasonable best efforts to wind down the participation of these Funds in the State Street Bank securities lending program for the foreseeable future with the ultimate objective of terminating such participation. State Street has fully exercised all rights afforded by State Street Bank to the Collective Trust and other participants in the State Street Bank securities lending program to reduce the Collective Trusts level of outstanding securities loan balances in 2009, and expects to continue to do so on an ongoing basis, to the extent permitted under the State Street Bank securities lending program.
Valuation of Units. The following discussion relates to all the Funds other than the Stable Asset Return Fund, the Retirement Date Funds and the Target Risk Funds. For information related to the valuation of Units in the Stable Asset Return Fund, the Retirement Date Funds and the Target Risk Funds see Stable Asset Return Fund, Retirement Date Funds, and Target Risk Funds, respectively. An investors interest in a Fund is represented by the value of the Units credited to the investors account for that Fund. The number of Units purchased with a contribution or transfer or allocation of assets to a Fund is the quotient of the amount so allocated to the Fund divided by the per Unit value of the Fund calculated as of the end of the regular trading session of the New York Stock Exchange on the Business Day the contribution is credited to the Fund by State Street Bank (normally, 4:00 p.m. Eastern time). The Units themselves are not traded on the New York Stock Exchange or any other exchange. Once a number of Units has been credited to an investors account, this number will not vary because of any subsequent fluctuation in the Unit value. The value of each Unit, however, will fluctuate with the investment experience of the particular Fund, which reflects the investment income and realized and unrealized capital gains and losses of that Fund. Unit values for the Funds are determined as of the close of the regular trading session of the New York Stock Exchange on each Business Day. The Unit value for each Fund is the value of all assets of the Fund, less all liabilities of the Fund, divided by the number of outstanding Units of the Fund prior to adjustment for any contributions, transfers or withdrawals with respect to the Fund. State Street has delegated to State Street Bank the responsibility to determine the value of each Fund based on the market value of each Funds portfolio of securities. Consistent with the
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Securities and Exchange Commissions rules applicable to the periodic determination of the net asset value of redeemable securities, in the determination of Unit values for the Funds, State Street Bank reflects changes in holdings of portfolio securities no later than the first Business Day following the trade date.
A recorded message providing per Unit values for the Funds as of the close of business on the previous Business Day is available at (800) 826-8905.
State Street Bank generally values each Funds portfolio of securities based on closing market prices or readily available market quotations. When closing market prices or market quotations are not readily available or are considered by State Street Bank to be unreliable, the fair value of the particular securities or assets is determined in good faith by State Street. For market prices and quotations, as well as some fair value methods of pricing, State Street or State Street Bank may rely upon securities prices provided by pricing services, the Investment Advisor(s) or independent dealers. For the reasons set forth in Item 1A, Risk FactorsRisks Related to Securities Lending, State Street Bank currently determines the value of Units of each Fund that participates in its securities lending program consistent with its utilization of the amortized cost price of $1.00 per unit for purchases and sales of interests in its cash collateral funds described therein notwithstanding that the mark-to-market values of the Funds interests in such cash collateral funds are less than $1.00.
All methods of determining the value of a security on a basis other than market value, including those discussed below, are forms of fair value pricing. All valuations of securities on a fair value basis are made pursuant to fair value procedures adopted by State Street. The use of fair value pricing with respect to the securities of any Fund may cause the value of the Units of that Fund to differ from the Unit value that would be calculated using only market prices.
State Street, acting through a valuation committee, uses the fair value of a security, including a non-U.S. security, when State Street Bank determines that the closing market price on the primary exchange where the security is traded is not readily available or no longer accurately reflects the value of the security at the time of calculation of its net asset value. This may occur for a variety of reasons that affect either the relevant securities markets generally or the specific issuer. In making the fair value determination, State Street endeavors to value the security at the amount the owner might reasonably expect to receive upon the securitys current sale. In so doing, the valuation committee considers all factors it deems appropriate, including, if relevant, external factors such as general market developments and news events. With respect to non-U.S. securities, if a significant event has occurred between the closing of the foreign exchange or market on which such securities trade and the calculation of net asset value, fair value pricing may be appropriate. Specifically, under appropriate circumstances, State Street will utilize a fair value model for the International All Cap Equity Fund to make fair value adjustments to the prices of non-U.S. securities based on movements in the U.S. markets after the close of foreign markets. If a significant event occurs other than general movements in the U.S. markets, State Street Bank will determine whether that event might affect the value of the non-U.S. securities and whether, if so, the securities should be valued in accordance with State Streets fair value procedures.
Certain other types of securities, including those discussed below in this paragraph, may be priced using fair value rather than market prices. For instance, State Street Bank may use a pricing matrix to determine the value of fixed-income securities that do not trade daily. A pricing matrix is a means of valuing a debt security on the basis of current market prices for other debt securities and historical trading patterns in the market for fixed income securities. To the extent that a Fund invests in the shares of bank collective trust funds or of other registered open-end investment companies that are not traded on an exchange (mutual funds), such shares are valued at their net asset values per share as reported by the funds. Each of these funds may, under certain circumstances, use fair value pricing in determining their net asset values.
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For a discussion of the valuation of Units in the Stable Asset Return Fund, see Stable Asset Return FundValuation of Units.
Transfers. Transfers to and withdrawals from any of the Funds, as well as transfers to and withdrawals from the Self-Managed Brokerage Accounts and withdrawals from the Balanced Fund, will be effective on the day instructions are received if such instructions are received on a Business Day prior to 4:00 p.m. Eastern time (or, if earlier, the close of regular market trading). For additional information relating to transfers to and withdrawals from the investment options, and special restrictions on transfers in some cases, see Transfers Among Investment Options and Withdrawals.
Performance Information. Each Fund may, from time to time, report its performance in terms of the Funds total return. A Funds total return is determined based on historical results and is not intended to indicate future performance. A Funds total return is computed by determining the average annual compound rate of return for a specified period which, when applied to a hypothetical $1,000 investment in the Fund at the beginning of the period, would produce the redeemable value of that investment at the end of the period. Each Fund may also report a total return computed in the same manner but without annualizing the result. Each Managed Fund, the Real Asset Return Fund and each Target Risk Fund may, from time to time, report the composite performance of accounts of its respective Investment Advisor(s) that employ investment strategies similar to those of such Fund.
The Funds will not engage in transactions in derivative instruments, except as described below. Derivatives, which are financial instruments the value of which is derived from the value of other instruments or assets, include futures, options, swaps, swaptions, caps or floor contracts or foreign currency hedging contracts. Collateralized mortgage obligations, which we refer to as CMOs, and other mortgage-backed securities, as well as asset-backed securities, are considered derivative securities because their value is derived from the cash flows from their underlying assets, such as the mortgages or accounts receivable.
· | The indexed portions of the Large Cap Equity Fund, the Small-Mid Cap Equity Fund, the International All Cap Equity Fund (to the extent it may invest in international index equity funds) and the Index Funds may engage in transactions in stock index futures and options for hedging purposes and as a substitute for comparable market positions in the securities held by each such Fund (with respect to the portion of its portfolio that is held in cash itemsfor example, pending investment or to pay for redemption requests). |
· | The International All Cap Equity Fund, the International Index Equity Fund, and, to a lesser extent, the other Funds that invest in securities denominated in foreign currencies may enter into foreign currency hedging transactions in connection with their purchase or sale of foreign securities as described in the third paragraph below. |
· | The Bond Core Plus Fund and the Bond Index Fund may, subject to limitations, invest in futures, options, swaps, swaptions, forwards, mortgage-backed securities, including asset-backed securities, CMOs, interest only (IO) and principal only (PO) strips. Interest-only and principal-only stripped mortgage-backed securities are considered derivatives because their value is derived from that of the underlying mortgage-backed bonds. |
· | The Stable Asset Return Fund may invest in asset-backed securities, including CMOs and other derivative mortgage-backed securities. |
The Index Funds may also engage in transactions in derivatives, including but not limited to, financial futures (including interest rate futures), swap contracts and foreign currency forwards, options and futures instruments, CMOs and other derivative mortgage-backed securities or other investments as State Street Bank deems appropriate under the circumstances.
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The Real Asset Return Fund may invest in derivative securities as described in Real Asset Return Fund.
The Retirement Date Funds may invest in derivative securities as described in Retirement Date Funds.
The Target Risk Funds may invest in derivative securities as described in Target Risk Funds.
The Funds may engage in transactions in derivatives in connection with their transition through the changes described under Recent and Expected Changes to the Program; Role of Northern Trust to the extent consistent with their respective investment objectives.
Foreign Currency Exchange Contracts. All of the Funds that may invest in securities denominated in foreign currencies may enter into forward foreign currency exchange contracts to hedge against exchange rate-related fluctuations in the U.S. dollar price of the security. In addition, the International All Cap Equity Fund and the International Index Equity Fund may sell or buy a particular foreign currency (or another currency that acts as a proxy for that currency) when the Investment Advisor believes that the currency of a particular foreign country may move substantially against another currency. A forward foreign currency exchange contract involves an obligation to purchase or sell a specific amount of a specific currency at a future date, which may be any fixed number of days from the date of the contract agreed upon by the parties, at a price set at the time of the contract. A Fund can use such contracts to reduce its exposure to changes in the value of the currency it will deliver and increase its exposure to changes in the value of the currency into which it will be exchanged. The effect on the value of a Fund is similar to selling securities denominated in one currency and purchasing securities denominated in another. U.S. dollar-denominated American Depositary Receipts, which we refer to as ADRs, which are issued by domestic banks and are traded in the United States on exchanges or over-the-counter, are available with respect to many foreign securities. ADRs do not lessen the foreign exchange risk inherent in investment in the securities of foreign issuers; however, by investing in ADRs rather than directly in the foreign issuers stock, a Fund can avoid currency risks during the settlement period for purchases or sales without having to engage in separate foreign currency hedging transactions.
Options. The purchase and writing of options involve risks. During the option period, a writer of a covered call option gives up, in return for the premium on the option, the opportunity to profit from a price increase in the underlying security above the exercise price but retains, as long as its obligations as a writer continues, the risk of loss should the price of the underlying security decline. The writer of an option traded on an option exchange in the United States has no control over the time when it may be required to fulfill the writers obligation. Once an option writer has received an exercise notice, it cannot effect a closing purchase transaction in order to terminate its obligation under the option and must deliver the underlying securities at the exercise price. The writer of an uncovered option bears the risk of having to purchase the security subject to the option at a price higher than the exercise price of the option. As the price of a security could appreciate substantially, the option writers loss could be significant. If a put or call option is not sold when it has remaining value, and if the market price of the underlying security, in the case of a put, remains equal to or greater than the exercise price or, in the case of a call, remains less than or equal to the exercise price, the investor will lose its entire investment in the option. Also, when a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security. Furthermore, there can be no assurance that a liquid market will exist when an investor seeks to close out an option position. If trading restrictions or suspensions are imposed on the options markets, an investor may be unable to close out a position.
Swap Agreements. A swap transaction is an individually negotiated, non-standardized agreement between two parties to exchange cash flows measured by different interest rates, exchange rates, indices
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or prices, with payments generally calculated by reference to a principal, which we refer to as notional, amount or quantity. Swap contracts are not traded on exchanges; rather, banks and dealers act as principals in these markets. Because swap agreements are two-party contracts and may have terms of greater than seven days, such agreements may be considered to be illiquid. Moreover, an investor bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default or bankruptcy of a swap agreement counterparty. The swaps market is largely unregulated by the United States or any foreign governmental authority, and it is possible that developments in the swaps market, including potential government regulation, could adversely affect an investors ability to terminate existing swap agreements or to realize amounts to be received under these agreements.
Futures and Futures Options. There are several risks associated with the use of futures and futures options. Futures and options contracts may not always be successful hedges and their prices can be highly volatile. Using these contracts could lower a funds total return and the potential loss from their use can exceed a funds initial investment in these contracts. There can be no guarantee that there will be a correlation between price movements in the hedging vehicle and in the portfolio securities being hedged. An incorrect correlation could result in a loss on both the hedged securities and the hedging vehicle so that the portfolio return might have been greater had hedging not been attempted. There can be no assurance that a liquid market will exist at a time when an investor seeks to close out a futures contract or a futures option position. Many futures exchanges and boards of trade limit the amount of fluctuation permitted in futures contract prices during a single day; once the daily limit has been reached on a particular contract, no trades may be made that day at a price beyond that limit. In addition, some of these instruments are relatively new and without significant trading history. As a result, there is no assurance that an active secondary market will develop or continue to exist. Lack of a liquid market for any reason may prevent an investor from liquidating an unfavorable position even though the investor would remain obligated to meet margin requirements until the position is closed.
Certain Funds may engage in forward trading. None of the U.S. Commodity Futures Trading Commission, which we refer to as CFTC, the National Futures Association, which we refer to as NFA, futures exchanges or banking authorities currently regulate privately negotiated over-the-counter transactions executed in the inter-bank currency markets (i.e., non-retail forex). If a fund engages in forward trading, it will do so by entering into such privately negotiated transactions. This trading would take place in unregulated markets rather than on futures exchanges subject to the jurisdiction of the CFTC, NFA or other regulatory bodies. Fund funds on deposit with the counterparties with which the Funds would trade such forward contracts are not protected by the same segregation requirements imposed on CFTC-regulated commodity brokers in respect to customer funds deposited with them. Although the Funds would deal with major financial institutions as counterparties to forward trading, the insolvency or bankruptcy of a counterparty could subject a Fund to the loss of its entire deposit with such counterparty. The forward markets are well established; however, it is impossible to predict how these markets would react during periods of unusual market conditions.
State Street has retained the services of various persons or entities, which we refer to as Investment Advisors, to assist it in the exercise of its investment responsibility with respect to the Funds or various portions thereof. Each Investment Advisor recommends to State Street investments and reinvestments of the assets allocated to it in accordance with the investment policies of the applicable Fund or Funds. State Street exercises discretion with respect to the selection and retention of the Investment Advisors and may remove an Investment Advisor at any time, upon consultation with Northern Trust as investment fiduciary to the extent described under ABA Retirement Funds, and otherwise subject to consultation with ABA Retirement Funds. State Street may also change at any time the allocation of assets among Investment Advisors where a Fund has more than one Investment Advisor, subject to
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consultation with Northern Trust to the extent described under ABA Retirement Funds. See Recent and Expected Changes to the Program; Role of Northern Trust.
Recommendations to buy and sell securities for the Funds are made by Investment Advisors in accordance with the investment policies and restrictions of the Funds, subject to monitoring and approval by State Street. Investment recommendations for the Funds are not necessarily made consistently with those of other investment accounts managed by the Investment Advisors. Occasions may arise, however, when an Investment Advisor makes the same investment recommendation to more than one of its clients accounts. In such circumstances, State Street believes that the Investment Advisors will adhere to the following practices: The practice of each Investment Advisor is to allocate these purchases or sales to be executed in connection with these recommendations insofar as feasible among its various clients in a manner it deems equitable. The principal factors which the Investment Advisors consider in making these allocations are the relative investment objectives of their clients, the relative size of the portfolio holdings of the same or comparable securities and the then remaining availability in the particular account of funds for investment. Portfolio securities held by one client of an Investment Advisor may also be held by one or more of its other clients. When two or more of an Investment Advisors clients are engaged in the simultaneous sale or purchase of securities, the Investment Advisor allocates the transactions as to amount in accordance with formulas deemed to be equitable as to each client. There may be circumstances under which purchases or sales of portfolio securities for one or more of an Investment Advisors clients will have an adverse effect on other clients.
Transactions on stock exchanges (such as the NYSE and NASDAQ) on behalf of the Funds involve the payment of negotiated brokerage commissions. There is generally no stated commission in the case of securities traded in the over-the-counter markets, but the price of those securities includes an undisclosed commission or mark-up. The cost of securities purchased from underwriters includes an underwriting commission or concession, and the prices at which securities are purchased from and sold to dealers include a dealers mark-up or mark-down.
In executing portfolio transactions, Investment Advisors seek the most favorable execution available. The agreements between State Street and the Investment Advisors provide that, in assessing the best overall terms available for any transaction, the Investment Advisor may consider factors it deems relevant, including the brokerage and research services, as those terms are defined in section 28(e) of the Securities Exchange Act of 1934, provided to the Funds, viewed in terms of either that particular transaction or the broker-dealers overall responsibilities to the Fund.
State Street periodically reviews the brokerage commissions paid by the Funds to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits inuring to the Funds. It is possible that some of the services received from a broker or dealer in connection with the execution of transactions will primarily benefit one or more other accounts for which an Investment Advisor exercises discretion, or a Fund other than that for which the transaction was executed. Conversely, any given Fund may be the primary beneficiary of the service received as a result of portfolio transactions effected for those other accounts or Funds. The fees of the Investment Advisors are not reduced by reason of receipt of brokerage and research services.
SELF-MANAGED BROKERAGE ACCOUNTS
Self-Managed Brokerage Accounts are not included in the Collective Trust and are not registered under the Securities Act of 1933. They are described in this Annual Report on Form 10-K for information purposes only.
As an additional investment option under the Program, State Street Bank, through its affiliate State Street Global Markets, LLC, makes available a Self-Managed Brokerage Account. The Self-Managed
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Brokerage Account is available for all plans unless the Employer elects not to make it available for its plan. State Street and State Street Bank permit an Investor (as defined in Contributions and Investment Selection) whose plan includes the Self-Managed Brokerage Account as an investment option to authorize, at the Investors own cost, a third party investment manager, as defined in Section 3(38) of ERISA, to trade that Investors Self-Managed Brokerage Account. With the exception of certain in-kind rollover contributions, contributions cannot be allocated directly to the Self-Managed Brokerage Account, but must first be allocated to one or more of the Funds and then transferred to the Self-Managed Brokerage Account. In-kind rollover contributions may be allocated directly to the Self- Managed Brokerage Account, subject to prior approval of State Street. Assets in a Self-Managed Brokerage Account may be invested in publicly traded debt and equity securities and mutual funds. Some types of investments, such as options, futures, commodities, foreign securities (other than American Depositary Receipts), initial public offerings, bulletin board stocks, privately traded limited partnerships, commercial paper, bank investments and insurance investments, cannot be made in a Self-Managed Brokerage Account. Margin trading and short selling are not permitted in Self-Managed Brokerage Accounts. For more information regarding the Self-Managed Brokerage Account, please call (800) 348-2272.
The Self-Managed Brokerage Account generally is funded, in accordance with Program rules established by State Street Bank, through Core Funds, which is defined as all investment options, but excluding the Self-Managed Brokerage Account. To establish a Self-Managed Brokerage Account, an Investor must transfer initially a minimum of $2,500 from the Investors Core Funds to the Self-Managed Brokerage Account, provided that the Investor must at all times maintain in the Investors Core Funds the greater of $1,000 and 5% of the Investors entire account balance (including, for purposes of the 5% calculation, the assets in the Participants Self-Managed Brokerage Account). After the initial transfer, an Investor may make transfers of not less than $500 from the Core Funds to the Self-Managed Brokerage Account. No transfer from the Core Funds will be permitted to the extent that such transfer would cause the Investors Core Funds to fall below the required minimum.
Satisfaction of the requirement for maintenance of a minimum account balance of an Investors Core Funds will be based on the most recent valuations of the investment options, which are valued daily. If the value of an Investors Core Funds falls below the greater of $1,000 and 5% of the Investors aggregate account balances in all investment options (including, for purposes of the 5% calculation, the assets in the Participants Self-Managed Brokerage Account), the Investor will not be permitted to transfer assets to the Self-Managed Brokerage Account until the required minimum in the Investors Core Funds is again met.
At the discretion of State Street Bank, a Self-Managed Brokerage Account may be funded through in-kind transfers from other tax-qualified retirement plans. The foregoing account balance minimums and transfer restrictions with regard to the Core Funds remain in effect.
CONTRIBUTIONS AND INVESTMENT SELECTION
The person or entity responsible for allocating the assets of a plan among the investment options, which we refer to as the Investor, may be either the Participant, the Employer or the plan trustee depending on the terms of the plan.
Contributions are credited on the day of receipt if they are accompanied or preceded by proper allocation instructions and are received by 4:00 p.m. Eastern time (or, if earlier, the close of regular market trading) on a Business Day. Contributions received after that time will be credited on the following Business Day. Remittance of a contribution which is believed to be incorrect or failure to provide instructions as to the particular Investor account to which a contribution should be deposited may result in a delay in crediting contributions.
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Contributions allocated to the Funds are used to purchase Units in the Funds at the per Unit values of the Fund, calculated as of the close of the regular trading session of the New York Stock Exchange on the Business Day on which the contributions are credited. With the exception of certain in-kind rollover contributions, contributions cannot be allocated directly to the Self-Managed Brokerage Account, but must first be allocated to one or more of the Funds and then transferred to the Self-Managed Brokerage Account. In-kind rollover contributions may be allocated directly to the Self-Managed Brokerage Account, subject to prior approval of State Street. Also, contributions no longer can be allocated to the Balanced Fund. See Balanced Fund.
TRANSFERS AMONG INVESTMENT OPTIONS AND WITHDRAWALS
Transfers among offered investment options may be authorized at any time, subject to the terms and restrictions applicable to each investment option as discussed below under Frequent Trading; Restrictions on Transfers. A specified whole percentage or whole dollar amount or the total investment in an investment option may be transferred. Transfers will be made on the day the Program receives properly authorized instructions from the Investor, provided that these instructions are received not later than 4:00 p.m. Eastern time (or, if earlier, the close of regular market trading) on a Business Day. Transfer requests received after that time will be made on the next Business Day. Transfers may no longer be made into the Balanced Fund. Transfers involving Funds and withdrawals from the Balanced Fund are effected based upon the relative Unit values of the Funds or the Balanced Fund as determined at the close of the regular trading session of the New York Stock Exchange on the effective date of the transfer. There is no fee for transfers among investment options.
Transfer requests may be made by telephone through the Voice Response Unit or a Participant Services Representative or via the Internet Web site. Call the Program at (800) 348-2272 to make telephone transfers. All telephone transfer instructions are recorded. By authorizing telephone transfers, the Investor consents to such recording. The Program will accept telephone transfer instructions from any person who provides the correct identifying information. Consequently, this service may entail additional risks. The Program reserves the right, subject to the approval of ABA Retirement Funds, to cancel telephone transfer services at any time without advance notice to Investors. Transfer requests may also be made through the Programs Web site by accessing www.abaretirement.com. The Investor must use the correct identifying information in order to gain access to such Investors account through the Internet. Transfers will be effective as of a particular Business Day if confirmed on the Internet no later than 4:00 p.m. Eastern time (or, if earlier, the close of regular market trading) on that Business Day. Transfers confirmed after that time will be made on the next Business Day. In addition, a Transfer Among Investment Options form may be sent to ABA Retirement Funds Program, P.O. Box 5142, Boston, Massachusetts 02206-5142.
Frequent Trading; Restrictions on Transfers. Short-term or other excessive trading into and out of a Fund may harm its performance by disrupting portfolio management strategies and by increasing expenses. The policy of State Street, as trustee, is to discourage such trading. The International All Cap Equity Fund and the International Index Equity Fund have both adopted a specific excessive transfer restriction with respect to an Investors ability to make transfers into the International All Cap Equity Fund or the International Index Equity Fund. Under this restriction, Investors may make not more than one transfer into the International All Cap Equity Fund or the International Index Equity Fund within any 45 calendar day period. There are no restrictions on an Investors ability to make transfers out of the International All Cap Equity Fund or the International Index Equity Fund on any Business Day. The International All Cap Equity Fund and the International Index Equity Fund have adopted this restriction to reduce potential disruptions to such Fund that could potentially affect its investment performance. An Investor who is unable to make a transfer into the International All Cap Equity Fund or the International Index Equity Fund as a result of this restriction will not achieve the investment results,
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whether gain or loss, that would have been achieved if the transfer were implemented. The International All Cap Equity Fund, the International Index Equity Fund and their respective other Investors do not incur any gain or loss as a result of such inability of such Investor to make a transfer.
State Street, as trustee, reserves the right to take such additional actions with respect to excessive trading activity in the International All Cap Equity Fund, the International Index Equity Fund or other investment options, such as the rejection of transfer requests, as it may, in its discretion, deem appropriate and in the best interests of all Investors to curtail excessive trading. In addition, to discourage short-term trading, State Street Bank, as State Streets agent, may use fair value pricing in certain circumstances, as discussed under Information With Respect to the FundsValuation of Units.
State Street reserves the right to suspend withdrawals from or transfers to any Fund or a Self-Managed Brokerage Account or transfer or withdrawals from the Balanced Fund at any time during which any market or stock exchange on which a significant portion of the investments of a Fund, a Self-Managed Brokerage Account or the Balanced Fund are quoted is closed or during which dealings thereon are restricted or suspended. In addition, State Street reserves the right to suspend withdrawals or transfers to or from any Fund or transfer or withdrawals from the Balanced Fund at any time during which (a) there exists any state of affairs which, in the reasonable opinion of State Street, constitutes an emergency as a result of which disposition of the assets of a Fund or transfer or withdrawals from the Balanced Fund would not be reasonably practicable or would be seriously prejudicial to the holders of Units of a Fund or the Balanced Fund, (b) there has been a breakdown in the means of communication normally employed in determining the price or value of any of the investments of a Fund or the Balanced Fund, or of current prices on any stock exchange on which a significant portion of the direct or indirect investments of such Fund or the Balanced Fund are quoted, or when for any reason the prices or values of any investments owned by such Fund cannot reasonably be promptly and accurately ascertained, or (c) the transfer of funds involved in the realization or acquisition of any investment cannot, in the reasonable opinion of State Street, be effected at normal rates of exchange. In addition, transfers and withdrawals from the Stable Asset Return Fund may be suspended or limited temporarily if the amount of liquid assets in the Stable Asset Return Fund is insufficient to satisfy all withdrawal or transfer requests.
With respect to the Stable Asset Return Fund, State Street will utilize a tiered liquidity structure in the following sequence to satisfy withdrawal and transfer requests: cash flows (contributions, transfers-in, maturities and interest); and sales of Short-Term Investment Products. In the event that the amount of liquid assets held by the Stable Asset Return Fund is insufficient to satisfy all withdrawal and transfer requests immediately, State Street may be forced to limit or suspend withdrawals and transfers from the Stable Asset Return Fund. In such cases, withdrawals by Participants from the Program because of death, disability, retirement or termination of employment will be given priority and will be honored from available liquid assets, including the benefit responsive features of the investment contracts, in the order in which withdrawal instructions were received by State Street. Subject to any applicable legal requirements, after all such withdrawals have been effected, transfers to other allowable investment options will be honored from available liquid assets in the order that transfer instructions were received by State Street. The length of any suspension or limitation on withdrawals or transfers could vary and would depend, on the one hand, on the aggregate amount of assets that Participants have requested to withdraw or transfer and, on the other hand, on the rate at which assets become available for withdrawal or transfer through the exercise of permitted withdrawal rights under the investment contracts and through the maturity of investment contracts and the rate at which additional monies are contributed to the Stable Asset Return Fund by Participants. See Stable Asset Return Fund.
Withdrawals. Withdrawals from the Funds are made at such time and in such manner as is prescribed by the various plans which participate in the Program.
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A Participants eligibility for contributions, benefits, and the time and manner of distributions depends on the terms of the applicable plan through which he or she participates. For information regarding the terms of a plan, a Participant should contact his or her Employer.
The Program, with the approval of ABA Retirement Funds, has engaged ING Investment Advisors, LLC, which we refer to as ING Investment Advisors, an investment adviser registered under the Investment Advisers Act of 1940, as amended, and a subsidiary of ING Services, to make available to Participants through its call center the services of its investment advisor representatives for the telephonic delivery of investment advice and account maintenance and an Internet-based personalized defined contribution plan asset allocation investment advisor service, which we refer to as the Online Advisor Service. ING Services is a wholly owned subsidiary of ING Group, a Netherlands-based financial services company. The advisory service model described herein is based on Department of Labor Advisory Opinion 2001-09A.
ING Investment Advisors provides to Investors who are Participants (or beneficiaries) in plans adopted under the American Bar Association Members Retirement Plan (and certain individually designed defined contribution plans) individualized investment advice regarding the designated investment options under the Program over the telephone through its investment advisor representatives or via the Internet through access to the Online Advisor Service Web site. The Online Advisor Service provides retirement forecasts and advice, utilizing the computer program of Financial Engines, Inc.®, which we refer to as FE, which is not affiliated with ING Investment Advisors, to analyze market conditions and the Funds available under the Collective Trust, as well as information provided by the Investor through an electronic questionnaire or through discussions with an investment advisor representative over the telephone. Based on this analysis, the FE computer program will generate specific portfolio recommendations to the Investor as to the allocation of account balances among the Funds. The computer program is based upon the application of economic models and formulae developed by FE that are not specific to ING Investment Advisors or its affiliated companies, or the investment options, but are based on generally accepted financial planning and investment principles. Hence, ING Investment Advisors does not have any discretion regarding the allocation recommendations generated by the computer program.
The investment advice and recommendations provided to Investors by ING Investment Advisors are required by law to be unbiased and solely in the best interest of Investors. ING Investment Advisors recommendations of specific investment options are prepared and provided without consideration to revenues received by ING Investment Advisors for the delivery of its services or the advisory fees it charges for the services it provides.
Investors are solely responsible for determining whether to use or follow the investment advice provided by ING Investment Advisors. Additional information regarding this service may be obtained from the Programs Participant Services Line at (800) 348-2272.
The fees for the Online Advisor Service are included in the program expense fee payable to ING Life. Because the program expense fee is charged against the Unit values of the Funds, all Participants investing in the Funds effectively bear the cost of the Online Advisor Service, regardless of whether they actually use the service. See Deductions and Fees.
Separately, an Investor may elect to receive advice through a call center investment advisor representative and to have the Investors account advised and managed by ING Investment Advisors
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through the Professional Account Manager program. By making this election, Investors delegate discretionary management of their account to ING Investment Advisors. An Investor electing to receive such services will incur a monthly charge payable directly from the Investors account as of the last day of each month for which the Investor has elected to receive such advice, based upon the following fee schedule:
Advised Account Balance |
Annualized Fee | ||
First $100,000 |
.50 | % | |
Next $50,000 |
.45 | ||
Next $50,000 |
.40 | ||
Next $100,000 |
.35 | ||
Over $300,000 |
.25 |
Any Investor who has elected to use the Professional Account Manager program may elect to discontinue such use as of any month-end by making a request by telephone to a call center investment advisor representative no later than five Business Days prior to the applicable month-end.
Advisory services are provided by ING Investment Advisors for which Financial Engines® Advisors, LLC acts as sub advisor. ING Investment Advisors does not give tax or legal advice. If you need tax advice, contact your accountant or lawyer; if you need legal advice, contact your lawyer. For more information about the advisory services provided by ING Investment Advisors, please read the ING Advisor Service Disclosure Statement. The Disclosure Statement may be viewed online by accessing the ING Advisor Service link from the Programs Web site at www.abaretirement.com or may be requested from an ING Financial Advisor by calling the Programs Participant Services Line at (800) 348-2272.
Persons who are Employers or who are responsible for allocating assets under a particular plan may obtain administrative, investment allocation and transfer forms or additional information by:
· | calling the Program at (800) 348-2272 between 8:00 a.m. and 8:00 p.m. Eastern time; |
· | calling the Programs FaxBack line at (877) 202-3930; or |
· | accessing the Programs Web site at www.abaretirement.com. |
A Participant may also obtain forms from his or her Employer, or by using one of the methods outlined above.
For information regarding enrollment in the Program, Eligible Employers may call the Program at (800) 826-8901 between 9:00 a.m. and 5:00 p.m. Eastern time or write to ABA Retirement Funds Program, P.O. Box 5142, Boston, Massachusetts 02206-5142.
For Unit values for the current Funds, and for the 30-day yield of the Bond Core Plus Fund and the Bond Index Fund, call the Programs daily rate line at (800) 826-8905.
For a recorded message providing current account information, call the Program at (800) 348-2272.
Sole practitioners, partnerships (including limited liability companies) and professional corporations engaged in the practice of law may adopt the Program if they or at least one of their
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partners or shareholders, as the case may be, is a member or associate of the American Bar Association or of a state or local bar association that is represented in the ABAs House of Delegates. State or local bar associations represented in the ABAs House of Delegates may also adopt the Program for their own employees subject to limitations imposed by the Internal Revenue Code. An organization that is not engaged in the practice of law may also be eligible to adopt the Program if it is closely associated with the legal profession, receives the approval of ABA Retirement Funds, and has, as an owner or a member of its governing board, a member or associate of the American Bar Association. The retirement program specialists engaged by or through State Street or State Street Bank are available to help individuals and organizations determine whether they are eligible to adopt the Program.
Eligible Employers that elect to participate in the Program may do so either by adopting one or both of the American Bar Association Members Defined Benefit Pension Plan and the American Bar Association Members Retirement Plan, the two ABA Members Plans sponsored by ABA Retirement Funds, or through their own individually designed plans. The ABA Members Plans are master plans designed to qualify under section 401(a) of the Internal Revenue Code.
Under the American Bar Association Members Retirement Plan, an Eligible Employer may adopt a SIMPLE 401(k) plan, a profit sharing plan, a money purchase pension plan or a target benefit plan. The Internal Revenue Service has issued an opinion letter dated March 31, 2008 stating that the available forms of the American Bar Association Members Retirement Plan is qualified under section 401(a) of the Internal Revenue Code for use by employers for the benefit of their employees. On January 25, 2002, the Internal Revenue Service issued opinion letters that the available forms of the American Bar Association Members Defined Benefit Pension Plan are so qualified.
Assets contributed under master plans are held by State Street Bank as trustee of the Retirement Trust. Assets invested through individually designed plans are held by State Street Bank as trustee of the Pooled Trust. Assets contributed to each of these trusts are invested in the investment options available under the Program in accordance with the instructions of the person or entity vested with responsibility for determining the investment allocation of the assets of each plan. In accordance with the plans, assets of the trusts are held for the benefit of the Participants. Pursuant to the above-described opinion letter, the Internal Revenue Service has determined the Retirement Trust to be a tax-exempt trust under section 501(a) of the Internal Revenue Code.
To adopt either the American Bar Association Members Defined Benefit Pension Plan or the American Bar Association Members Retirement Plan, an Eligible Employer must complete and execute an adoption agreement. The adoption agreement contains the basic features that must be considered in designing an appropriate master plan under the Program and effects the Eligible Employers adoption of the Retirement Trust to hold assets of the master plan. The Programs retirement program specialists will assist Eligible Employers in the preparation of an adoption agreement. However, neither State Street Bank nor ING Services is authorized to give tax or legal advice, and Eligible Employers should consult with their tax or legal advisors prior to executing an adoption agreement. Depending on the form of adoption agreement adopted by an Eligible Employer and the other retirement plans, if any, maintained by the Eligible Employer, it may be advisable for an Eligible Employer to apply to the Internal Revenue Service for a determination of the qualified status of the master plan as adopted by the Eligible Employer.
An Eligible Employer which maintains an individually designed plan that is qualified under section 401(a) of the Internal Revenue Code may also participate in the Program and make use of the investment options, and in some cases the recordkeeping services, available under the Program by causing an adoption agreement for the Pooled Trust to be executed by the trustee of the individually designed plan. The trustee must demonstrate to ING Services, on behalf of State Street, that the participating trust is exempt from tax under section 501(a) of the Internal Revenue Code and that the
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related individually designed plan is qualified under section 401(a) of the Internal Revenue Code. The Programs retirement program specialists will assist in the preparation of an adoption agreement. However, neither State Street Bank nor ING Services is authorized to give tax or legal advice, and Eligible Employers and the trustees of an individually designed plan should consult with their tax or legal advisors prior to executing an adoption agreement. Only plans qualified under section 401(a) of the Internal Revenue Code may participate in the Program. Eligible Employers should note that the Internal Revenue Code and related regulations place limits on the amount of assets that may be contributed to the plans, as well as on withdrawals from the plans.
For copies of the appropriate adoption agreements and further information concerning the steps to be taken to adopt the Program, call State Street Bank at (800) 826-8901 between 9:00 a.m. and 5:00 p.m. Eastern time or write to State Street Bank and Trust Company, P.O. Box 5142, Boston, Massachusetts 02206-5142.
STATE STREET AND STATE STREET BANK
State Street is a wholly-owned subsidiary of State Street Bank which, in turn, is a wholly-owned subsidiary of State Street Corporation, a Massachusetts corporation and a bank holding company registered with the Federal Reserve Board pursuant to the Federal Bank Holding Company Act of 1956, as amended. State Street Corporation operates as a financial holding company pursuant to the Gramm-Leach-Bliley Act and Federal Reserve Board interpretations. Effective as of December 1, 2004, State Street was substituted for State Street Bank as trustee of the Collective Trust. State Street was formed as a New Hampshire non-depository trust company as a result of a conversion of the charter of State Street Bank and Trust Company of New Hampshire, N.A., which we refer to as the National Bank, on October 25, 2004. As part of the conversion, State Street succeeded to the assets and liabilities of the National Bank and performs the operations previously performed by the National Bank and those relating to service as trustee of the Collective Trust. State Streets principal office is located at 20 Trafalgar Square, Suite 449, Nashua, New Hampshire 03063.
State Street Bank is a Massachusetts chartered trust company and a wholly-owned subsidiary of State Street Corporation. As of December 31, 2009, State Street Bank had a total risk-based capital ratio of 19.0%, which is in excess of applicable regulatory minimum requirements for qualifying as a well-capitalized bank under the Federal Reserve Boards risk-based capital rules. State Street Corporation is a leading specialist in meeting the needs of institutional investors worldwide. State Street Banks customers include mutual funds and other collective investment funds, corporate and public retirement plans, insurance companies, foundations, endowments and other investment pools, and investment managers. As of December 31, 2009, State Street Bank and its affiliates on a consolidated basis had approximately $18.79 trillion of assets under custody and administration and had approximately $1.91 trillion of assets under management. State Street Banks principal offices are located at One Lincoln Street, Boston, Massachusetts 02111.
State Street is responsible for all the functions formerly performed by State Street Bank as trustee of the Collective Trust. State Street Bank has guaranteed to ABA Retirement Funds, the Collective Trust and those persons who from time to time have an interest in the Collective Trust the obligations of State Street as trustee of the Collective Trust, and the Collective Trusts Declaration of Trust, as amended, provides that (i) in the event of an issuance or entry of a decree or order by an applicable state or federal bank regulator or court of competent jurisdiction declaring State Street bankrupt or insolvent, (ii) in the event State Street is prevented from serving as trustee of the Collective Trust by regulatory order or (iii) upon the seizure of State Street or any substantial part of its property by an applicable state or federal bank regulator or pursuant to an order of a court of competent jurisdiction, State Street Bank automatically will again become the trustee of the Collective Trust.
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State Street Bank has entered into a master services agreement with State Street pursuant to which State Street Bank provides custodial and related services with respect to the Collective Trust and the Funds. State Street Bank serves as trustee of the Retirement Trust and the Pooled Trust and makes available the Self-Managed Brokerage Account option as described in this Annual Report on Form 10-K.
State Street and ING have entered into a Program Interface Agreement, which we refer to as the State Street Interface Agreement, pursuant to which, effective May 1, 2009, the parties have agreed to provide the services and information necessary to operate the Program pending the effective date of the Northern Fiduciary Services Agreement referred to under Recent and Expected Changes to the Program; Rule of Northern Trust.
For a description of certain expected changes to the above-described arrangements, see Recent and Expected Changes to the Program; Role of Northern Trust.
Pursuant to the Program Services Agreement, dated December 6, 2008, between ABA Retirement Funds and ING Life, which we refer to as the Program Services Agreement, effective as of May 1, 2009, ING Life, an affiliate of ING Services, provides the recordkeeping, communication, administration and marketing services to the Program theretofore provided by or through State Street Bank. ING Life has delegated to its affiliate, ING Services, responsibility for performing the services required of ING Life under the Program Services Agreement. While ING Services, as a signatory to the Program Services Agreement, has represented that it is obligated to perform the services required of ING Life under the Program Services Agreement pursuant to a services agreement between ING Life and ING Services, neither the engagement of ING Services nor the performance of services by ING Services relieves ING Life of any liability imposed upon ING Life under the Program Services Agreement with respect to such services.
ING Services and/or its affiliates directly distribute marketing materials on behalf of the Collective Trust. No distributors or broker-dealers who are unaffiliated with ING Services or its affiliates are utilized. The Program is marketed through advertising in legal periodicals, exhibiting at legal conventions and direct mail and phone solicitations to law firms. Firms that indicate an interest in the services made available through the Program are assigned a marketing representative who facilitates participation in the Program through phone or on-site discussions. ABA Retirement Funds is responsible for the selection, retention and oversight of ING Services and any affiliate thereof with respect to the foregoing services.
RECENT AND EXPECTED CHANGES TO THE PROGRAM; ROLE OF NORTHERN TRUST
ABA Retirement Funds, Northern Trust and Northern Trust Investments have entered into a Fiduciary Investment Services Agreement dated as of August 15, 2008, as amended, effective as of May 1, 2009, which we refer to as the Northern Fiduciary Services Agreement. The Northern Fiduciary Services Agreement provides, among other things, for the substitution of Northern Trust for State Street as trustee of the Collective Trust effective September 30, 2011, or if earlier, upon the effective date of a Succession and Assignment Agreement dated as of June 29, 2009 among Northern Trust, Northern Trust Investments, State Street and State Street Bank. The substitution of Northern Trust as trustee of the Collective Trust on a date earlier than September 30, 2011 is conditioned, in part, on the net asset value of the State Street cash collateral funds referred to in Item 1A, Risk FactorsRisks Related to Securities Lending reaching a weighted average of at least 99% of amortized cost valuation thereof. According to State Street, the net asset value of these cash collateral funds first reached this weighted average value of
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99% of amortized cost as of February 26, 2010. The effective date of the Succession Agreement accordingly has been tentatively scheduled to occur on or about July 1, 2010, although it may occur earlier or later. We refer to the effective date of the Succession Agreement as the FISA Effective Date.
As permitted under the Northern Fiduciary Services Agreement, Northern Trust has determined to cause Northern Trust Investments to carry out Northern Trusts obligations to act as trustee of the Collective Trust and related duties. From and after the FISA Effective Date, Northern Trust will be liable to the same extent as if Northern Trust had directly performed such obligations and related duties, and Northern Trust Investments will be responsible for all the functions currently performed by State Street in its capacity as trustee of the Collective Trust.
In accordance with the Northern Fiduciary Services Agreement, Northern Trust Investments has recommended an investment policy for the Program, which has been accepted by ABA Retirement Funds. Additionally, effective as of May 1, 2009, Northern Trust was appointed by ABA Retirement Funds to act as investment fiduciary for the Program to the extent described under ABA Retirement Funds, and as permitted by the Northern Fiduciary Services Agreement, Northern Trust has determined to utilize Northern Trust Global Advisors, Inc., a wholly-owned subsidiary of Northern Trust Corporation, to assist it to carry out Northern Trusts obligations as investment fiduciary.
Northern Trust is a wholly-owned subsidiary of Northern Trust Corporation, a publicly-traded bank holding company registered with the Federal Reserve Board pursuant to the Federal Bank Holding Company Act of 1956, as amended. Northern Trust Corporation operates as a financial holding company pursuant to the Gramm-Leach-Bliley Act and Federal Reserve Board interpretations. Northern Trust is an Illinois banking corporation and as of December 31, 2009 had a total risk-based capital ratio of 16%, which is in excess of applicable regulatory minimum requirements for qualifying as a well-capitalized bank under the Federal Reserve Boards risk-based capital rules. Northern Trust, Northern Trust Investments and their affiliates serve institutional investors worldwide. Northern Trust Investments customers include mutual funds, collective investment funds, corporate and public retirement plans, insurance companies, foundations, endowments and other investment pools, and investment managers. As of December 31, 2009, Northern Trust and its affiliates on a consolidated basis had approximately $3.657 trillion of assets under custody and had approximately $627.2 billion of assets under management. Northern Trusts principal offices are located at 50 South LaSalle Street, Chicago, Illinois 60603.
As described under Information with Respect to the Funds, certain Funds participate, directly or indirectly, in the State Street Bank securities lending program. As described under Item 1A, Risk FactorsRisks Related to Securities Lending, State Street Bank has imposed limitations with respect to withdrawal from the securities lending program (although these withdrawal limitations have not impacted Participants or Employers under the Program). Under the Succession Agreement, the FISA Effective Date is to occur within six months after limitations on withdrawal from the securities lending program have been lifted or the market value of the cash collateral funds employed in connection with securities lending has reached a specified level. It is currently expected that the FISA Effective Date will occur on or about July 1, 2010, although it may occur earlier or later. Prior to the FISA Effective Date, State Street will remain as trustee of the Collective Trust, and pursuant to amendments to the Administrative and Investment Services Agreement dated as of June 29, 2009 between ABA Retirement Funds and State Street Bank, as amended, which we refer to as the Administrative and Investment Services Agreement, and the Northern Fiduciary Services Agreement, Northern Trust, as investment fiduciary, from May 1, 2009 until the FISA Effective Date will exercise the rights previously held by ABA Retirement Funds to make recommendations to the Trustee regarding certain of the investment options and the engagement and termination of Investment Advisors with respect to such options, consistent with the investment policy for the Program developed by Northern Trust and accepted by ABA Retirement Funds. (Northern Trust, however, has not made, and has no authority to make, recommendations regarding management of the indexed portions of the Large Cap Equity Fund or the
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Small-Mid Cap Equity Fund, or the All Cap Index Equity Fund, or the Retirement Date Funds.) Northern Trust has made recommendations and State Street has reviewed and evaluated the recommendations made and, giving full consideration to them as the Administrative and Investment Services Agreement requires, has made its determination as to those recommendations that should be implemented and those Investment Advisors that should be retained. The selection of Funds offered as investment options as described in this Annual Report on Form 10-K and the Investment Advisors thereof is consistent with State Streets determinations.
The Northern Fiduciary Services Agreement provides that with respect to the designation of Northern Trust Investments as trustee of the Collective Trust, Northern Trust Corporation will guarantee, in writing, the obligations of Northern Trust Investments as trustee, and such guarantee has been executed and delivered to ABA Retirement Funds.
Commencing on the FISA Effective Date, Northern Trust will be paid a trust, management and administration fee based on the aggregate value of assets held by the Funds, excluding the Retirement Date Funds, at the following annual rate:
Value of Assets |
Rate | ||
First $1 billion |
.115 | % | |
Next $2 billion |
.08 | ||
Over $3 billion |
.065 |
This fee will accrue daily and be paid to Northern Trust at the end of each calendar month. This fee is based upon the Funds line-up as described in this Annual Report on Form 10-K and the specific construction of each Fund relative to its Investment Advisor composition, custody and other Fund administration requirements. ABA Retirement Funds and Northern Trust reserve the right to change such fee should the Funds line-up or construction change in the future in a manner that changes Northern Trusts costs of administering the Funds.
Also commencing on the FISA Effective Date, Northern Trust will be paid a Retirement Date Funds management fee of .115%, of the value of assets held by the respective Retirement Date Funds. This fee will accrue daily and be paid to Northern Trust at the end of each month.
Northern Trust, Northern Trust Investments and ING Services have entered into a Program Interface Agreement, which we refer to as the Northern Trust Interface Agreement, pursuant to which the parties have agreed to provide services and information to each other to the extent necessary or appropriate to operate the Program from and after the FISA Effective Date. ABA Retirement Funds is a third-party beneficiary of the Northern Trust Interface Agreement with the power to enforce its terms for the benefit of the Program.
In connection with the recent changes described above, effective July 2, 2009, the previously offered Large-Cap Value Equity Fund, the Large-Cap Growth Equity Fund, the Mid-Cap Value Equity Fund, the Mid-Cap Growth Equity Fund and the Small-Cap Equity Fund were terminated, and assets contributed to the Program may no longer be invested in any of these funds as of that date.
As sponsor of the Program, ABA Retirement Funds is responsible for the design of the Program documents, and the maintenance of the American Bar Association Members Defined Benefit Pension Plan, the American Bar Association Members Retirement Plan, the Retirement Trust and the Pooled Trust. ABA Retirement Funds has engaged State Street Bank to provide investment services and to make
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the investment options available under the Program. Under the Administrative and Investment Services Agreement, State Street Bank may substitute a wholly-owned subsidiary of State Street Bank as trustee of the Collective Trust, and effective as of December 1, 2004, State Street became the trustee of the Collective Trust.
Under the Administrative and Investment Services Agreement, ABA Retirement Funds has the right to designate an investment fiduciary with the authority to make recommendations to State Street regarding the addition or deletion of Funds as investment options and the engagement and termination of Investment Advisors. ABA Retirement Funds, with or without the assistance of a consultant, also monitors the performance of State Street, State Street Bank and the investment fiduciary. Pursuant to the Administrative and Investment Services Agreement and the Northern Fiduciary Services Agreement, ABA Retirement Funds has designated Northern Trust as investment fiduciary with certain rights and responsibilities under the Administrative and Investment Services Agreement to make recommendations to State Street regarding the addition or deletion of Funds as investment options and the engagement and termination of Investment Advisors, including State Street and State Street Bank (to the extent that each serves as an Investment Advisor), subject to limitations described below. State Street has recognized such designation and has agreed to give full good faith consideration to all such recommendations made by Northern Trust, although State Street retains exclusive management and control over the Funds and the Investment Advisors.
Pursuant to the above-described arrangements, Northern Trust has recommended the continued engagement of State Street Bank to manage the Real Asset Return Fund and the Target Risk Funds. Also, pursuant to the investment policy for the Program as Northern Trust Investments has recommended and ABA Retirement Funds has accepted, Northern Trust has recommended, and State Street has considered and determined to adopt, the Program as described in this Annual Report on Form 10-K, except that Northern Trust has not made, and does not have authority to make, recommendations regarding management of the indexed portions of the Large Cap Equity Fund or the Small-Mid Cap Equity Fund, or the All Cap Index Equity Fund or the Retirement Date Funds. In addition, Northern Trust has not made, and does not have authority to make, recommendations with the respect to the securities lending activities conducted by State Street Bank.
Under the Program Services Agreement between ABA Retirement Funds and ING Life, effective as of May 1, 2009, ING Life, through ING Services, performs recordkeeping, communication, administration and marketing services for the Program.
State Street, State Street Bank, ING Life, Northern Trust, Northern Trust Investments and ABA Retirement Funds have reviewed and negotiated the terms and conditions of the respective documents establishing the respective rights and obligations of the parties relating to the Program, including fees payable to State Street Bank, Northern and ING Life in connection with the Program. ABA Retirement Funds monitors State Streets, State Street Banks, Northern Trusts, Northern Trust Investments and ING Lifes services rendered in connection with the Program and approves the hiring by ING Life of certain other major service providers, such as actuaries and consultants.
The Collective Trust pays a program expense fee to each of ING Life (or ING Services) and ABA Retirement Funds for their services in connection with the Program, which services are described under ING Life and ING Services and ABA Retirement Funds, respectively. For all investment options other than the Self-Managed Brokerage Account, the fee is paid directly from the assets of the Funds. ING Life is contractually responsible for all services provided by ING Services.
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Effective from and after May 1, 2009, the Collective Trust pays a program expense fee to ING Life equal to (A) $135,250 for each of the first twelve calendar months after that date, (B) $177,850 for each of the next twelve calendar months, and (C) $152,850 for each of the remaining calendar months of the term of the Program Services Agreement; plus, for each calendar month of the term of the Program Services Agreement, a fee based on the aggregate assets of the Funds and the Balanced Fund at the following annual rate:
Value of Assets |
Rate of ING Life Program Expense Fee | |
First $4 billion |
.47% | |
Next $1 billion |
.36 | |
Next $1 billion |
.215 | |
Over $6 billion |
.22 |
This program expense fee is accrued daily and paid monthly based on the aggregate assets of the Funds and the Balanced Fund as of the last Business Day of the preceding month. The Funds and the Balanced Fund bear their respective portions of this program expense fee pro rata based on their respective net assets as of the time of calculation thereof. This program expense fee attributable to the portions of the Balanced Fund invested in the Large Cap Equity Fund and the Bond Core Plus Fund are accrued and paid from the Large Cap Equity Fund or the Bond Core Plus Fund, as applicable, not from the Balanced Fund. The Program Services Agreement contains certain service standards applicable to the performance of recordkeeping services by ING Life and imposes penalties that reduce the program expense fee if these service standards are not met.
For the period from May 1, 2009 through December 31, 2009, the program expense fee paid to ING Services was $11,156,188.
Prior to May 1, 2009, the Collective Trust paid a program expense fee to State Street Bank based on the aggregate assets of the Funds and the Balanced Fund at the following annual rate (excluding one-time project fees):
Value of Assets |
Rate of State Street Bank Program Expense Fee | |
First $2 billion |
.40% | |
Next $1 billion |
.31 | |
Next $1 billion |
.21 | |
Over $4 billion |
.13 |
A one-time additional program expense fee of $150,000 was charged to the Program on February 2, 2009 relating to expenses incurred by State Street in connection with the establishment of the Index Funds in early 2009.
For the period from January 1, 2009 through April 30, 2009, the program expense fee paid to State Street Bank was $3,588,754. The relevant agreement between ABA Retirement Funds and State Street Bank had service standards similar to those contained in the Program Services Agreement and imposed similar penalties for failure to meet those standards. A service penalty of $75,000 was imposed in September 2009.
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The program expense fee payable to ABA Retirement Funds is based on the aggregate assets of the Funds and the Balanced Fund. Effective from and after June 18, 2009, the Collective Trust pays a program expense fee to ABA Retirement Funds at the following annual rate:
Value of Assets |
Rate of ABA Retirement Funds Program Expense Fee |
||
First $3 billion |
.075 | % | |
Next $1 billion |
.065 | ||
Next $1 billion |
.035 | ||
Next $1 billion |
.025 | ||
Over $6 billion |
.015 |
This program expense fee is accrued daily and is paid to ABA Retirement Funds monthly based on the aggregate assets of the Funds and the Balanced Fund as of the end of the last Business Day of the preceding month. The Funds and the Balanced Fund bear their respective portions of this program expense fee pro rata based on their respective net assets as of the time of calculation thereof. This program expense fee attributable to the portions of the Balanced Fund invested in the Large Cap Equity Fund and the Bond Core Plus Fund are accrued and paid from the Large Cap Equity Fund or the Bond Core Plus Fund, as applicable, not from the Balanced Fund. The fee schedule set forth above may be increased only by written notification of such increase to all Employers, and shall become effective after a minimum of 60 days from such notice.
Prior to June 18, 2009, the Collective Trust paid a program expense fee to ABA Retirement Funds at the following annual rate:
Value of Assets |
Rate of ABA Retirement Funds Program Expense Fee |
||
First $500 million |
.075 | % | |
Next $850 million |
.065 | ||
Next $1.15 billion |
.035 | ||
Next $1.5 billion |
.025 | ||
Over $4.0 billion |
.015 |
The program expense fee paid to ABA Retirement Funds for the year ended December 31, 2009 was $1,950,929.
Trust, Management and Administration Fee
Effective from and since February 2, 2009, the Collective Trust pays State Street Bank a fee for trust, management, administration and custody services relating to the assets in the Funds and the Balanced Fund based on the aggregate value of their assets at the following annual rate:
Value of Assets |
Rate of Trust, Management and Administration Fee* |
||
First $1.0 billion |
.202 | % | |
Next $1.8 billion |
.067 | ||
Over $2.8 billion |
.029 |
* | Prior to February 2, 2009, the annual fee rate on the first $1.0 billion was .217%, on the next $1.8 billion was .067% and over $2.8 billion was .029%. |
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This fee is accrued on a daily basis and is paid monthly from the assets of the Funds and the Balanced Fund. The Funds and the Balanced Fund bear their respective portions of this fee pro rata based on their respective net asset values as of the time of calculation thereof. The trust, management and administration fees attributable to the portions of the Balanced Fund invested in the Large Cap Equity Fund and the Bond Core Plus Fund are accrued and paid from the Large Cap Equity Fund or the Bond Core Plus Fund, as applicable, not from the Balanced Fund.
The fee paid to State Street Bank for trust, management, administration and custody services for the year ended December 31, 2009 was $3,311,857.
Benefit payments under the Program generally are made by check. Within two Business Days before the check is payable, funds for the payment of benefits are transferred to a non-interest bearing account with State Street Bank. There is no separate fee charged for benefit payments.
For a description of certain expected changes to the above-described arrangements, see Recent and Expected Changes to the Program; Role of Northern Trust.
Investment Advisor FeesManaged Funds
An Investment Advisor fee is paid to each Investment Advisor with respect to the Managed Funds, excluding the Stable Asset Return Fund, based on the value of the assets allocated to that Investment Advisor. These fees are accrued on a daily basis and paid monthly from the respective Managed Funds.
The table below provides the respective blended annual rates of aggregate fees payable by each of the Large Cap Equity Fund, the International All Cap Equity Fund and the Small-Mid Cap Equity Fund to its respective Investment Advisors. These aggregate advisory fee rates are stated as a percentage of the assets of each Fund and are calculated utilizing fee rates and asset allocations as of December 31, 2009 in the case of the Small-Mid Cap Equity Fund and as of January 19, 2010 in the case of the Large Cap Equity Fund and the International All Cap Equity Fund:
Fund |
Advisory Fees |
||
Large Cap Equity Fund |
.259 | % | |
Small-Mid Cap Equity Fund |
.504 | ||
International All Cap Equity Fund |
.482 |
The Bond Core Plus Fund pays its Investment Advisor a fee at the following annual rate:
Value of Assets in Bond Core Plus Fund(1) Allocated to Pacific Investment Management Company LLC |
Rate | ||
First $25 million |
.50 | % | |
Next $25 million |
.375 | ||
Over $50 million |
.25 |
(1) | The assets of the debt portion of the Balanced Fund are invested in the Bond Core Plus Fund. Pacific Investment Management Company LLC receives an Investment Advisor fee according to this fee schedule and based on the aggregate value of all assets allocated to the Bond Core Plus Fund, including those so allocated through the debt portion of the Balanced Fund. |
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From on or about July 6, 2009 to on or about January 18, 2010, each of the Large Cap Equity Fund and the International All Cap Equity Fund paid its Investment Advisors aggregate fees at the following respective blended annual rates:
Fund |
Advisory Fees |
||
Large Cap Equity Fund |
.274 | % | |
International All Cap Equity Fund |
.476 |
Prior to on or about July 6, 2009, the International All Cap Equity Fund paid its Investment Advisors fees at the following annual rates:
Value of Assets in International All Cap Equity Fund Allocated to JPMorgan Asset Management (UK) Limited |
Rate | ||
First $100 million |
.65 | % | |
Over $100 million |
.55 | ||
Value of Assets in International All Cap Equity Fund Allocated to Philadelphia International Advisors, LP |
Rate | ||
First $5 million |
.75 | % | |
Next $10 million |
.55 | ||
Over $15 million |
.45 |
Investment Advisor FeesIndex Funds and Indexed Portions of Managed Funds
Effective from and after February 3, 2009 (or, if later, since inception), the Collective Trust pays Investment Advisor fees to State Street Bank for the investment management services it performs relating to the assets in the Index Funds. The Collective Trust also pays Investment Advisor fees to State Street Bank for the investment management services it performs relating to the indexed portions of the Large Cap Equity Fund and the Small-Mid Cap Equity Fund. These fees are accrued on a daily basis and paid monthly from the relevant assets of the respective Funds and are based on respective net assets as of the time of calculation. The fees for the indexed portions of the Managed Funds identified above are at an annual rate of .05% of the relevant assets of these Funds, and the fees for the respective Index Funds are at the following annual rates:
Index Fund |
Rate | ||
Bond Index Fund |
.04 | % | |
Large Cap Index Equity Fund |
.02 | ||
All Cap Index Equity Fund |
.05 | ||
Mid Cap Index Equity Fund |
.05 | ||
Small Cap Index Equity Fund |
.05 | ||
International Index Equity Fund |
.10 |
The cash reserve portion of the International All Cap Equity Fund may be invested in a collective investment fund maintained by State Street Bank which is designed to replicate the MSCI ACWI ex-US Index, and the fees for the portion of the Fund so invested are at an annual rate of .12% of the relevant assets of the Fund.
Investment Advisor FeesReal Asset Return Fund
Fees are paid to State Street Bank for the investment management services it performs relating to the assets in the Real Asset Return Fund. These services include monitoring appropriate asset allocations
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at various time periods and selection of investment vehicles by which to gain exposure to desired allocations. This fee is at the annual rate of .09% of the assets of the Real Asset Return Fund and is accrued on a daily basis and paid monthly from the assets of the Fund.
Investment Advisor FeesRetirement Date Funds
Fees are paid to State Street Bank for the investment management services it performs relating to the assets in the Retirement Date Funds. These services include monitoring appropriate asset allocations at various time periods to target date and selection of investment vehicles by which to gain exposure to desired allocations. This fee is at the annual rate of .10% of the assets of the Retirement Date Funds and is accrued on a daily basis and paid monthly from the assets of the respective Retirement Date Funds. The Retirement Date Funds bear their respective portions of this fee pro rata based on their respective net assets as of the time of calculation of the fee.
Investment Advisor FeesTarget Risk Funds
Fees are paid to State Street Bank for the investment management services it performs relating to the assets in the Target Risk Funds. These services include monitoring appropriate asset allocations at various time periods and selection of investment vehicles by which to gain exposure to desired allocations. This fee is at the annual rate of .06% of the respective Target Risk Funds and is accrued on a daily basis and paid monthly from the assets of the respective Funds. The Target Risk Funds bear their respective portions of this fee pro rata based on their respective net assets as of the time of calculation thereof.
Operational and Offering Costs
Recurring expenses incurred in connection with operating the Collective Trust, such as printing, legal, registration, consulting and auditing expenses, are considered operational expenses and are accrued throughout the year. For the year ended December 31, 2009, these expenses totaled $5,354,714, which includes $141,596 that was paid by the Collective Trust to Ennis Knupp & Associates through on or about June 30, 2009 for certain investment consulting services. Fees in the amount of approximately $78,120 for the registration of $1.4 billion of Units with the Securities and Exchange Commission were paid during 2009 and are an operational cost. These operational costs are allocated to all of the Funds and the Balanced Fund based on net assets. For purposes of this allocation, assets of the Balanced Fund invested through the Large Cap Equity Fund or the Bond Core Plus Fund are included only under the Large Cap Equity Fund or the Bond Core Plus Fund, as applicable, and not under the Balanced Fund.
Expenses relating to the establishment and offering of the five new Index Funds in early 2009 were approximately $545,000. The fee payable to State Street Bank for its services as transition manager to facilitate the transition of Program assets in early 2009 was approximately $492,000. These one-time expenses were charged to the Program on February 2, 2009.
From on or about July 1, 2009 until the FISA Effective Date, the Collective Trust pays Northern Trust an annual fee of $500,000 for its services as investment fiduciary, plus a one time payment of $250,000 for related services performed by Northern Trust prior to July 1, 2009. The one-time payment was charged to the Collective Trust on or about July 2, 2009. Northern Trusts annual fee accrues on a daily basis and is paid monthly from the assets of the respective Funds. The Funds bear their respective portions of this fee based on their respective net assets as of the time of calculation of the fee.
With respect to any Fund that engages in securities lending, State Street and/or State Street Bank may waive fees with respect to the Program payable to State Street and/or State Street Bank to take into account, in whole or in part, any differences between amortized cost and mark-to-market value pricing attributable to the cash collateral funds.
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Self-Managed Brokerage Account Fees
Transaction fees for the purchase or sale of securities for the Self-Managed Brokerage Account of a Participant are charged in accordance with the schedule of rates communicated from time to time to Participants with Self-Managed Brokerage Accounts. These transaction fees are imposed by State Street Global Markets, LLC, a member of the Financial Industry Regulatory Authority and an affiliate of State Street Bank.
Actuarial and Consulting Services and Fees
ING Life has retained a third-party consulting firm to provide actuarial services and other services related to individually designed plan features for each Employer that adopts or has adopted the American Bar Association Members Defined Benefit Plan or any other plan requiring either actuarial or other such special plan related services. The fees and expenses of the consulting firm will be charged to the Employer based on the amount of such services provided by the consulting firm. If the fee is not paid directly by the Employer, such fee, if permissible, will be deducted from the Employers plans assets.
The following table summarizes the fees paid to the Investment Advisors for services rendered to the Managed Funds for the year ended December 31, 2009:
Fund(1) |
Advisory Fees | ||
Bond Core Plus Fund |
$ | 1,062,238 | |
Large Cap Equity Fund(2) |
831,070 | ||
Small-Mid Cap Equity Fund(2) |
680,122 | ||
International All Cap Equity Fund |
734,813 |
(1) | The Stable Asset Return Fund does not have applicable Investment Advisor fees. |
(2) | Since inception on July 2, 2009. Does not include fees paid to State Street Bank for investment management services it performs relating to the indexed portions of the respective Fund. |
The fees paid to State Street Bank for investment management services it performs relating to the Index Funds and the indexed portions of the Large Cap Equity Fund, the Small-Mid Cap Equity Fund and the International All Cap Equity Fund for the year ended December 31, 2009 were as follows:
Fund |
Advisory Fees | ||
Bond Index Fund(1) |
$ | 7,226 | |
Large Cap Index Equity Fund(2) |
2,790 | ||
All Cap Index Equity Fund(3) |
106,526 | ||
Mid Cap Index Equity Fund(1) |
4,447 | ||
Small Cap Index Equity Fund(1) |
3,128 | ||
International Index Equity Fund(4) |
9,138 | ||
Large Cap Equity Fund(5) |
40,075 | ||
Small-Mid Cap Equity Fund(5) |
1,784 | ||
International All Cap Equity Fund(6) |
9,090 |
(1) | Since inception on February 3, 2009. |
(2) | Since inception on February 9, 2009. |
(3) | Since fee inception on February 1, 2009. |
(4) | Since inception on March 3, 2009. |
(5) | Since inception on July 2, 2009. |
(6) | Since fee inception on July 2, 2009. |
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The fee paid to State Street Bank for investment management services it performs relating to the Real Asset Return Fund for the period from the Funds inception on July 7, 2009 to December 31, 2009 was $1,485.
The fees paid to State Street Bank for investment management services it performs relating to the Retirement Date Funds for the year ended December 31, 2009 were as follows:
Fund |
Advisory Fees | ||
Lifetime Income Retirement Date Fund |
$ | 26,802 | |
2010 Retirement Date Fund |
51,889 | ||
2020 Retirement Date Fund |
85,000 | ||
2030 Retirement Date Fund |
59,638 | ||
2040 Retirement Date Fund |
38,411 |
The fees paid to State Street Bank for investment management services it performs relating to the Target Risk Funds for the period from inception on July 7, 2009 to December 31, 2009 were as follows:
Fund |
Advisory Fees | ||
Conservative Risk Fund |
$ | 1,007 | |
Moderate Risk Fund |
2,479 | ||
Aggressive Risk Fund |
677 |
The following information with respect to estimated fees for 2010 is based on the approximate amount of assets of the Program on December 31, 2009, which was $3,412 million, except with respect to the amounts with respect to the Large Cap Equity Fund and the International All Cap Equity Fund, which are based on the approximate allocation of each Funds assets as of January 18, 2010.
ING Life, the party with primary responsibility for recordkeeping, administration and marketing of the Program, would receive a program expense fee of $17,997,850 on an annual basis. ABA Retirement Funds would receive a program expense fee of $2,517,475 on an annual basis in its capacity as sponsor of the Program. State Street Bank would receive a trust, management and administration fee of $3,403,348 on an annual basis. Northern Trust would receive an annual fee of $500,000 for its services as Investment Fiduciary. For information on changes to the fees in connection with expected changes to the Program, see Recent and Expected Changes to the Program.
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The following table sets forth the estimated annual Investment Advisor fees payable in 2010 by each of the Funds set forth below:
Fund |
Advisory Fee(1) | ||
Stable Asset Return Fund |
$ | | |
Bond Core Plus Fund |
1,047,498 | ||
Large Cap Equity Fund |
2,119,701 | ||
Small-Mid Cap Equity Fund |
1,441,195 | ||
International All Cap Equity Fund |
803,577 | ||
Bond Index Fund |
14,199 | ||
Large Cap Index Equity Fund |
6,800 | ||
All Cap Index Equity Fund |
133,302 | ||
Mid Cap Index Equity Fund |
12,600 | ||
Small Cap Index Equity Fund |
7,702 | ||
International Index Equity Fund |
24,200 | ||
Real Asset Return Fund |
4,771 | ||
Lifetime Income Retirement Date Fund |
28,799 | ||
2010 Retirement Date Fund |
61,999 | ||
2020 Retirement Date Fund |
106,500 | ||
2030 Retirement Date Fund |
77,000 | ||
2040 Retirement Date Fund |
49,399 | ||
Conservative Risk Fund |
3,300 | ||
Moderate Risk Fund |
8,099 | ||
Aggressive Risk Fund |
2,519 |
(1) | The table is based on approximate amount of assets of the Program on December 31, 2009, and the approximate allocation of the Programs assets among the investment options and the approximate allocation of each multi-manager Funds assets among Investment Advisors as of December 31, 2009, except with respect to the amounts with respect to the Large Cap Equity Fund and the International All Cap Equity Fund, which are based on the approximate allocation of each Funds assets as of January 18, 2010. For purposes of this table, the debt portion of the Balanced Fund invested through the Bond Core Plus Fund, which totaled $114,022,873 as of December 31, 2009, and the equity portion of the Balanced Fund invested through the Large Cap Equity Fund, which totaled $170,780,000 as of December 31, 2009, are included under the Bond Core Plus Fund and the Large Cap Equity Fund, respectively. |
Each Employer, by electing to participate in the Program, agrees to the fees payable to State Street Bank, ING Life, Northern Trust and ABA Retirement Funds as described in this Annual Report on Form 10-K and that such fees are reasonable compensation for the services performed by State Street Bank, ING Life, Northern Trust and ABA Retirement Funds, respectively, for the Program.
ITEM 1A. | Risk Factors. |
The risk factors that pertain to investment in the Units of each Fund are described in detail in the description of such Fund included in this Annual Report on Form 10-K. Following are some of the general risks of investing in the Funds.
Equity Market Risks. The Funds, to the extent invested in the equity markets, are subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic
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developments. The value of the Funds, to the extent invested in the equity markets, will fluctuate, and the holders of Units should be able to tolerate declines, sometimes sudden or substantial, in the value of their investment.
Risks of Investing in Equity Securities of Non-U.S. Companies and Smaller Companies. Investments in non-U.S. securities, including emerging markets equities, and in small capitalization and mid-capitalization equity securities, involve special risks. For instance, smaller companies may be impacted by economic conditions more quickly and severely than larger companies. Risks of investing in foreign securities include those relating to political or economic conditions in foreign countries, potentially less stringent investor protection, disclosure standards and settlement procedures of foreign markets, potentially less liquidity of foreign markets, potential applicability of withholding or other taxes imposed by these countries, and currency exchange fluctuations.
Interest Rate Risk Applicable to Investment in Fixed-Income Securities. The Funds, to the extent invested in fixed-income securities, are subject to the risks associated with investing in such instruments. Fixed-income securities such as bonds are issued to evidence loans that investors make to corporations and governments, either foreign or domestic. If prevailing interest rates fall, the market value of fixed-income securities that trade on a yield basis tends to rise. On the other hand, if prevailing interest rates rise, the market value of these fixed-income securities generally will fall. In general, the shorter the maturity, the lower the yield but the greater the price stability. These factors may have an effect on the value of the Funds. A change in the level of interest rates will tend to cause the net asset value of the Funds to change. If these interest rate changes are sustained over time, the yield of the Funds will fluctuate accordingly.
Credit Risk Applicable to Investment in Fixed-Income Securities, Including those of Lower Credit Quality. Fixed-income securities, including corporate bonds, are subject to credit risk. When a security is purchased, its anticipated yield is dependent on the timely payment by the borrower of each interest and principal installment. Credit analysis and bond ratings take into account the relative likelihood that such timely payment will result. Bonds with a lower credit rating tend to have higher yields than bonds of similar maturity with a better credit rating. However, to the extent the Funds invest in securities with medium or lower credit quality, they are subject to a higher level of credit risk than investments in investment-grade securities. In addition, the credit quality of non-investment grade securities is considered speculative by recognized ratings agencies with respect to the issuers continuing ability to pay interest and principal. Lower-grade securities may have less liquidity and a higher incidence of default than higher-grade securities. Furthermore, as economic, political and business developments unfold, lower-quality bonds, which possess lower levels of protection with respect to timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity, and the value of the Funds invested therein will reflect this volatility.
Risks of Investing in REITs. The Funds, to the extent invested in real estate investment trusts, which we refer to as REITs, are subject to a variety of risks associated with real estate and related investments. REITs tend to be medium-size and small companies. Like small-capitalization stocks in general, REIT stocks can be more volatile thanand at times will perform differently fromthe large-capitalization stocks such as those found in the S&P 500. Investments in equity REITs are also subject to all the risks associated with the ownership of real estate. These risks include: declines in the value of real estate, adverse changes in the economic condition applicable to real estate, risks related to general and local economic conditions, over-building and increased competition, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, leveraging of interests in real estate, increases in prevailing interest rates and costs resulting from clean-up of environmental problems or liability to third parties for damages arising from environmental problems.
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Risks Associated with Commodity Investments and Derivatives. To the extent invested in commodities, commodity futures or related instruments, or other derivative instruments, the Funds will be subject to the special risks associated with these investments.
Risk of Reliance on Industry Research. Certain Funds are dependent to a significant extent on information and data obtained from a wide variety of sources, such as financial publications that monitor markets and investments, industry research materials, ratings issued by one or more nationally recognized credit rating agencies to assess the credit quality of securities in which they propose to invest, and other materials prepared by third parties. There may be limitations on the quality of such information, data, publications, research and ratings, and generally neither a Funds Investment Advisor nor the Trustee independently verifies any of the same. For instance, certain asset-backed securities, such as sub-prime collateralized mortgage obligations and securities backed by bond insurance that initially received relatively high credit ratings were, in connection with the credit markets turbulence that began in 2007, subsequently significantly downgraded as the investment community came to realize that there may have been previously unanticipated risks associated with these securities. There is a risk of loss associated with securities even if initially determined to be of relatively low risk, such as in the case of collateralized debt obligations and other structured-finance investments that often are highly complex.
Risks Related to Market Disruptions and Governmental Interventions. Since 2008, the global financial markets have undergone pervasive and fundamental disruptions, resulting in substantial declines in valuation and liquidity in the capital markets on a global basis. This global market turmoil, combined with a global reduction in the availability of credit, have led to an increased level of commercial and consumer delinquencies and have contributed to a lack of consumer confidence, increased market volatility and reduction of business activity generally. Valuation issues with mortgage, asset-backed and other fixed-income securities, a deleveraging of the financial markets and the inability or reluctance of traditional market participants to act as dealers or market-makers have constrained liquidity and have adversely affected values of securities traded in these markets, although valuations of fixed income securities have, as a general rule, improved to a considerable degree from their recent lows. The resulting economic pressure on consumers and lack of confidence in the financial markets have also adversely affected the equity markets. Consumer and business confidence is still fragile and subject to possible reversal for a variety of reasons, including high and growing debt levels by many consumers, business institutions, and governments in the U.S. and around the world, and continued job losses. This could result in further market disruptions that adversely affect fixed income and equity markets on a world-wide basis. Global market turmoil also has led to extensive and unprecedented governmental intervention and stimulus and in some cases actions to restructure or effectively liquidate financial institutions. Such intervention and actions have in certain cases been implemented on an emergency basis, sometimes suddenly and substantially changing market participants ability to continue to implement certain strategies or manage risk. In addition, these interventions and actions have sometimes been unclear in scope and application, and not necessarily consistent, resulting in confusion and uncertainty which in itself may be materially detrimental to the efficient functioning of the markets. Certain policies implemented by the U.S. government, including the so-called bailout of institutions holding mortgage-related and other troubled instruments, the federal stimulus legislation enacted in early 2009 and governmental interventions in bankruptcy or reorganization proceedings of certain companies, were some of the largest governmental interventions in the history of the U.S. financial markets and involve new restrictions on the U.S. financial markets. In addition, there are legislative proposals in the U.S. Congress that, if enacted, would restructure the supervision and regulation of U.S. financial institutions and impose significant regulations, requirements and restrictions on both U.S. financial institutions and certain markets and their participants. These actions and significant regulatory initiatives, if adopted, may have a material adverse impact on the future competitiveness of U.S. financial institutions and these markets. Regulators in other jurisdictions have taken actions to support financial institutions viewed to be central to their economies and have imposed their own regulations, requirements and restrictions. The Collective Trust cannot predict what additional interim or
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permanent governmental regulation or restrictions may be imposed on the markets or the effect of such regulation or restrictions on the investment objectives or strategies of the respective Funds. In addition, a resumption of global market turmoil or reduced business activity would likely exacerbate the adverse effects of the difficult global market conditions on the investment objectives and strategies of the respective Funds.
Risks Related to Securities Lending. Certain Funds engage directly or indirectly in the State Street Bank securities lending program. Under the securities lending program, up to 100% of the securities of the particular Fund or of one or more State Street Bank collective investment funds in which a Fund is invested (we refer to each such State Street Bank collective investment fund as a Lending Fund and, together with the Funds, as the Lenders) are loaned to institutional borrowers and the Lender of such securities receives collateral in excess of the value of the loaned securities, generally 102% of the value of domestic securities and 105% of the value of foreign securities. Such collateral usually takes the form of cash. If the value of the loaned securities increases, then the borrower is obligated to deposit additional collateral to maintain the specified excess margin. The borrower could default on its obligations (including as a result of the insolvency, bankruptcy or liquidation of the borrower or for other reasons such as the lack of sufficient liquidity on the part of the borrower) and fail to maintain sufficient collateral or otherwise fail to perform its obligations under the borrowing agreement with the Lender, including failing promptly to return the borrowed securities and any dividends and distributions paid on such borrowed securities. State Street Bank has contractually agreed to a limited indemnity with respect to defaults by the borrower, but State Street Bank may not have sufficient resources or otherwise may be unable (by reason of its insolvency or otherwise) to satisfy the indemnity for borrower defaults. If the borrower and State Street Bank were to default on their respective obligations, then the Fund affected, directly or indirectly, by such default could suffer losses if the collateral held for the benefit of the affected Fund (or its underlying Lending Funds) were insufficient to satisfy in a timely manner all of the obligations of the defaulting borrower and State Street Bank.
All cash collateral received by the Lender from its borrowers is reinvested for the account and, subject to ERISAs fiduciary requirements, at the risk of the Lender in one or more cash collateral collective trust funds managed by State Street Bank, as trustee. The cash collateral funds are not registered money market funds or FDIC-insured bank deposits or otherwise guaranteed by State Street Bank or its affiliates. In addition to other consideration that State Street Bank and its affiliates receive from the Collective Trust, State Street Bank is compensated for operating and maintaining the securities lending program and for managing the cash collateral funds. Both State Street Bank and the Lender earn higher fees, as a general matter, if higher levels of securities loans are outstanding and more cash is invested in the cash collateral funds, including by reason of any limitations on withdrawals of cash from the cash collateral funds. State Street Bank has reduced the fee it charges for operating and maintaining the securities lending program for the Funds that directly engage in securities lending from 50% of the net income after rebates paid to borrowers of the loaned securities to 30% of such net income, effective as of January 1, 2010, with the result that each Fund that directly engages in securities lending retains 70% of any such net income. With respect to the Lending Funds, State Street Bank retains 50% of any net income after rebates paid to borrowers of the loaned securities with the balance credited to the particular Lending Fund.
Each underlying cash collateral fund utilizes amortized cost pricing of its underlying investments (in an effort to maintain a constant price for units purchased in, or redeemed from, the fund) as opposed to marking the underlying investments to market (which would result in a fluctuating value for the units of the cash collateral fund). To the extent that the cash collateral fund suffers losses or its underlying investments default, there is insufficient liquidity in the cash collateral fund to discharge a Lenders obligations to make required cash payments to the borrowers, the cash collateral fund is required to sell investments prior to their maturity at a loss and/or the cash collateral fund is required to cease using amortized cost pricing in whole or in part and is forced to reduce the value of its units, then the affected
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Lender would be obligated to utilize additional assets of its own to satisfy any deficiency or losses that may arise with respect to its investment in the cash collateral fund, which could adversely impact the affected Fund. State Street Bank does not provide any indemnity to Lenders with respect to the cash collateral funds or the investment of cash collateral (including in any of the foregoing circumstances), and State Street Bank has notified the Collective Trust that it does not believe there is any contractual or other legal requirement for it to support the value of interests in, or the liquidity of, the cash collateral funds or the underlying assets of the cash collateral funds through any form of liquidity or credit support agreement.
The Lender of securities is obligated to pay a fee to the borrower as compensation for the borrowers transfer of cash collateral to the Lender. If a cash collateral fund fails to generate sufficient income on its investments to cover the fee due to a borrower, then the affected Lender of securities would be required to fund any shortfall from its own resources, which would adversely impact the affected Fund.
In 2009, the securities lending program generated approximately $1.3 million of net income in the aggregate for all Funds that participate in the securities lending program, in comparison to $3.1 million generated in 2008. The 2009 net income from securities lending is lower than the 2008 net income in part because of the decline in interest rates on certain investments of the cash collateral funds in 2009 and in part because of lower levels of securities lending balances and related cash collateral investments resulting from actions taken by State Street in 2009 to reduce securities loan balances as discussed below. State Street Bank has notified the Collective Trust that it expects net income for the Funds participating in the securities lending program, if any, to continue to decrease as State Street transitions certain of these Lending Funds out of the State Street Bank securities lending program and as a result of lower expected prevailing interest rates. No assurance or guarantee can be given that these Funds will generate any significant net income from participation in the State Street Bank securities lending program.
The Funds that engage in securities lending invest in a number of cash collateral collective trust funds in which the Funds and other unaffiliated institutional investors invest cash collateral from securities lending. While these cash collateral funds are managed by State Street Bank with the objective of maintaining a net asset value of $1.00 and generally utilize amortized cost pricing, they are not required to do so, and their net asset value for purposes of generally accepted accounting principles, also known as GAAP, fluctuates over time, reflecting, among other things, liquidity in the market for short and intermediate term instruments in which the cash collateral funds invest. Notwithstanding that the net asset value fluctuates for purposes of GAAP, the cash collateral funds continue to transact purchases and redemptions at $1.00 per unit, which we refer to as the transactional price. At December 31, 2009, the average net asset value of these cash collateral funds determined in accordance with GAAP was approximately $0.98 per unit, an increase of $.06 in average net asset value per unit from the approximate $0.92 per unit at December 31, 2008. The average net asset value of these cash collateral funds was approximately $0.98 per unit as of March 15, 2010, an increase of $0.01 in average net asset value per unit from December 31, 2009.
State Street Bank has informed the Collective Trust that none of the securities in the cash collateral funds was in default at December 31, 2009, and that it believes that it remains appropriate to continue to use the transactional price of the cash collateral funds for purchases of and redemptions from the cash collateral funds and in valuing the Funds that hold units of those cash collateral funds for transactional purposes. There can be no assurance or guarantee that State Street Bank will be able to continue to transact purchase and withdrawal activity reflecting a constant value of $1.00 for the cash collateral funds units. If State Street Bank were to determine in the future to transact in Units of the Funds using the lower mark-to-market value for interests in the cash collateral funds, the Participants with exposure to the Funds at any such time would realize economic losses. As discussed above, the book value to
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mark-to-market value differential for the cash collateral funds narrowed favorably to a significant extent from December 31, 2008 to March 15, 2010, although such differential could change in the future (either unfavorably or favorably).
State Street Bank, in its capacity as trustee of the cash collateral funds, has the contractual authority to limit withdrawals from participation in the securities lending program (including by Funds that engage directly in securities lending and Funds that invest in Lending Funds), in whole or in part. If a Fund participates directly in the State Street Bank securities lending program or invests in a Lending Fund, the Funds liquidity may be adversely affected to the extent State Street Bank exercises its authority to limit withdrawals. If, as a result of the application of withdrawal limitations by State Street Bank, a Fund has insufficient liquidity, the Fund may be required to limit the ability of investors to withdraw from the Fund, in whole or in part. Although any limitations on redemptions would be imposed to protect all investors in the affected Funds and Lending Funds, State Street Bank may also benefit financially from these limitations on redemptions.
State Street Bank has imposed various limitations with respect to withdrawal from the securities lending program. Currently, no limitations are being imposed upon redemptions directed by Participants in the Program. Although the level of redemptions in connection with plan activity is being monitored by State Street and State Street Bank, no plan withdrawal decisions initiated by a plan sponsor are, as of the date of filing this Annual Report on Form 10-K, being limited. If the level of redemption activity, either through Participant activity or plan activity, were to materially increase, State Street and State Street Bank retain the right to impose limitations on such activity. State Street has fully exercised all rights afforded by State Street Bank to the Collective Trust and other participants in the State Street Bank securities lending program to reduce the Collective Trusts level of outstanding securities loan balances in 2009, has continued to do so in 2010, and expects to continue to do so on an ongoing basis, to the extent permitted under the State Street Bank securities lending program.
On April 7, 2009, Fishman Haygood Phelps Walmsley Willis & Swanson LLP, the Plan Administrator for the Fishman Haygood Phelps Walmsley Willis & Swanson LLP Profit Sharing Plan, filed a putative class action lawsuit against State Street Corporation, State Street Bank, State Street, and State Street Global Advisors. The action is pending in the United States District Court for the District of Massachusetts. Plaintiffs assert breaches of fiduciary duty and violations of ERISA in connection with the securities lending program and management of the collateral for securities on loan. Among other allegations, plaintiffs claim that the defendants were imprudent, acted without sufficient care, and engaged in self-dealing. Neither the Collective Trust nor any of the securities lending collateral pools are parties to this action. Plaintiffs seek, among other remedies, a declaration that the defendants breached their duties under ERISA, restitution of losses and lost profits, and a constructive trust for any unjust enrichment by the defendants. The defendants have filed a motion to dismiss the complaint, which motion is currently pending.
The Collective Trust and the Funds are not Regulated Investment Companies. The Collective Trust and the Funds are not registered as investment companies under the Investment Company Act of 1940 and, therefore, are not subject to compliance with the requirements of that Act. Consequently, investors do not have the protections and rights afforded by the Investment Company Act of 1940. For example, under that Act, a mutual fund is required to provide shareholders with voting rights with respect to a variety of matters, including the election of the mutual funds directors or trustees, the approval of the funds contracts with its investment advisors and the approval of changes to the mutual funds fundamental investment policies. Under the Collective Trust, investors have no voting rights with respect to the selection of trustee, the selection of the Funds Investment Advisors or changes to any investment policy of a Fund. In addition, the Funds are not subject to the reporting requirements of the Investment Company Act of 1940 and the operations of the Funds are not subject to inspection by the Securities and Exchange Commission under the Investment Company Act of 1940.
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A Court Might Determine that the Assets of a Fund are Available to Satisfy the Obligations of Other Funds. The Collective Trusts Declaration of Trust provides that any creditor of, or other person having any claim of any type against, a Fund, may look only to the assets of such Fund for payment of obligations of such Fund, and that every contract, instrument, certificate or undertaking of or on behalf of any Fund shall be conclusively deemed to have been executed only by or for that Fund and no Fund shall be answerable for any obligation assumed or liability incurred by any other Fund. The enforceability of these provisions has never been tested, and the Collective Trust believes that, under New Hampshire law, the Funds have no separate legal existence and exist only as sub-trusts of the Collective Trust. Moreover, neither ERISA, nor the laws of the State of New Hampshire, under which the Collective Trust is organized, have any specific statutory provision deeming assets of one sub-trust created under a trust to be unavailable to creditors of other sub-trusts so created. In the unlikely event that a particular Fund were not to have sufficient net assets with which to satisfy its obligations, it is possible that a court could determine that the assets of the other Funds could be available to satisfy those obligations. In addition, the Collective Trust will be subject to the laws of the State of Illinois upon the substitution of Northern Trust for State Street as trustee. See Item 1, Recent and Expected Changes to the Program; Role of Northern Trust.
For a discussion of the risk factors applicable to investment in the Units of the respective Funds, please refer to page 8 (Stable Asset Return Fund), page 14 (Bond Core Plus Fund), page 17 (Large Cap Equity Fund), page 21 (Small-Mid Cap Equity Fund), page 25 (International All Cap Equity Fund), page 29 (Bond Index Fund), page 32 (Large Cap Index Equity Fund), page 34 (All Cap Index Equity Fund), page 36 (Mid Cap Index Equity Fund), page 38 (Small Cap Index Equity Fund), page 41 (International Index Equity Fund), page 45 (Real Asset Return Fund), page 54 (Retirement Date Funds) and page 61 (Target Risk Funds) in Item 1, Description of Investment Options.
ITEM 1B. | Unresolved Staff Comments. |
None.
ITEM 2. | Properties. |
Not applicable. The Collective Trust does not have any physical properties as contemplated by this Item.
ITEM 3. | Legal Proceedings. |
None.
ITEM 4. | (Removed and Reserved.) |
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ITEM 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
(a) Market Information.
Units of beneficial interest in the Funds are not transferable and, therefore, are not traded on any market. Participants in certain employer plans receive distributions of benefits upon retirement or disability, or upon termination of employment with a vested benefit. A participant may withdraw from the plans the contributions and earnings thereon at any age, subject to the withdrawal restrictions applicable therein. Participants in the individually designed plans receive distributions based upon the terms and provisions of the respective employer plan. Prior to distribution, assets in the various plans may be transferred among the Funds, subject to the restrictions that apply to each Fund, by the person or entity vested with the responsibility for determining the investment allocation of the assets of the plan.
(b) Holders.
Eligible Employers which elect to participate in the Program may do so by adopting a master plan under one or both of two American Bar Association Members Plans sponsored by ABA Retirement Funds (the ABA Members Plans). The ABA Members Plans consist of the American Bar Association Members Retirement Plan, a defined contribution master plan, and the American Bar Association Members Defined Benefit Pension Plan, a defined benefit master plan. Eligible Employers which design and maintain their own individually designed plans may also participate in most aspects of the Program through those individually designed plans. Assets contributed under the Program are held by State Street Bank as trustee of the American Bar Association Members Retirement Trust and the American Bar Association Members Retirement Pooled Trust for Retirement Plans. Assets contributed under the Program are allocated among the investment options available under the Program in accordance with the instructions of the person or entity having responsibility for determining the investment allocation of the assets of a Plan held in the American Bar Association Members Retirement Trust or the American Bar Association Members Pooled Trust for Retirement Plans. Under the Program, certain participants, employers or plan trustees may also direct State Street to purchase and sell a wide variety of publicly traded debt and equity securities and shares of numerous mutual funds for the participants, employers or plan trustees Self-Managed Brokerage Account. The Self-Managed Brokerage Account is available only to participants in the American Bar Association Members Retirement Plan and to employers with respect to the American Bar Association Members Defined Benefit Pension Plan, provided that in either case the employer has designed the Self-Managed Brokerage Account as an investment option for its plan. The Self-Managed Brokerage Account is also available for participants, employers and trustees of certain individually designed plans. Assets contributed to the plans are allocated among the Funds and the portfolios in accordance with the instructions of the person or entity vested with the responsibility for determining the investment allocation of the assets of the plans held in the American Bar Association Members Retirement Trust and the American Bar Association Members Pooled Trust for Retirement Plans.
(c) Dividends.
Income or gains on contributions are automatically reinvested in the respective Funds.
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ITEM 6. | Selected Financial Data. |
The summary financial data below provides information with respect to income, expenses and capital changes for each of the Funds attributable to each Unit outstanding for the periods indicated. The summary financial data should be read in conjunction with the financial statements for the year ended December 31, 2009 of the Funds, including the related Notes thereto, included in this Form 10-K. See Item 1, Additional Information. Per Unit calculations of investment income and expense have been prepared using the monthly average number of Units outstanding during the period.
Managed Funds
Stable Asset Return Fund:
Year ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income |
$ | 1.18 | $ | 1.45 | $ | 1.59 | $ | 1.47 | $ | .96 | ||||||||||
Expenses() |
(.16 | ) | (.17 | ) | (.18 | ) | (.20 | ) | (.28 | ) | ||||||||||
Net investment income (loss) |
1.02 | 1.28 | 1.41 | 1.27 | .68 | |||||||||||||||
Distributions of net investment income |
| | | | | |||||||||||||||
Net increase (decrease) in unit value |
$ | 1.02 | $ | 1.28 | $ | 1.41 | $ | 1.27 | $ | .68 | ||||||||||
Net asset value at beginning of period |
29.56 | 30.58 | 31.86 | 33.27 | 34.54 | |||||||||||||||
Net asset value at end of period |
$ | 30.58 | $ | 31.86 | $ | 33.27 | $ | 34.54 | $ | 35.22 | ||||||||||
Ratio of expenses to average net assets |
.52 | % | .57 | % | .54 | % | .58 | % | .81 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
3.42 | % | 4.07 | % | 4.35 | % | 3.73 | % | 1.95 | % | ||||||||||
Total return |
3.45 | % | 4.19 | % | 4.43 | % | 3.82 | % | 1.97 | % | ||||||||||
Net assets at end of period (in thousands) |
$ | 870,500 | $ | 845,842 | $ | 878,342 | $ | 967,092 | $ | 1,066,993 | ||||||||||
Bond Core Plus Fund*:
|
||||||||||||||||||||
Year ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income |
$ | .81 | $ | .96 | $ | 1.06 | $ | 1.21 | $ | 1.14 | ||||||||||
Expenses() |
(.15 | ) | (.16 | ) | (.16 | ) | (.18 | ) | (.25 | ) | ||||||||||
Net investment income (loss) |
.66 | .80 | 0.90 | 1.03 | .89 | |||||||||||||||
Net realized and unrealized gain (loss) |
(.29 | ) | (.08 | ) | 0.69 | (.51 | ) | 1.21 | ||||||||||||
Net increase (decrease) in unit value |
.37 | .72 | 1.59 | .52 | 2.10 | |||||||||||||||
Net asset value at beginning of period |
18.79 | 19.16 | 19.88 | 21.47 | 21.99 | |||||||||||||||
Net asset value at end of period |
$ | 19.16 | $ | 19.88 | $ | 21.47 | $ | 21.99 | $ | 24.09 | ||||||||||
Ratio of expenses to average net assets |
.79 | % | .84 | % | .81 | % | .84 | % | 1.09 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
3.48 | % | 4.14 | % | 4.42 | % | 4.73 | % | 3.88 | % | ||||||||||
Portfolio turnover |
458 | % | 389 | % | 489 | % | 806 | % | 1,422 | % | ||||||||||
Total return |
1.97 | % | 3.76 | % | 8.00 | % | 2.42 | % | 9.55 | % | ||||||||||
Net assets at end of period (in thousands) |
$ | 454,045 | $ | 457,719 | $ | 484,362 | $ | 398,724 | $ | 386,246 |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests a portion of its assets. |
* | Formerly named the Intermediate Bond Fund. |
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Large Cap Equity Fund:
For the period July 2, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | .07 | ||
Expenses() |
(.07 | ) | ||
Net investment income (loss) |
| |||
Net realized and unrealized gain (loss) |
2.15 | |||
Net increase (decrease) in unit value |
2.15 | |||
Net asset value at beginning of period |
10.00 | |||
Net asset value at end of period |
$ | 12.15 | ||
Ratio of expenses to average net assets* |
1.17 | % | ||
Ratio of net investment income (loss) to average net assets* |
.11 | % | ||
Portfolio turnover** |
68 | % | ||
Total return** |
21.50 | % | ||
Net assets at end of period (in thousands) |
$ | 811,636 |
Small-Mid Cap Equity Fund:
For the period July 2, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | .11 | ||
Expenses() |
(.09 | ) | ||
Net investment income (loss) |
.02 | |||
Net realized and unrealized gain (loss) |
2.30 | |||
Net increase (decrease) in unit value |
2.32 | |||
Net asset value at beginning of period |
11.00 | |||
Net asset value at end of period |
$ | 13.32 | ||
Ratio of expenses to average net assets* |
1.44 | % | ||
Ratio of net investment income (loss) to average net assets* |
.29 | % | ||
Portfolio turnover** |
61 | % | ||
Total return** |
21.09 | % | ||
Net assets at end of period (in thousands) |
$ | 283,199 |
(a) | Commencement of operations. |
* | Annualized for the period from July 2, 2009 to December 31, 2009. |
** | Not annualized for the period from July 2, 2009 to December 31, 2009. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| With respect to the portion of the Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales by the Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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International All Cap Equity Fund*:
Year ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income |
$ | .59 | $ | .79 | $ | 1.06 | $ | 1.27 | $ | .66 | ||||||||||
Expenses() |
(.25 | ) | (.32 | ) | (.36 | ) | (.31 | ) | (.29 | ) | ||||||||||
Net investment income (loss) |
.34 | .47 | .70 | .96 | .37 | |||||||||||||||
Net realized and unrealized gain (loss) |
2.64 | 5.84 | 2.07 | (16.45 | ) | 6.10 | ||||||||||||||
Net increase (decrease) in unit value |
2.98 | 6.31 | 2.77 | (15.49 | ) | 6.47 | ||||||||||||||
Net asset value at beginning of period |
21.87 | 24.85 | 31.16 | 33.93 | 18.44 | |||||||||||||||
Net asset value at end of period |
$ | 24.85 | $ | 31.16 | $ | 33.93 | $ | 18.44 | $ | 24.91 | ||||||||||
Ratio of expenses to average net assets |
1.11 | % | 1.14 | % | 1.08 | % | 1.13 | % | 1.37 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
1.50 | % | 1.69 | % | 2.12 | % | 3.45 | % | 1.77 | % | ||||||||||
Portfolio turnover |
35 | % | 30 | % | 30 | % | 33 | % | 160 | % | ||||||||||
Total return |
13.63 | % | 25.39 | % | 8.89 | % | (45.65 | )% | 35.09 | % | ||||||||||
Net assets at end of period (in thousands) |
$ | 202,106 | $ | 273,525 | $ | 309,162 | $ | 133,960 | $ | 165,528 |
* | Formerly named the International Equity Fund. On or about July 6, 2009, the International All Cap Equity Fund engaged a new line-up of Investment Advisors. |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests a portion of its assets. |
| With respect to the portion of the Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales by the Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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Index Funds
Bond Index Fund:
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(.09 | ) | ||
Net investment income (loss) |
(.09 | ) | ||
Net realized and unrealized gain (loss) |
.74 | |||
Net increase (decrease) in unit value |
.65 | |||
Net asset value at beginning of period |
11.00 | |||
Net asset value at end of period |
$ | 11.65 | ||
Ratio of expenses to average net assets* |
.88 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.88 | )% | ||
Portfolio turnover** |
158 | % | ||
Total return** |
5.91 | % | ||
Net assets at end of period (in thousands) |
$ | 35,769 |
(a) | Commencement of operations. |
* | Annualized for the period from February 3, 2009 to December 31, 2009. |
** | Not annualized for the period from February 3, 2009 to December 31, 2009. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests its assets. |
| Portfolio turnover reflects purchases and sales by the Fund of units of the collective investment fund in which the Fund invests, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
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Large Cap Index Equity Fund:
For the period February 9, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(.11 | ) | ||
Net investment income (loss) |
(.11 | ) | ||
Net realized and unrealized gain (loss) |
3.79 | |||
Net increase (decrease) in unit value |
3.68 | |||
Net asset value at beginning of period |
12.00 | |||
Net asset value at end of period |
$ | 15.68 | ||
Ratio of expenses to average net assets* |
.87 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.87 | )% | ||
Portfolio turnover** |
159 | % | ||
Total return** |
30.67 | % | ||
Net assets at end of period (in thousands) |
$ | 34,242 |
(a) | Commencement of operations. |
* | Annualized for the period from February 9, 2009 to December 31, 2009. |
** | Not annualized for the period from February 9, 2009 to December 31, 2009. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests its assets. |
| Portfolio turnover reflects purchases and sales by the Fund of units of the collective investment fund in which the Fund invests, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
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All Cap Index Equity Fund(a):
Year ended December 31, | ||||||||||||||||||||
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income(*)** |
$ | .00 | $ | .00 | $ | .01 | $ | .03 | $ | .03 | ||||||||||
Expenses(**)*** |
(.16 | ) | (.19 | ) | (.21 | ) | (.18 | ) | (.22 | ) | ||||||||||
Net investment income (loss) |
(.16 | ) | (.19 | ) | (.20 | ) | (.15 | ) | (.19 | ) | ||||||||||
Net realized and unrealized gain (loss) |
1.87 | 5.00 | (b) | 1.93 | (14.44 | ) | 6.93 | |||||||||||||
Net increase (decrease) in unit value |
1.71 | 4.81 | 1.73 | (14.59 | ) | 6.74 | ||||||||||||||
Net asset value at beginning of period |
30.20 | 31.91 | 36.72 | 38.45 | 23.86 | |||||||||||||||
Net asset value at end of period |
$ | 31.91 | $ | 36.72 | $ | 38.45 | $ | 23.86 | $ | 30.60 | ||||||||||
Ratio of expenses to average net assets*** |
.52 | % | .57 | % | .54 | % | .56 | % | .87 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
(.51 | )% | (.56 | )% | (.52 | )% | (.47 | )% | (.76 | )% | ||||||||||
Portfolio turnover**** |
7 | % | 6 | % | 6 | % | 3 | % | 153 | % | ||||||||||
Total return |
5.66 | % | 15.07 | % | 4.71 | % | (37.95 | )% | 28.25 | % | ||||||||||
Net assets at end of period (in thousands) |
$ | 402,702 | $ | 437,011 | $ | 438,803 | $ | 221,260 | $ | 266,484 |
(a) | Formerly, the Index Equity Fund. |
(b) | Net of payment made by the Programs recordkeeper, which reimbursed the Fund for trading losses attributable to processing errors. Impact of the increase is less than $0.005 per unit. |
* | Amounts less than $.005 per unit are rounded to zero. |
** | Calculations prepared using the daily average number of units outstanding during the year. |
*** | Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests its assets. |
**** | Portfolio turnover reflects purchases and sales by the Fund of units of the collective investment funds in which the Fund invests rather than the turnover of the underlying portfolios of such collective investment funds. |
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Mid Cap Index Equity Fund:
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(.15 | ) | ||
Net investment income (loss) |
(.15 | ) | ||
Net realized and unrealized gain (loss) |
6.81 | |||
Net increase (decrease) in unit value |
6.66 | |||
Net asset value at beginning of period |
13.00 | |||
Net asset value at end of period |
$ | 19.66 | ||
Ratio of expenses to average net assets* |
.91 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.91 | )% | ||
Portfolio turnover** |
165 | % | ||
Total return** |
51.23 | % | ||
Net assets at end of period (in thousands) |
$ | 25,311 |
Small Cap Index Equity Fund:
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(.16 | ) | ||
Net investment income (loss) |
(.16 | ) | ||
Net realized and unrealized gain (loss) |
6.83 | |||
Net increase (decrease) in unit value |
6.67 | |||
Net asset value at beginning of period |
14.00 | |||
Net asset value at end of period |
$ | 20.67 | ||
Ratio of expenses to average net assets* |
.90 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.90 | )% | ||
Portfolio turnover** |
192 | % | ||
Total return** |
47.64 | % | ||
Net assets at end of period (in thousands) |
$ | 15,508 |
(a) | Commencement of operations. |
* | Annualized for the period from February 3, 2009 to December 31, 2009. |
** | Not annualized for the period from February 3, 2009 to December 31, 2009. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests its assets. |
| Portfolio turnover reflects purchases and sales by the Fund of units of the collective investment fund in which the Fund invests, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
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International Index Equity Fund:
For the period March 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(.20 | ) | ||
Net investment income (loss) |
(.20 | ) | ||
Net realized and unrealized gain (loss) |
11.48 | |||
Net increase (decrease) in unit value |
11.28 | |||
Net asset value at beginning of period |
15.00 | |||
Net asset value at end of period |
$ | 26.28 | ||
Ratio of expenses to average net assets* |
.96 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.96 | )% | ||
Portfolio turnover** |
147 | % | ||
Total return** |
75.20 | % | ||
Net assets at end of period (in thousands) |
$ | 24,346 |
(a) | Commencement of operations. |
* | Annualized for the period from March 3, 2009 to December 31, 2009. |
** | Not annualized for the period from March 3, 2009 to December 31, 2009. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests its assets. |
| Portfolio turnover reflects purchases and sales by the Fund of units of the collective investment fund in which the Fund invests, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
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Real Asset Return Fund
Real Asset Return Fund:
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(.06 | ) | ||
Net investment income (loss) |
(.06 | ) | ||
Net realized and unrealized gain (loss) |
2.57 | |||
Net increase (decrease) in unit value |
2.51 | |||
Net asset value at beginning of period |
12.00 | |||
Net asset value at end of period |
$ | 14.51 | ||
Ratio of expenses to average net assets* |
.95 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.95 | )% | ||
Portfolio turnover** |
14 | % | ||
Total return** |
20.92 | % | ||
Net assets at end of period (in thousands) |
$ | 5,371 |
(a) | Commencement of operations. |
* | Annualized for the period from July 7, 2009 to December 31, 2009. |
** | Not annualized for the period from July 7, 2009 to December 31, 2009. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales by the Fund of units of the collective investment funds in which the Fund invests, rather than portfolio turnover of the underlying portfolio of such collective investment funds. |
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Retirement Date Funds
Lifetime Income Retirement Date Fund:
For the period August 9, 2006(a) to December 31, 2006 |
Year ended December 31, 2007 |
Year ended December 31, 2008 |
Year ended December 31, 2009 |
|||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(.03 | ) | (.07 | ) | (.07 | ) | (.09 | ) | ||||||||
Net investment income (loss) |
(.03 | ) | (.07 | ) | (.07 | ) | (.09 | ) | ||||||||
Net realized and unrealized gain (loss) |
.53 | .67 | (1.51 | ) | 1.51 | |||||||||||
Net increase (decrease) in unit value |
.50 | .60 | (1.58 | ) | 1.42 | |||||||||||
Net asset value at beginning of period |
10.00 | 10.50 | 11.10 | 9.52 | ||||||||||||
Net asset value at end of period |
$ | 10.50 | $ | 11.10 | $ | 9.52 | $ | 10.94 | ||||||||
Ratio of expenses to average net assets* |
.69 | % | .64 | % | .67 | % | .92 | % | ||||||||
Ratio of net investment income (loss) to average net assets* |
(.69 | )% | (.64 | )% | (.67 | )% | (.92 | )% | ||||||||
Portfolio turnover** |
72 | % | 21 | % | 33 | % | 54 | % | ||||||||
Total return** |
5.00 | % | 5.71 | % | (14.23 | )% | 14.92 | % | ||||||||
Net assets at end of period (in thousands) |
$ | 11,432 | $ | 18,606 | $ | 27,462 | $ | 28,934 |
(a) | Commencement of operations. |
* | Annualized for the period from August 9, 2006 to December 31, 2006. |
** | Not annualized for the period from August 9, 2006 to December 31, 2006. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Lifetime Income Retirement Date Fund and does not include expenses charged to the collective investment funds in which the Lifetime Income Retirement Date Fund invests a portion of its assets. |
| With respect to the portion of the Lifetime Income Retirement Date Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales by the Lifetime Income Retirement Date Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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2010 Retirement Date Fund:
For the period August 8, 2006(a) to December 31, 2006 |
Year ended December 31, 2007 |
Year ended December 31, 2008 |
Year ended December 31, 2009 |
|||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(.03 | ) | (.08 | ) | (.08 | ) | (.11 | ) | ||||||||
Net investment income (loss) |
(.03 | ) | (.08 | ) | (.08 | ) | (.11 | ) | ||||||||
Net realized and unrealized gain (loss) |
.80 | .88 | (2.51 | ) | 1.88 | |||||||||||
Net increase (decrease) in unit value |
.77 | .80 | (2.59 | ) | 1.77 | |||||||||||
Net asset value at beginning of period |
12.00 | 12.77 | 13.57 | 10.98 | ||||||||||||
Net asset value at end of period |
$ | 12.77 | $ | 13.57 | $ | 10.98 | $ | 12.75 | ||||||||
Ratio of expenses to average net assets* |
.69 | % | .63 | % | .67 | % | .92 | % | ||||||||
Ratio of net investment income (loss) to average net assets* |
(.69 | )% | (.63 | )% | (.67 | )% | (.92 | )% | ||||||||
Portfolio turnover** |
21 | % | 18 | % | 27 | % | 56 | % | ||||||||
Total return** |
6.42 | % | 6.26 | % | (19.09 | % | 16.12 | % | ||||||||
Net assets at end of period (in thousands) |
$ | 15,765 | $ | 38,099 | $ | 49,186 | $ | 61,971 |
(a) | Commencement of operations. |
* | Annualized for the period from August 8, 2006 to December 31, 2006. |
** | Not annualized for the period from August 8, 2006 to December 31, 2006. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the 2010 Retirement Date Fund and does not include expenses charged to the collective investment funds in which the 2010 Retirement Date Fund invests a portion of its assets. |
| With respect to the portion of the 2010 Retirement Date Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales by the 2010 Retirement Date Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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2020 Retirement Date Fund:
For the period August 2, 2006(a) to December 31, 2006 |
Year ended December 31, 2007 |
Year ended December 31, 2008 |
Year ended December 31, 2009 |
|||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(.04 | ) | (.10 | ) | (.10 | ) | (.12 | ) | ||||||||
Net investment income (loss) |
(.04 | ) | (.10 | ) | (.10 | ) | (.12 | ) | ||||||||
Net realized and unrealized gain (loss) |
1.36 | 1.16 | (4.37 | ) | 2.66 | |||||||||||
Net increase (decrease) in unit value |
1.32 | 1.06 | (4.47 | ) | 2.54 | |||||||||||
Net asset value at beginning of period |
14.00 | 15.32 | 16.38 | 11.91 | ||||||||||||
Net asset value at end of period |
$ | 15.32 | $ | 16.38 | $ | 11.91 | $ | 14.45 | ||||||||
Ratio of expenses to average net assets* |
.69 | % | .63 | % | .67 | % | .92 | % | ||||||||
Ratio of net investment income (loss) to average net assets* |
(.69 | )% | (.63 | )% | (.67 | )% | (.92 | )% | ||||||||
Portfolio turnover** |
16 | % | 20 | % | 17 | % | 51 | % | ||||||||
Total return** |
9.43 | % | 6.92 | % | (27.29 | )% | 21.33 | % | ||||||||
Net assets at end of period (in thousands) |
$ | 21,315 | $ | 49,077 | $ | 74,855 | $ | 106,568 |
(a) | Commencement of operations. |
* | Annualized for the period from August 2, 2006 to December 31, 2006. |
** | Not annualized for the period from August 2, 2006 to December 31, 2006. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the 2020 Retirement Date Fund and does not include expenses charged to the collective investment funds in which the 2020 Retirement Date Fund invests a portion of its assets. |
| With respect to the portion of the 2020 Retirement Date Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales by the 2020 Retirement Date Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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2030 Retirement Date Fund:
For the period August 2, 2006(a) to December 31, 2006 |
Year ended December 31, 2007 |
Year ended December 31, 2008 |
Year ended December 31, 2009 |
|||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(.05 | ) | (.12 | ) | (.11 | ) | (.13 | ) | ||||||||
Net investment income (loss) |
(.05 | ) | (.12 | ) | (.11 | ) | (.13 | ) | ||||||||
Net realized and unrealized gain (loss) |
1.81 | 1.38 | (6.12 | ) | 3.37 | |||||||||||
Net increase (decrease) in unit value |
1.76 | 1.26 | (6.23 | ) | 3.24 | |||||||||||
Net asset value at beginning of period |
16.00 | 17.76 | 19.02 | 12.79 | ||||||||||||
Net asset value at end of period |
$ | 17.76 | $ | 19.02 | $ | 12.79 | $ | 16.03 | ||||||||
Ratio of expenses to average net assets* |
.69 | % | .63 | % | .67 | % | .92 | % | ||||||||
Ratio of net investment income (loss) to average net assets* |
(.69 | )% | (.63 | )% | (.67 | )% | (.92 | )% | ||||||||
Portfolio turnover** |
6 | % | 7 | % | 15 | % | 48 | % | ||||||||
Total return** |
11.00 | % | 7.09 | % | (32.75 | )% | 25.33 | % | ||||||||
Net assets at end of period (in thousands) |
$ | 15,260 | $ | 44,407 | $ | 51,242 | $ | 77,025 |
(a) | Commencement of operations. |
* | Annualized for the period from August 2, 2006 to December 31, 2006. |
** | Not annualized for the period from August 2, 2006 to December 31, 2006. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the 2030 Retirement Date Fund and does not include expenses charged to the collective investment funds in which the 2030 Retirement Date Fund invests a portion of its assets. |
| With respect to the portion of the 2030 Retirement Date Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales by the 2030 Retirement Date Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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2040 Retirement Date Fund:
For the period August 3, 2006(a) to December 31, 2006 |
Year ended December 31, 2007 |
Year ended December 31, 2008 |
Year ended December 31, 2009 |
|||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(.06 | ) | (.13 | ) | (.12 | ) | (.14 | ) | ||||||||
Net investment income (loss) |
(.06 | ) | (.13 | ) | (.12 | ) | (.14 | ) | ||||||||
Net realized and unrealized gain (loss) |
2.05 | 1.62 | (7.45 | ) | 4.06 | |||||||||||
Net increase (decrease) in unit value |
1.99 | 1.49 | (7.57 | ) | 3.92 | |||||||||||
Net asset value at beginning of period |
18.00 | 19.99 | 21.48 | 13.91 | ||||||||||||
Net asset value at end of period |
$ | 19.99 | $ | 21.48 | $ | 13.91 | $ | 17.83 | ||||||||
Ratio of expenses to average net assets* |
.69 | % | .63 | % | .67 | % | .92 | % | ||||||||
Ratio of net investment income (loss) to average net assets* |
(.69 | )% | (.63 | )% | (.67 | )% | (.92 | )% | ||||||||
Portfolio turnover** |
8 | % | 14 | % | 14 | % | 50 | % | ||||||||
Total return** |
11.06 | % | 7.45 | % | (35.24 | )% | 28.18 | % | ||||||||
Net assets at end of period (in thousands) |
$ | 11,894 | $ | 28,871 | $ | 31,314 | $ | 49,613 |
(a) | Commencement of operations. |
* | Annualized for the period from August 3, 2006 to December 31, 2006. |
** | Not annualized for the period from August 3, 2006 to December 31, 2006. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the 2040 Retirement Date Fund and does not include expenses charged to the collective investment funds in which the 2040 Retirement Date Fund invests a portion of its assets. |
| With respect to the portion of the 2040 Retirement Date Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales by the 2040 Retirement Date Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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Target Risk Funds
Conservative Risk Fund:
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | .00 | (b) | |
Expenses() |
(.06 | ) | ||
Net investment income (loss) |
(.06 | ) | ||
Net realized and unrealized gain (loss) |
1.45 | |||
Net increase (decrease) in unit value |
1.39 | |||
Net asset value at beginning of period |
13.00 | |||
Net asset value at end of period |
$ | 14.39 | ||
Ratio of expenses to average net assets* |
.92 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.90 | )% | ||
Portfolio turnover** |
5 | % | ||
Total return** |
10.69 | % | ||
Net assets at end of period (in thousands) |
$ | 5,643 |
Moderate Risk Fund:
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | .00 | (b) | |
Expenses() |
(.07 | ) | ||
Net investment income (loss) |
(.07 | ) | ||
Net realized and unrealized gain (loss) |
2.50 | |||
Net increase (decrease) in unit value |
2.43 | |||
Net asset value at beginning of period |
14.00 | |||
Net asset value at end of period |
$ | 16.43 | ||
Ratio of expenses to average net assets* |
.92 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.91 | )% | ||
Portfolio turnover** |
7 | % | ||
Total return** |
17.36 | % | ||
Net assets at end of period (in thousands) |
$ | 13,581 |
(a) | Commencement of operations. |
(b) | Amounts less than $0.005 per unit are rounded to zero. |
* | Annualized for the period from July 7, 2009 to December 31, 2009. |
** | Not annualized for the period from July 7, 2009 to December 31, 2009. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales by the Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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Aggressive Risk Fund:
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(.08 | ) | ||
Net investment income (loss) |
(.08 | ) | ||
Net realized and unrealized gain (loss) |
3.70 | |||
Net increase (decrease) in unit value |
3.62 | |||
Net asset value at beginning of period |
15.00 | |||
Net asset value at end of period |
$ | 18.62 | ||
Ratio of expenses to average net assets* |
.92 | % | ||
Ratio of net investment income (loss) to average net assets* |
(.92 | )% | ||
Portfolio turnover** |
9 | % | ||
Total return** |
24.13 | % | ||
Net assets at end of period (in thousands) |
$ | 4,212 |
(a) | Commencement of operations. |
* | Annualized for the period from July 7, 2009 to December 31, 2009. |
** | Not annualized for the period from July 7, 2009 to December 31, 2009. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales by the Fund of units of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
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ITEM 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations. |
Year Ended December 31, 2009
Stable Asset Return Fund
The Stable Asset Return Fund does not make any direct investments, but invests all of its assets indirectly through SAFT, a collective investment fund maintained by State Street Bank. SAFT in turn invests in investment contracts, Synthetic GICs with associated underlying assets, and high-quality fixed-income instruments, including by investing in the Short-Term Fund, a collective investment fund maintained by State Street Bank. See Item 1, Stable Asset Return Fund.
For the year ended December 31, 2009, the Stable Asset Return Fund experienced a total return, net of expenses, of 1.97%. By comparison, a combination of the Ryan Labs Three Year GIC Index and the iMoneyNet MFR Prime Institutional Money Market Fund Average, weighted 70%/30%, respectively, produced an investment record of 3.23% for the same period. Further, to account for reductions in the Funds yield due to increases in money market-type investments resulting from uncertainties in the Synthetic GIC market and an increased emphasis on benchmark credit quality, the combination benchmark less 0.5% per year, on an annualized basis, produced an investment record of 2.73% for the same period. The Ryan Labs Three Year GIC Index portion of the combination benchmark does not include an allowance for the fees that an investor would pay for investing in the instruments that comprise that index or for fund expenses.
Throughout 2009 the portfolio was positioned to benefit from recovery within the fixed income markets while limiting the likelihood of future market value volatility. As such, the portfolios holdings were focused on short duration money market instruments and segments of the market that had a high degree of government support such as US Treasury Notes & Bonds as well as Debentures and Mortgage Backed Securities issued or backed by U.S. Agencies. The portfolio maintained a position that was of higher credit quality and lower duration than that of the combination benchmark. The portfolio had less market value sensitivity but in a positively sloped interest rate environment it underperformed the benchmark.
Bond Core Plus Fund
The Bond Core Plus Fund, formerly named the Intermediate Bond Fund, seeks to achieve a total return from current income and capital appreciation by investing primarily in a diversified portfolio of fixed income securities.
For the year ended December 31, 2009, the Bond Core Plus Fund experienced a total return, net of expenses, of 9.55%. By comparison, the Barclays Capital U.S. Aggregate Bond Index produced an investment record of 5.93% for the same period. The Barclays Capital U.S. Aggregate Bond Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise the Index or for fund expenses.
For the year ended December 31, 2009, the Bond Core Plus Fund, which is advised with the assistance of Pacific Investment Management Company LLC, outperformed the Barclays Capital U.S. Aggregate Bond Index. An overweight to duration detracted from performance during the first half of the year as investors sought higher-yielding credits and mortgage-backed securities and took part in a broad-based equity rally beginning in March. The perceived threat of inflation and pending increase in Treasury issuance also sent yields higher. In the second half of the year, however, continued weakness in the labor markets, strong demand at Treasury auctions, and accelerated Treasury purchases by the Federal Reserve caused yields to fall. A small curve-steepening bias was a slight contributor to portfolio performance as the U.S. yield curve steepened by 160 basis points during the year. Much of the curve-
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steepening came from a sell-off in long maturities; two-year yields rose 38 basis points whereas thirty-year yields soared by 196 basis points. Long yields rose as investors sold Treasuries amid threats of looming inflation, the onset of economic recovery, and a rebound in risk assets. Towards the end of the year, as the yield curve steepened, the portfolio reduced its curve-steepening bias in favor of intermediate to long Treasuries. Meanwhile, Eurodollar futures added to performance. Forward expectations of three-month LIBOR rates fell during the year, and spot LIBOR rates fell to all-time lows. As the Federal Reserve and Treasury launched new stimulus programs and signaled their intentions to do whatever was necessary to prop up the economy, investors pushed their expectations for hikes deeper and deeper into 2010.
Agency mortgage-backed securities outperformed like-duration Treasuries for eleven out of twelve months in 2009 due to support from the Federal Reserves Agency Mortgage-Backed Securities (MBS) Purchase Program. The portfolios exposure to mortgages was positive for returns. These returns were enhanced by up-in-coupon positioning, an expression of the belief that prepay speeds would not reach 2003 levels despite the market view that higher coupons would suffer from higher prepayments in a falling interest rate environment. Over the year, the Federal Reserve purchased $1.1 trillion of MBS, more than half the gross issuance in most coupons. Allocations to non-agency mortgages were very positive as these securities recovered from severe market dislocations in 2008. Small exposure to Commercial Mortgage-Backed Securities (CMBS) and Consumer Asset Backed Securities (ABS) benefited the portfolio. The CMBS market had a strong year as spreads tightened dramatically on the back of the Term Asset-Backed Securities Loan Facility (TALF) program and the Public-Private Investment Program (PIPP). Consumer ABS also benefited from the TALF program as spreads tightened dramatically on both senior and subordinated debt. An overweight to investment grade credit was positive for performance as high quality corporate bonds significantly outperformed Treasuries in 2009. Corporate credit fundamentals improved on the back of efforts by management to raise cash balances and shore up balance sheets. Within investment grade credit, the focus on financials, including banks, brokerages, and select insurance companies, enhanced returns as these sectors outperformed in light of improving financial conditions and continued support from government policy. An allocation to Treasury Inflation Protected Securities (TIPS) was positive during the year. TIPS posted a strong year on the back of a weak 2008, owing to improved technicals and growing inflation fears. Exposure to non-taxable municipal bonds and taxable Build America Bonds benefited portfolios in 2009. The portfolios exposure to European bonds detracted from performance as yields rose over the course of the year. A small allocation to the U.K. was negative for performance as gilts declined for the first time in a decade. Tactical exposure to local rates in Brazil added to performance as Real-denominated debt outperformed the Barclays U.S. Aggregate Bond Index in 2009. Brazils Central Bank aggressively cut rates in the beginning of the year from 13.75% down to 8.75% where the rate remained for the rest of the year.
For the year ended December 31, 2009, the Bond Core Plus Fund participated in the State Street Bank securities lending program as described under Item 1, Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds that Participate in Securities Lending, the financial statement-reported performance of the Bond Core Plus Fund for the year ended December 31, 2009 was positively impacted by 0.06 percentage point as a result of such participation. As discussed below under Effect on Performance of Certain Funds that Participate in Securities Lending, actual returns experienced by Participants in the Fund based on net asset values for transaction purposes do not reflect the impact of any unrealized gains or losses in the cash collateral funds associated with the State Street Bank securities lending program.
Large Cap Equity Fund
The Large Cap Equity Fund seeks to outperform, over extended periods of time, broad measures of the U.S. stock market. The Fund invests primarily in common stocks and other equity-type securities of
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larger-capitalization companies with market capitalizations, at the time of purchase, of greater than $1 billion. A portion of the Fund (approximately 15% as of December 31, 2009) is invested to replicate the Russell 1000 Index, which is comprised of the approximately 1,000 largest companies in the Russell 3000 Index. The remainder of the Fund is actively managed.
The Large Cap Equity Fund uses a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street Bank and Trust Company of New Hampshire, which we refer to as State Street, subject to consultation with The Northern Trust Company, which we refer to as Northern Trust. Each Investment Advisor acts independently from the others and uses its own distinct investment style in selecting securities. Each Investment Advisor must operate within the constraints of the Funds investment objective, strategies and restrictions and subject to the general supervision of State Street. The performance of each Investment Advisor may be measured in the context of its own investment style.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the Large Cap Equity Fund experienced a total return, net of expenses, of 21.50%. By comparison, the Russell 1000 Index produced an investment record of 22.53% for the same period. The Russell 1000 Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses. As discussed below under Effect of Transition on Performance of Certain Funds, the Funds return in this period was negatively affected by transition-related costs as well as the adverse market impact on the day of the transition.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Large Cap Equity Fund advised with the assistance of C.S. McKee, L.P. (approximately 45% as of December 31, 2009) positively contributed to the performance of the Fund, as well as outperformed the Russell 1000 Value Index, against which this portion of the Fund is compared. Stock selection in the energy sector was a contributor to the outperformance as shares of Transocean and Apache rallied on demand for deep water drilling equipment and a rebound in natural gas prices. Stock selection in the financial sector detracted from performance.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Large Cap Equity Fund advised with the assistance of Jennison Associates LLC (approximately 40% as of December 31, 2009) positively contributed to the performance of the Fund, as well as outperformed the Russell 1000 Growth Index, against which this portion of the Fund is compared. Information technology holdings contributed most to the return as both stock selection and an overweight position were beneficial. Several positions in the sector posted gains of more than 30%. Security selection was also strong in consumer discretionary, consumer staples and health care. Underweight positions in consumer staples and industrials also worked well. Stock selection detracted from returns in financials, materials, and industrials. An overweight in health care was detrimental as well.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the performance of the indexed portion of the Large Cap Equity Fund was consistent with the Russell 1000 Index after taking expenses into account and the effect of participation in securities lending.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the Large Cap Equity Fund participated in the State Street Bank securities lending program as described under Item 1, Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds that Participate in Securities Lending, the financial statement-reported performance of the Large Cap Equity Fund for the period from commencement of operations on July 2, 2009 to December 31, 2009 was negatively impacted by 0.29 percentage point as a result of such participation. As discussed below under Effect on Performance of Certain Funds that Participate in
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Securities Lending, actual returns experienced by Participants in the Fund based on net asset values for transaction purposes do not reflect the impact of any unrealized gains or losses in the cash collateral funds associated with the State Street Bank securities lending program.
Small-Mid Cap Equity Fund
The Small-Mid Cap Equity Fund seeks to outperform, over extended periods of time, broad measures of the U.S. stock market. The Fund invests primarily in common stocks and other equity-type securities of companies with market capitalizations, at the time of purchase, of between $100 million and $20 billion. A portion of the Fund (approximately 2% as of December 31, 2009) is invested to replicate the Russell 2000 Index, which is comprised of the approximately 2,000 smallest companies in the Russell 3000 Index. The remainder of the Fund is actively managed.
The Small-Mid Cap Equity Fund uses a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. Each Investment Advisor acts independently from the others and uses its own distinct investment style in selecting securities. Each Investment Advisor must operate within the constraints of the Funds investment objective, strategies and restrictions and subject to the general supervision of State Street. The performance of each Investment Advisor may be measured in the context of its own investment style.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the Small-Mid Cap Equity Fund experienced a total return, net of expenses, of 21.09%. By comparison, the Russell 2500 Index produced an investment record of 24.52% for the same period. The Russell 2500 Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses. As discussed below under Effect of Transition on Performance of Certain Funds, the Funds return in this period was negatively affected by transition-related costs as well as the adverse market impact on the day of the transition.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Small-Mid Cap Equity Fund advised with the assistance of Denver Investment Advisors LLC (d/b/a Denver Investments) (approximately 14% as of December 31, 2009) positively contributed to the performance of the Fund, as well as outperformed the Russell 2000 Value Index, against which this portion of the Fund is compared. During the period, the sectors that provided the greatest contribution to performance were interest rate sensitive and capital goods.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Small-Mid Cap Equity Fund advised with the assistance of Frontier Capital Management Co. LLC (approximately 10% as of December 31, 2009) positively contributed to the performance of the Fund, but underperformed the Russell Midcap Growth Index, against which this portion of the Fund is compared. Specifically, performance was hampered during the third quarter, a period in which the portfolios defensive posturing was misaligned with a sharp reprice of risk. Performance was much more in line with the benchmark during the last four months of the year. During the fourth quarter specifically, performance was helped by strong contributions from energy and technology. Relative performance was held back a bit, however, by healthcare and consumer discretionary investments.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Small-Mid Cap Equity Fund advised with the assistance of LSV Asset Management (approximately 15% as of December 31, 2009) positively contributed to the performance of the Fund, as well as outperformed the Russell Midcap Value Index, against which this portion of the Fund is compared. Stock selection in the portfolio added value in the period while sector selection detracted from performance. Stock selection was particularly strong in the financial and technology sectors. An
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underweight to Real Estate Investment Trusts (REITs) which rebounded in the period and an overweight to consumer staples, the weakest sector in the benchmark, had a negative impact.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Small-Mid Cap Equity Fund advised with the assistance of OFI Institutional Asset Management, Inc. (approximately 14% as of December 31, 2009) positively contributed to the performance of the Fund, as well as outperformed the Russell 2000 Value Index, against which this portion of the Fund is compared. Stock selection within industrials proved to be additive during the period since inception. Stock selection was also beneficial within the financial sector which additionally was overweighted. Another contributor to performance was the overweight position in materials. The consumer discretionary sector had a negative impact on the portfolio.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Small-Mid Cap Equity Fund advised with the assistance of Oppenheimer Capital LLC (approximately 10% as of December 31, 2009) positively contributed to the performance of the Fund, as well as outperformed the Russell 2000 Growth Index, against which this portion of the Fund is compared. The portfolio outperformed based on strong stock selection in technology, energy and consumer discretionary. Particularly in technology, strong end-market demand has translated into top-line growth acceleration for the e-commerce holdings, while in energy, despite continued low natural gas prices, the portfolios holdings of companies with low cost, high return, replenishable reserves and production growth outperformed relative to their peers.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Small-Mid Cap Equity Fund advised with the assistance of Riverbridge Partners (approximately 10% as of December 31, 2009) negatively contributed to the performance of the Fund, but outperformed the Russell 2000 Growth Index, against which this portion of the Fund is compared. Top performing sectors included information technology, materials and consumer discretionary.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Small-Mid Cap Equity Fund advised with the assistance of Systematic Financial Management, L.P. (approximately 15% as of December 31, 2009) positively contributed to the performance of the Fund, but underperformed the Russell Midcap Value Index, against which this portion of the Fund is compared. The portfolios focus on companies believed to have a combination of attractive valuations and a positive earnings catalyst detracted from relative performance in August and September, as deep value and contrarian stocks returned to favor. The outperformance in the fourth quarter was driven by stock selection as sector allocations had a negligible impact on performance.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the portion of the Small-Mid Cap Equity Fund advised with the assistance of TCW Investment Management Company (approximately 10% as of December 31, 2009) positively contributed to the performance of the Fund, as well as outperformed the Russell Midcap Growth Index, against which this portion of the Fund is compared. Through September the portfolio outperformed primarily due to strong stock selection in health care, information technology and telecommunication services. The fourth quarter had positive absolute returns in all sectors. The portfolio continued to experience relative underperformance in the financial sector.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the performance of the indexed portion of the Small-Mid Cap Equity Fund was consistent with the Russell 2000 Index after taking expenses into account and the effect of participation in securities lending.
For the period from commencement of operations on July 2, 2009 to December 31, 2009, the Small-Mid Cap Equity Fund participated in the State Street Bank securities lending program as
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described under Item 1, Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds that Participate in Securities Lending, the financial statement-reported performance of the Small-Mid Cap Equity Fund for the period from commencement of operations on July 2, 2009 to December 31, 2009 was negatively impacted by 1.09 percentage points as a result of such participation. As discussed below under Effect on Performance of Certain Funds that Participate in Securities Lending, actual returns experienced by Participants in the Fund based on net asset values for transaction purposes do not reflect the impact of any unrealized gains or losses in the cash collateral funds associated with the State Street Bank securities lending program.
International All Cap Equity Fund
The International All Cap Equity Fund, formerly named the International Equity Fund, seeks to provide long-term capital appreciation through a diversified portfolio of primarily non-U.S. equity securities. The Fund seeks to diversify investments broadly among developed and emerging countries and generally to have at least three different countries represented in the Fund. The Fund seeks to achieve, over an extended period of time, total returns comparable to or superior to broad measures of the international (non-U.S.) stock market.
For the year ended December 31, 2009, the International All Cap Equity Fund experienced a total return, net of expenses, of 35.09%. By comparison, the Morgan Stanley Capital International All-Country World Ex-U.S. Index, which we refer to as the MSCI ACWI ex-US Index, produced an investment record of 41.45% for the same period. The MSCI ACWI ex-US Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses. As discussed below under Effect of Transition on Performance of Certain Funds, the Funds return in this period was negatively affected by transition-related costs as well as the adverse market impact on the day of its transition to a multi-manager fund.
Prior to July 6, 2009, State Street retained JPMorgan Asset Management (UK) Limited, which we refer to as JPMAM, to be an Investment Advisor for approximately half of the assets in the Fund, and Philadelphia International Advisors, L.P., which we refer to as PIA, to serve as Investment Advisor for the other half of the assets in the Fund. State Street determined the portion of the International All Cap Equity Funds assets for which advice was obtained from each Investment Advisor. Effective July 6, 2009, the Fund began to utilize a multi-manager approach whereby the Funds assets are allocated to one or more Investment Advisors, in percentages determined at the discretion of State Street, subject to consultation with Northern Trust. Each Investment Advisor acts independently from the others and uses its own distinct investment style in selecting securities. Each Investment Advisor must operate within the constraints of the Funds investment objective, strategies and restrictions and subject to the general supervision of State Street. The performance of each Investment Advisor may be measured in the context of its own investment style. The performance of the portions of the Fund previously managed by JPMAM and PIA are included in the performance of each of the portions of the Fund advised by the new Investment Advisors and in the portion invested by State Street in the State Street Bank securities lending program for the year ended December 31, 2009.
For the period from July 2, 2009 to December 31, 2009, the portion of the International All Cap Equity Fund advised with the assistance of Altrinsic Global Advisors, LLC (approximately 39% as of December 31, 2009) positively contributed to the performance of the Fund, but underperformed the Morgan Stanley Capital International Europe, Australasia, Far East (MSCI EAFE) Value ND Index, against which this portion of the Fund is compared. The portfolio experienced favorable results from the holdings in European and U.K. consumer staples, healthcare and telecommunications sectors. Positioning in financials as well as holdings in the information technology and European industrials sectors adversely affected performance.
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For the period from July 2, 2009 to December 31, 2009, the portion of the International All Cap Equity Fund advised with the assistance of Eagle Global Advisors LLC (approximately 21% as of December 31, 2009) positively contributed to the performance of the Fund, as well as outperformed the MSCI EAFE Growth ND Index, against which this portion of the Fund is compared. Through September the portfolio was aided by good stock selection in the industrial and telecommunication services sectors. The portfolio was also aided by good stock selection in the staples and materials sectors during the fourth quarter. The portfolio benefited from being underweight Japan; however, it was negatively impacted by being underweight Australia.
For the period from July 2, 2009 to December 31, 2009, the portion of the International All Cap Equity Fund advised with the assistance of First State Investments International Limited (approximately 17% as of December 31, 2009) positively contributed to the performance of the Fund, but underperformed the MSCI Emerging Markets ND Index, against which this portion of the Fund is compared. The main drivers of the underperformance were stock selection in the materials sector along with stock selection in Russia, Taiwan and South Korea.
For the period from July 2, 2009 to December 31, 2009, the portion of the International All Cap Equity Fund advised with the assistance of Martin Currie Inc. (approximately 20% as of December 31, 2009) negatively contributed to the performance of the Fund, as well as underperformed the MSCI EAFE Growth ND Index, against which this portion of the Fund is compared. The portfolio did not hold the most highly leveraged stocks which led the market rally and led to the underperformance. During the period, stocks with financial high quality, good value and strong growth lagged as they had previously performed well in the early part of the year.
For the period from January 1, 2009 to July 1, 2009, the portion of the International All Cap Equity Fund advised with the assistance of JPMAM outperformed the MSCI ACWI ex-US Index. The financials and telecoms sectors were the largest contributors to relative performance while the technology and industrials sectors detracted. Regionally, stock selection in the U.K. and Japan was strong but stock selection in continental Europe, the Pacific region (excluding Japan) and emerging markets lagged the Index. Holdings in the Brazilian oil/gas company Petrobras were a major contributor to relative performance. In contrast, holdings in the global banking group HSBC detracted from relative performance.
For the period from January 1, 2009 to July 1, 2009, the portion of the International All Cap Equity Fund advised with the assistance of PIA outperformed the MSCI ACWI ex-US Index. The outperformance was due to solid stock picking in the consumer and utility sectors and within the U.K. and Germany. Regionally, stock selection in continental Europe and the U.K. was particularly strong while the portfolios underweight position in the emerging markets sector detracted from relative returns.
For the year ended December 31, 2009, the International All Cap Equity Fund participated in the State Street Bank securities lending program as described under Item 1, Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds that Participate in Securities Lending, the financial statement-reported performance of the International All Cap Equity Fund for the year ended December 31, 2009 was positively impacted by 1.07 percentage points as a result of such participation. As discussed below under Effect on Performance of Certain Funds that Participate in Securities Lending, actual returns experienced by Participants in the Fund based on net asset values for transaction purposes do not reflect the impact of any unrealized gains or losses in the cash collateral funds associated with the State Street Bank securities lending program.
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Bond Index Fund
The Bond Index Fund seeks to replicate, after taking into account Fund expenses, the total rate of return of the Barclays Capital U.S. Aggregate Bond Index by investing generally in securities which are representative of the domestic investment grade bond market as included in such Index.
For the period from commencement of operations on February 3, 2009 to December 31, 2009, the Bond Index Fund experienced a total return, net of expenses, of 5.91%. By comparison, the Barclays Capital U.S. Aggregate Bond Index produced an investment record of 6.87% for the same period. The Barclays Capital U.S. Aggregate Bond Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses.
The performance of the Bond Index Fund for the period from commencement of operations on February 3, 2009 to December 31, 2009 was consistent with the Barclays Capital U.S. Aggregate Bond Index after taking expenses into account.
Large Cap Index Equity Fund
The Large Cap Index Equity Fund seeks to replicate, after taking into account Fund expenses, the total rate of return of the S&P 500 Index by investing generally in securities included in such Index. The S&P 500 Index represents approximately 75% of the U.S. equity market based on the market capitalization of the companies in the S&P 500 Index.
For the period from commencement of operations on February 9, 2009 to December 31, 2009, the Large Cap Index Equity Fund experienced a total return, net of expenses, of 30.67%. By comparison, the S&P 500 Index produced an investment record of 31.15% for the same period. The S&P 500 Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses.
The performance of the Large Cap Index Equity Fund for the period from commencement of operations of February 9, 2009 to December 31, 2009 was consistent with the S&P 500 Index after taking expenses into account.
All Cap Index Equity Fund
The All Cap Index Equity Fund, formerly named the Index Equity Fund, seeks to replicate, after taking into account Fund expenses, the total return of the Russell 3000 Index by investing in stocks included in the Russell 3000 Index, with the overall objective of achieving long-term growth of capital. The Russell 3000 Index represents approximately 98% of the U.S. equity market based on the market capitalization of the companies in the Russell 3000 Index.
For the year ended December 31, 2009, the All Cap Index Equity Fund experienced a total return, net of expenses, of 28.25%. By comparison, the Russell 3000 Index produced an investment record of 28.34% for the same period. The Russell 3000 Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses.
The performance of the All Cap Index Equity Fund for the year ended December 31, 2009 was consistent with the Russell 3000 Index after taking expenses into account and the effect of participation in securities lending.
For the year ended December 31, 2009, the All Cap Index Equity Fund participated in the State Street Bank securities lending program as described under Item 1, Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds that
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Participate in Securities Lending, the financial statement-reported performance of the All Cap Index Equity Fund for the year ended December 31, 2009 was positively impacted by 0.66 percentage point as a result of such participation. As discussed below under Effect on Performance of Certain Funds that Participate in Securities Lending, actual returns experienced by Participants in the Fund based on net asset values for transaction purposes do not reflect the impact of any unrealized gains or losses in the cash collateral funds associated with the State Street Bank securities lending program.
Mid Cap Index Equity Fund
The Mid Cap Index Equity Fund seeks to replicate, after taking into account Fund expenses, the total rate of return of the S&P MidCap 400 Index by investing generally in securities included in such Index. The S&P MidCap 400 Index includes 400 companies and, as of December 31, 2009, represented approximately 7% of the U.S. equity market based on the market capitalization of the companies in the S&P MidCap 400 Index.
For the period from commencement of operations on February 3, 2009 to December 31, 2009, the Mid Cap Index Equity Fund experienced a total return, net of expenses, of 51.23%. By comparison, the S&P MidCap 400 Index produced an investment record of 47.65% for the same period. The S&P MidCap 400 Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses.
The performance of the Mid-Cap Index Equity Fund for the period from commencement of operations on February 3, 2009 to December 31, 2009 exceeded that of the S&P MidCap 400 Index due primarily to several significant purchases of Fund Units having been made on days on which the S&P MidCap 400 Index experienced significant declines, with the result that the Funds performance on such days exceeded that of the Index due to the time delay involved in the investment of the proceeds of such Units in the Index. Otherwise, the performance of the Fund was consistent with the S&P MidCap 400 Index after taking expenses into account.
Small Cap Index Equity Fund
The Small Cap Index Equity Fund seeks to replicate, after taking into account Fund expenses, the total rate of return of the Russell 2000 Index by investing generally in securities included in such Index. The Russell 2000 Index is comprised of the approximately 2,000 companies in the Russell 3000 Index with the smallest market capitalization and represents approximately 10% of the Russell 3000 Index total market capitalization.
For the period from commencement of operations on February 3, 2009 to December 31, 2009, the Small Cap Index Equity Fund experienced a total return, net of expenses, of 47.64%. By comparison, the Russell 2000 Index produced an investment record of 41.15% for the same period. The Russell 2000 Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses.
The performance of the Small Cap Index Equity Fund for the period from commencement of operations on February 3, 2009 to December 31, 2009 exceeded that of the Russell 2000 Index due primarily to several significant purchases of Fund Units having been made on days on which the Russell 2000 Index experienced significant declines, with the result that the Funds performance on such days exceeded that of the Index due to the time delay involved in the investment of the proceeds of such Units in the Index. Otherwise, the performance of the Fund was consistent with the Russell 2000 Index after taking expenses into account.
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International Index Equity Fund
The investment objective of the International Index Equity Fund is to replicate, after taking into account Fund expenses, the total rate of return of the MSCI ACWI ex-US Index by investing generally in securities included in such Index. The MSCI ACWI ex-US Index consists of approximately 1,800 securities in 45 markets, with securities of emerging markets representing approximately 20% of the Index.
For the period from commencement of operations on March 3, 2009 to December 31, 2009, the International Index Equity Fund experienced a total return, net of expenses, of 75.20%. By comparison, the MSCI ACWI ex-US Index produced an investment record of 80.28% for the same period. The MSCI ACWI ex-US Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that Index or for fund expenses.
The performance of the International Index Equity Fund for the period from commencement of operations on March 3, 2009 to December 31, 2009 underperformed the MSCI ACWI ex-US Index due primarily to several significant purchases of Fund Units having been made on days on which the Index experienced significant increases, with the result that the Funds performance on such days lagged that of the Index due to the time delay involved in the investment of the proceeds of such Units in the Index. Otherwise, the performance of the Fund was consistent with the MSCI ACWI ex-US Index after taking expenses into account.
Real Asset Return Fund
The investment objective of the Real Asset Return Fund is to provide capital appreciation in excess of inflation as measured by the All Items Less Food and Energy Consumer Price Index for All Urban Consumers for the U.S. City Average, 1982-84 = 100 through investment in a diversified portfolio of primarily Treasury Inflation Protected Securities, commodity futures and real estate investment trusts.
The Fund seeks to achieve its objective by investing indirectly in various index or other collective investment funds maintained by State Street Bank. During the period from commencement of operations on July 7, 2009 to December 31, 2009, these funds included the REIT Index Non-Lending Series Fund, the Treasury Inflation Protected Securities Index Non-Lending Series Fund and the Dow Jones UBS Commodities Index Non-Lending Series Fund.
For the period from commencement of operations on July 7, 2009 to December 31, 2009, the Fund experienced a total return, net of expenses, of 20.92%. The performance of the Real Asset Return Fund for period from commencement of operations on July 7, 2009 to December 31, 2009 was consistent with its composite benchmark after taking expenses into account.
Retirement Date Funds
The Retirement Date Funds provide a series of balanced investment funds each of which is designed by State Street Bank to correspond to a particular time horizon to retirement. Each Retirement Date Fund has a different initial investment strategy representing different risk and reward characteristics that reflect the remaining time horizon to the most conservative investment mix. The longer the time horizon to the year in which a Retirement Date Fund will reach its most conservative investment mix, the greater is the Retirement Date Funds initial risk and potential reward profile. The Lifetime Income Retirement Date Fund seeks to avoid significant loss of principal for investors who have reached or are beyond their retirement date and is comprised primarily of bonds and shorter-term high-quality debt instruments to provide stability and income (although such Fund also has a target equity exposure of 30%). The 2010 Retirement Date Fund currently seeks to provide a blend of capital appreciation and
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stability of principal for participants planning to retire in or around the year 2010. The 2020 Retirement Date Fund currently seeks to provide long-term capital appreciation and more limited stability of principal for participants planning to retire in or around the year 2020. The 2030 Retirement Date Fund currently seeks to provide long-term capital appreciation for participants planning to retire in or around the year 2030 and is comprised mainly of stocks for higher growth potential. The 2040 Retirement Date Fund currently seeks to provide long-term capital appreciation for participants planning to retire in or around the year 2040 and is comprised mainly of stocks for maximum growth potential.
The Retirement Date Funds seek to achieve their objectives by investing in various index or other collective investment funds maintained by State Street Bank. For substantially all of the year ended December 31, 2009, these funds included, in the case of some or all of the Retirement Date Funds and in varying allocations, the S&P 500 Flagship Securities Lending Fund, the Daily MSCI ACWI Ex-US Index Securities Lending Fund, the S&P Mid-Cap Index Securities Lending Fund, the Russell 2000 Index Securities Lending Fund, the Long U.S. Government Index Securities Lending Fund, the Passive Bond Market Index Securities Lending Fund, the U.S. Treasury Inflation Protected Securities Fund and the Principal Accumulation Return Fund.
For the year ended December 31, 2009, the Retirement Date Funds experienced a total return, net of expenses, of 14.92% for the Lifetime Income Retirement Date Fund, 16.12% for the 2010 Retirement Date Fund, 21.33% for the 2020 Retirement Date Fund, 25.33% for the 2030 Retirement Date Fund and 28.18% for the 2040 Retirement Date Fund. The performance of each Retirement Date Fund for the year ended December 31, 2009 was consistent with its respective composite benchmark after taking expenses into account and the effect of participation in securities lending.
For the year ended December 31, 2009, the Retirement Date Funds participated in the State Street Bank securities lending program as described under Item 1, Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds that Participate in Securities Lending, the financial statement-reported performance of the Retirement Date Funds for the year ended December 31, 2009 was positively impacted by 0.81 percentage point for the Lifetime Income Retirement Date Fund, 1.72 percentage points for the 2010 Retirement Date Fund, 1.56 percentage points for the 2020 Retirement Date Fund, 1.40 percentage points for the 2030 Retirement Date Fund and 1.16 percentage points for the 2040 Retirement Date Fund as a result of such participation. As discussed below under Effect on Performance of Certain Funds that Participate in Securities Lending, actual returns experienced by Participants in the Funds based on net asset values for transaction purposes do not reflect the impact of any unrealized gains or losses associated with the State Street Bank securities lending program.
Target Risk Funds
The Target Risk Funds provide a series of balanced investment funds each of which is designed to correspond to a particular investment risk level. Each Target Risk Fund has a different investment strategy representing different risk and reward characteristics. The Conservative Risk Fund seeks to avoid significant loss of principal and is comprised primarily of bonds and shorter-term high-quality debt instruments to provide stability and income (although such Fund also has a target equity exposure of 29%). The Moderate Risk Fund seeks to provide long-term capital appreciation and more limited stability of principal for participants. The Aggressive Risk Fund seeks to provide long-term capital appreciation for participants and is comprised mainly of stocks for significant growth potential.
The Target Risk Funds seek to achieve their objectives by investing in various index or other collective investment funds maintained by State Street Bank. During the period from commencement of operations on July 7, 2009 to December 31, 2009, these funds included, in the case of some or all of the Target Risk Funds and in varying allocations, the Russell 3000 Index Non-Lending Series Fund, the Daily
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EAFE Non-Lending Series Fund, the Daily MSCI ACWI Ex-US Index Non-Lending Series Fund, the Passive Bond Market Index Non-Lending Series Fund, the Treasury Inflation Protected Securities Index Non-Lending Series Fund, the Dow Jones UBS Commodities Index Non-Lending Series Fund, the REIT Index Non-Lending Series Fund and STIF.
For the period from commencement of operations on July 7, 2009 to December 31, 2009, the Target Risk Funds experienced a total return, net of expenses, of 10.69% for the Conservative Risk Fund, 17.36% for the Moderate Risk Fund and 24.13% for the Aggressive Risk Fund. The performance of each Target Risk Fund for the period from commencement of operations on July 7, 2009 to December 31, 2009 was consistent with its respective composite benchmark after taking expenses into account.
Balanced Fund
Certain assets contributed to the Program are held in the Balanced Fund. However, the Collective Trust no longer offers Units in the Balanced Fund.
The Balanced Fund seeks to achieve, over an extended period of time, total returns comparable to or superior to an appropriate combination of broad measures of the domestic stock and bond markets. The Fund invests in publicly traded common stocks, other equity-type securities, medium- to long-term debt securities with varying maturities and money market instruments.
For the year ended December 31, 2009, the Balanced Fund experienced a total return, net of expenses, of 21.47%. By comparison, a combination of the Russell 1000 Index and the Barclays Capital U.S. Aggregate Bond Index, weighted 60%/40%, respectively, produced an investment record of 19.50% for the same period. The Russell 1000 Index and the Barclays Capital U.S. Aggregate Bond Index do not include an allowance for the fees that an investor would pay for investing in the securities that comprise the indices or for fund expenses.
The equity segment of the Balanced Fund was advised with the assistance of Capital Guardian Trust Company during the period from January 1, 2009 to July 1, 2009 and was invested through the Large Cap Equity Fund during the period from July 2, 2009 to December 31, 2009. During the period from January 1, 2009 to July 1, 2009, the equity segment of the Balanced Fund outperformed the Russell 1000 Index. Please refer to the discussion of the investment performance of the Large Cap Equity Fund, above, for a description of the performance of the equity segment of the Balanced Fund for the period from July 2, 2009 to December 31, 2009.
For the year ended December 31, 2009, the debt segment of the Balanced Fund, which was invested through the Bond Core Plus Fund (formerly known as the Intermediate Bond Fund), outperformed the Barclays Capital U.S. Aggregate Bond Index. Please refer to the discussion of the investment performance of the Bond Core Plus Fund discussion, above, for a description of the performance of the debt segment of the Balanced Fund for the year ended December 31, 2009.
For the year ended December 31, 2009, the Balanced Fund participated in the State Street Bank securities lending program as described under Item 1, Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds that Participate in Securities Lending, the financial statement-reported performance of the Balanced Fund for the year ended December 31, 2009 was positively impacted by 0.32 percentage point as a result of such participation.
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Terminated Funds
On July 1, 2009 the previously offered Large-Cap Value Equity Fund, Large-Cap Growth Equity Fund, Mid-Cap Value Equity Fund, Mid-Cap Growth Equity Fund and Small-Cap Equity Fund (the Terminated Funds) were eliminated. The Collective Trust no longer offers Units in the Terminated Funds.
State Street transferred all of the assets invested in the Terminated Funds in accordance with directions received from Participants with investments then invested in the Terminated Funds. Any assets not subject to a valid direction to be transferred to another investment option and hence remaining in these Funds were transferred, in the case of the Large-Cap Value Equity Fund and the Large-Cap Growth Equity Fund, to the Large Cap Equity Fund, and, in the case of the Mid-Cap Value Equity Fund, the Mid-Cap Growth Equity Fund or the Small-Cap Equity Fund, to the Small-Mid Cap Equity Fund. Any election to invest contributions in any of the Large-Cap Value Equity Fund, the Large-Cap Growth Equity Fund, the Mid-Cap Value Equity Fund, the Mid-Cap Growth Equity Fund or the Small-Cap Equity Fund, which was not amended or revoked by a Participant by July 1, 2009, was allocated to whatever Fund was designated by the Participants Employer as its default option in the adoption agreement pursuant to which such Employer adopted the Program or any amendment thereto.
Additional information relating to Program assets formerly held in the Terminated Funds may be obtained by writing or calling State Street. See Item 1, Additional Information.
Effect on Performance of Certain Funds that Participate in Securities Lending
The per Unit net asset values of the Funds that participate directly or indirectly in the State Street Bank securities lending program as reflected in their financial statements are based on United States generally accepted accounting principles (GAAP) and differ from the per Unit net asset values calculated for purposes of transactions experienced by Participants in their accounts. The difference is driven by the valuation of securities lending cash collateral funds referred to below as cash collateral funds.
The Funds referred to above, either directly or indirectly through their investment in other funds and accounts managed by State Street Bank or its affiliates, participate in the State Street Bank securities lending program as described under Item 1, Information with Respect to the FundsLoans of Portfolio Securities. The Funds participating in this program typically receive cash collateral at the time of lending with a value in excess of that of the loaned securities, and collateral is increased or decreased, respectively, as the value of the loaned securities increases or decreases. The cash collateral is invested for the account and risk of the participating funds in the cash collateral funds, which are managed by State Street Bank or its affiliates. For purposes of normal daily transaction activity, these cash collateral funds, as permitted under their governing agreements, value their investments on the basis of amortized cost, rather than current market values, to the extent that an investment is not in default or considered to be impaired. State Street Bank has informed the Collective Trust that none of the securities in the cash collateral funds was in default at December 31, 2009 and therefore purchases and redemptions of units in the cash collateral funds continue to be transacted at a value equivalent to $1.00 per unit (100% of principal invested), even though, on a market basis at December 31, 2009, the cash collateral funds had net asset values ranging from $.977 to $.984 per unit. These net asset values compare to values ranging from $.908 to $.935 per unit at December 31, 2008.
For financial reporting purposes under GAAP, each of these Funds has valued its direct and indirect investments in the cash collateral funds at their market values, and has recognized either unrealized gains or unrealized losses in the financial statements for the year ended December 31, 2009. Gains positively impacted, and losses negatively impacted, reported performance of each relevant Fund to the
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extent stated in its respective discussion under Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations. The unrealized gains were the result of partial reversals of unrealized losses recognized in previous periods. These unrealized losses, net of any previously unrealized gains partially reversing these losses, could further reverse, in whole or in part, over time to the extent that principal is eventually recovered on maturities or higher prices are realized upon sale of the underlying securities, although, as with any investment, such events are not assured of occurring, and future losses could be experienced for financial reporting purposes if the net asset values per unit of the cash collateral funds on a market basis decrease from their December 31, 2009 levels. However, these Funds have continued to value their investments in the cash collateral funds for purposes of Participant transactions at amortized-cost based value used by the cash collateral funds for daily transactions. Accordingly, actual returns experienced by Participants in the Funds based on net asset values for transaction purposes do not reflect the impact of any unrealized gains or losses.
For information on the effect of the unrealized gains or losses described above on the performance for financial reporting purposes of a particular Fund, see the discussion related to performance of such Fund above for the year ended December 31, 2009.
Effect of Transition on Performance of Certain Funds
The returns of the Large Cap Equity Fund, the International All Cap Equity Fund and the Small-Mid Cap Equity Fund in the period from commencement of operations on or about July 2, 2009 to December 31, 2009 were negatively affected by (1) $492,000 in costs incurred related to (i) terminating the Large-Cap Value Equity Fund, the Large-Cap Growth Equity Fund, the Mid-Cap Value Equity Fund and the Small-Cap Equity Fund, (ii) establishing the Large Cap Equity Fund and the Small-Mid Cap Equity Fund and (iii) restructuring the International All Cap Equity Fund, which costs were allocated among the Large Cap Equity Fund, the Small-Mid Cap Equity Fund and the International All Cap Equity Fund in proportion to the assets of those Funds and (2) the adverse impact of costs and/or on the prices of securities caused by the large number of securities sold by the Terminated Funds and bought by these Funds on the day of the transition.
Year Ended December 31, 2008
Stable Asset Return Fund
The Stable Asset Return Fund does not make any direct investments, but invests all of its assets indirectly through SAFT, a collective investment fund maintained by State Street Bank. SAFT in turn invests in investment contracts, Synthetic GICs with associated underlying assets, and high-quality fixed-income instruments, including by investing in the Short-Term Fund, a collective investment fund maintained by State Street Bank. See Item 1, Stable Asset Return Fund.
For the year ended December 31, 2008, the Stable Asset Return Fund experienced a total return, net of expenses, of 3.82%. By comparison, a combination of the Ryan Labs Three Year GIC Index and the iMoneyNet MFR Prime Institutional Money Market Fund Average, weighted 70%/30%, respectively, produced an investment record of 4.13% for the same period. A combination of the Ryan Labs Three Year GIC Index and the iMoneyNet MFR Prime Institutional Money Market Fund Average, weighted 70%/30%, respectively, less 0.5% per year, produced an investment record of 3.63% for the same period. The Ryan Labs Three Year GIC Index portion of the combination benchmark does not include an allowance for the fees that an investor would pay for investing in the instruments that comprise that index or for fund expenses.
For 2008, all of the sectors with historically higher spreads posted negative relative returns. Other than a significant but brief tightening of spread products during April and May in response to the economys bounce from fiscal stimulus in the form of tax rebates, this relative underperformance set the
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tone for what would be the most challenging year in the modern history of the fixed income markets. With this brief exception, month after month new records were set for underperformance and incremental yield across risk assets, be they higher or lower in quality. Continued and worsening housing woes and the broader economic crisis they have spawned have forced governments, regulators and markets into uncharted territory. The Federal Reserve cut interest rates seven times in 2008 and promised additional quantitative easing measures. The U.S. Department of Treasury has made many direct investments into both securities markets and private entities to help maintain order. Both these institutions, as well as others globally, are redefining their roles in the global financial markets. Those markets are now forced to re-evaluate how and at what levels risk capital is lent and priced. The final chapter remains unwritten. Perhaps the most daunting challenge for 2009 will come in the form of a global economy in recession, with few predicting an upturn before late in the year.
During 2008, some of the investments underlying Synthetic GIC arrangements in which the Stable Asset Return Fund has an interest experienced depreciation in value as a result of the volatility and illiquidity in the fixed-income securities markets. According to the Synthetic GIC arrangements, when the fair value of these investments falls below a specified level for an extended period, the Synthetic GIC issuers may elect immunization of the contracts. In the fourth quarter of 2008, State Street Corporation contributed $21.6 million in cash (the Infusion) to enhance the fair value of the investments underlying these Synthetic GIC arrangements. State Street Corporation received no consideration in return for the Infusion. Upon the Infusion, the fair value of the investments remained below the specified level set forth in the contracts but to a lesser degree (although at year-end 2008, the fair value of the investments was greater than contract value). In addition, State Street Corporation purchased $132 million of asset-backed and mortgage-backed securities in which the Stable Asset Return Fund had an interest, as these securities were identified as having potential downside valuation risk if the markets remain disrupted.
Intermediate Bond Fund
The Intermediate Bond Funds investment objective is to achieve a total return from current income and capital appreciation by investing primarily in a diversified portfolio of fixed income securities.
For the year ended December 31, 2008, the Intermediate Bond Fund experienced a total return, net of expenses, of 2.42%. By comparison, the Barclays Capital U.S. Aggregate Bond Index produced an investment record of 5.24% for the same period. The Barclays Capital U.S. Aggregate Bond Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise the index or for fund expenses.
For the year ended December 31, 2008, the Intermediate Bond Fund, which is advised with the assistance of Pacific Investment Management Company LLC underperformed the Barclays Capital U.S. Aggregate Bond Index. For the quarter ended December 31, 2008, however, the Fund outperformed the benchmark.
During 2008, massive deleveraging originating in the sub-prime debacle shook the global financial system and produced a contraction in the credit markets that roiled markets and economies worldwide. Strategies designed to benefit from a decline in short-term inter-bank lending rates detracted from relative performance as banks demanded higher rates of return given the uncertainty in the credit markets. Faced with uncertainty in the credit markets, banks seemed reluctant to lend to one another. The short-term bond markets were negatively affected as a result. An overweight position in mortgage-backed securities also detracted from performance in the early part of 2008. However, this position added to performance after the federal government announced its support for Fannie Mae and Freddie Mac in early September. A focus on high-grade financials in the corporate sector also detracted from
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performance. An underweight position in this sector partially mitigated losses. Finally, the banking sector diminished its outlook for profitability amid continued write-downs on mortgage-related assets. As a result, allocation to bank capital notes in the U.S. detracted from performance as spreads significantly widened due to falling equity values and funding constraints.
By contrast, curve-steepening strategies have contributed to performance as short-term rates have rallied on reports of slowing growth, moderating inflation, a weakening housing market and expectations of lower monetary policy rates. An above-benchmark duration in the U.S. and interest rate exposure globally were positive for performance as such position mitigated the negative impact of the Lehman Brothers bankruptcy and fears of additional bank failures. During the year ended December 31, 2008, the Intermediate Bond Fund experienced a decrease in value of approximately $6.3 million on $7.6 million in Lehman Brothers bonds.
For the year ended December 31, 2008, the Intermediate Bond Fund engaged in the State Street Bank securities lending program as described under Item 1, Certain Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds and Retirement Date Funds that Participate in Securities Lending, the financial statement-reported performance of the Intermediate Bond Fund was lower by 0.14 percentage point than it otherwise would have been.
International Equity Fund
The International Equity Funds investment objective is to seek long-term growth of capital through investment primarily in common stocks of established non-U.S. companies. The Fund seeks to diversify investments broadly among developed and emerging countries and generally to have at least three different countries represented in the portion. The International Equity Fund seeks to achieve, over an extended period of time, total returns comparable to or superior to broad measures of the international (non-U.S.) stock market.
For the year ended December 31, 2008, the International Equity Fund experienced a total return, net of expenses, of -45.65%. By comparison, the MSCI ACWI ex-US Index produced an investment record of -45.53% for the same period. The MSCI ACWI ex-US does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that index or for fund expenses.
The portion of the International Equity Fund advised with the assistance of JP Morgan Asset Management (UK) Limited (JP Morgan) outperformed the MSCI ACWI ex-US Index for the year ended December 31, 2008.
2008 was a challenging year characterized by slowing global economic growth, concern about the health of the financial sector and a deteriorating corporate earnings outlook. Losses were widespread across sectors and regions. In general, financial and cyclically-oriented sectors sustained the largest losses while more defensive sectors such as healthcare and consumer staples fared relatively better. Japan fared better than other regions due to the yens having strengthened significantly against other major currencies.
The portion of the International Equity Fund advised with the assistance of JP Morgan benefited from holdings in the energy, technology and healthcare sectors. Despite the drop in oil prices during the fourth quarter of 2008, holdings of integrated oil companies such as Total S.A., Eni S.p.A and Royal Dutch Shell contributed positively to relative performance. These companies have generated significant cash flow in recent years and are therefore believed to be less vulnerable to the credit crisis than certain of their peers. In addition, the integrated nature of their operations provided a partial buffer against the
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fall in crude prices. Taiwan Semiconductor and SAP were major contributors to relative performance in the technology sector. An overweight position in the healthcare sector also contributed positively to relative performance. Teva Pharmaceuticals, Astellas and Roche were among the contributors in that sector.
By contrast, performance in the utilities and telecommunications sectors lagged. Shares of a number of Japanese utilities posted double-digit gains during the year 2008, fuelled by currency movements and investor appetite for more defensive investments. However, an underweight position in Japanese entities detracted from the segments performance in the utilities sector. Stock selection in Orascom Telecom (Egypt) and Mobile Telesystems (Russia) detracted from performance as these stocks fell with their local markets.
The portion of the International Equity Fund advised with the assistance of PIA underperformed the MSCI ACWI ex-US Index due, in part, to security selection in countries with emerging markets. Stock selection in the United Kingdom offset the impact of an underweight position in Canadian stocks and proved beneficial to returns. Holdings in the materials and information technology sectors also contributed to relative performance. By contrast, stock selections in the industrials and consumer discretionary sectors detracted from results. The portfolios performance was hampered by an underweight position in defensive sectors such as healthcare and consumer staples.
For the year ended December 31, 2008, the International Equity Fund engaged in the State Street Bank securities lending program as described under Item 1, Certain Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds and Retirement Date Funds that Participate in Securities Lending, the financial statement-reported performance of the International Equity Fund was lower by 0.65 percentage point than it otherwise would have been.
Index Equity Fund
The Index Equity Fund seeks to replicate the total return of the Russell 3000 Index by investing in stocks included in the Russell 3000 Index, with the overall objective of achieving long-term growth of capital. The Russell 3000 Index represents approximately 98% of the U.S. equity market based on market capitalization of the companies in the Russell 3000 Index.
For the year ended December 31, 2008, the Index Equity Fund experienced a total return, net of expenses, of -37.95%. By comparison, the Russell 3000 Index produced an investment record of -37.31% for the same period. The Russell 3000 Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that index or for fund expenses.
The performance of the Index Equity Fund for the year ended December 31, 2008 was consistent with the Russell 3000 Index after taking into account expenses and the effect of participation in securities lending.
For the year ended December 31, 2008, the Index Equity Fund engaged in the State Street Bank securities lending program as described under Item 1, Certain Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds and Retirement Date Funds that Participate in Securities Lending, the financial statement-reported performance of the Index Equity Fund was lower by 0.53 percentage point than it otherwise would have been.
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Retirement Date Funds
The Retirement Date Funds provide a series of balanced investment funds each of which is designed by State Street Bank to correspond to a particular time horizon to retirement. The five Retirement Date Funds, designated as the Lifetime Income Retirement Date Fund, 2010 Retirement Date Fund, 2020 Retirement Date Fund, 2030 Retirement Date Fund and 2040 Retirement Date Fund, respectively, offer five separate target retirement date strategies, each with a distinct asset mix. With the exception of the Lifetime Income Retirement Date Fund, which is designed for those currently retired, each Retirement Date Funds asset mix will, over time, become progressively more conservative as the specified target retirement date draws nearer. The Retirement Date Funds utilize a broad range of asset classes and an annual rebalancing process to provide diversification of returns and risks consistent with the stated time horizon to retirement. Investment in each such asset class is obtained by investing in index strategies or other pooled strategies designed for low tracking error.
Each Retirement Date Fund has a different initial investment strategy representing different risk and reward characteristics that reflect the remaining time horizon to the most conservative investment mix. The longer the time horizon to the year in which a Retirement Date Fund will reach its most conservative investment mix, the greater is the Retirement Date Funds initial risk and potential reward profile. Each of the Retirement Date Funds (other than the Lifetime Income Retirement Date Fund) will reach its most conservative investment mix until five years after the target retirement date. The Lifetime Income Retirement Date Fund seeks to avoid significant loss of principal for investors who have reached or are beyond their retirement date and is comprised primarily of bonds and shorter-term high-quality debt instruments to provide stability and income. The 2010 Retirement Date Fund currently seeks to provide a blend of capital appreciation and stability of principal for participants planning to retire in or around the year 2010. The 2020 Retirement Date Fund currently seeks to provide long-term capital appreciation and more limited stability of principal for participants planning to retire in or around the year 2020. The 2030 Retirement Date Fund currently seeks to provide long-term capital appreciation for participants planning to retire in or around the year 2030 and is comprised mainly of stocks for higher growth potential. The 2040 Retirement Date Fund currently seeks to provide long-term capital appreciation for participants planning to retire in or around the year 2040 and is comprised mainly of stocks for maximum growth potential.
The Retirement Date Funds seek to achieve their objectives by investing in various index or other collective investment funds maintained by State Street Bank. These funds include the S&P 500 Index Fund, Daily MSCI ACWI ex-USA Index Fund (MSCI ACWI ex-US Index Fund); S&P MidCap Index Fund; Russell 2000 Index Fund; Long Government Bond Fund; Passive Bond Market Index Securities Lending Series Fund (Bond Market Index Fund); U.S. Treasury Inflation Protected Securities Lending Series Fund (TIPS Fund) and Principal Accumulation Return Fund (Principal Accumulation Fund).
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For the year ended December 31, 2008, funds in each of the Retirement Date Funds were allocated as follows:
Lifetime Income Fund |
2010 Retirement Date Fund |
|||||||||
S&P 500 Index Fund |
26.5 | % | S&P 500 Index Fund | 34.8 | % | |||||
Bond Market Index Fund |
24.8 | % | Bond Market Index Fund | 19.8 | % | |||||
Principal Accumulation Fund |
20.2 | % | Long Government Bond Fund | 19.3 | % | |||||
TIPS Fund |
19.5 | % | Principal Accumulation Fund | | ||||||
MSCI AWCI ex-US Index Fund |
4.0 | % | TIPS Fund | 9.8 | % | |||||
S&P MidCap Index Fund |
3.0 | % | MSCI AWCI ex-US Index Fund | 9.0 | % | |||||
Russell 2000 Index Fund |
2.0 | % | S&P MidCap Index Fund | 4.4 | % | |||||
100.0 | % | Russell 2000 Index Fund | 2.9 | % | ||||||
100.0 | % | |||||||||
2020 Retirement Date Fund |
2030 Retirement Date Fund |
|||||||||
S&P 500 Index Fund |
42.7 | % | S&P 500 Index Fund | 45.0 | % | |||||
Long Government Bond Fund |
19.3 | % | Bond Market Index Fund | | ||||||
Bond Market Index Fund |
5.9 | % | Principal Accumulation Fund | | ||||||
Principal Accumulation Fund |
| Long Government Bond Fund | 15.0 | % | ||||||
TIPS Fund |
2.9 | % | TIPS Fund | | ||||||
MSCI AWCI ex-US Index Fund |
16.8 | % | MSCI AWCI ex-US Index Fund | 22.5 | % | |||||
S&P MidCap Index Fund |
6.8 | % | S&P MidCap Index Fund | 8.8 | % | |||||
Russell 2000 Index Fund |
5.6 | % | Russell 2000 Index Fund | 8.7 | % | |||||
100.0 | % | 100.0 | % | |||||||
2040 Retirement Date Fund |
||||||||||
S&P 500 Index Fund |
45.4 | % | ||||||||
Bond Market Index Fund |
| |||||||||
Long Government Bond Fund |
9.4 | % | ||||||||
Principal Accumulation Fund |
| |||||||||
TIPS Fund |
| |||||||||
MSCI AWCI ex-US Index Fund |
24.5 | % | ||||||||
S&P MidCap Index Fund |
10.3 | % | ||||||||
Russell 200 Index Fund |
10.4 | % | ||||||||
100.0 | % |
For the year ended December 31, 2008, the Retirement Date Funds experienced a total return, net of expenses, of -14.23% for the Lifetime Income Retirement Date Fund, -19.09% for the 2010 Retirement Date Fund, -27.29% for the 2020 Retirement Date Fund, -32.75% for the 2030 Retirement Date Fund and -35.24% for the 2040 Retirement Date Fund. The performance of each Retirement Date Fund for the period ended December 31, 2008 was consistent with the relevant combination benchmarks after taking into account expenses and the effect of securities lending.
For the year ended December 31, 2008, the Retirement Date Funds engaged in the State Street Bank securities lending program as described under Item 1, Certain Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds and Retirement Date Funds that Participate in Securities Lending, the financial statement-reported performance of the Retirement Date Funds was lower by 0.73 percentage point for the Lifetime Income Retirement Date Fund, 1.75 percentage points for the 2010 Retirement Date Fund, 1.55 percentage points for the 2020 Retirement Date Fund, 1.34 percentage points for the 2030 Retirement Date Fund and 1.10 percentage points for the 2040 Retirement Date Fund than each otherwise would have been.
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Balanced Fund
The Balanced Fund invests in publicly-traded common stocks, other equity-type securities, medium- to long-term debt securities with varying maturities and money market instruments. The Balanced Fund seeks to achieve, over an extended period of time, total returns comparable to or superior to an appropriate combination of broad measures of the domestic stock and bond markets.
For the year ended December 31, 2008, the Balanced Fund experienced a total return, net of expenses, of -24.02%. By comparison, a combination of the Russell 1000 Index and the Barclays Capital U.S. Aggregate Bond Index, weighted 60%/40%, respectively, produced an investment record of -22.47% for the same period. The Russell 1000 Index and the Barclays Capital U.S. Aggregate Bond Index do not include an allowance for the fees that an investor would pay for investing in the securities that comprise the indices or for fund expenses.
For the year ended December 31, 2008, the equity segment of the Balanced Fund, which is advised with the assistance of Capital Guardian, underperformed the Russell 1000 Index. The equity segments relative underperformance was due primarily to stock selection in the financials, consumer discretionary and information technology sectors. In the wake of the worsening credit crisis, holdings in the financials sector which were believed to be in a position to withstand the credit crunch contributed to underperformance. Freddie Mac, Fannie Mae and Lehman Brothers were among the main detractors in the financials sector. By contrast, holdings in JPMorgan Chase and Wells Fargo contributed positively to relative performance. The segment also benefited from not holding an investment in Citigroup. Stock selection in the healthcare sector contributed positively to the relative performance of the segment. ImClone Systems, which was acquired by Eli Lilly, and Genentech, which received a bid from Roche, were among the top contributors to relative performance. Holdings in UnitedHealth Group negatively impacted relative performance. Stock selection in the materials and industrials sectors contributed positively to relative performance of the segment.
For the year ended December 31, 2008, the debt segment of the Balanced Fund, which is advised with the assistance of PIMCO, underperformed the Barclays Capital U.S. Aggregate Bond Index. For the quarter ended December 31, 2008, however, the debt segment of the Balanced Fund outperformed the benchmark.
During 2008, massive deleveraging originating in the sub-prime debacle shook the global financial system and produced a contraction in the credit markets that roiled markets and economies worldwide. Strategies designed to benefit from a decline in short term inter-bank lending rates detracted from relative performance as banks demanded higher rates of return given the uncertainty in the credit markets. Faced with uncertainty in the credit markets, banks seemed reluctant to lend to one another. The short-term bond markets were negatively affected as a result. An overweight position in mortgage-backed securities also detracted from performance in the early part of 2008. However, this position added to performance after the federal government announced its support for Fannie Mae and Freddie Mac in early September. A focus on high-grade financials in the corporate sector also detracted from performance. An underweight position in this sector partially mitigated losses. Finally, the banking sector diminished its outlook for profitability amid continued write-downs on mortgage-related assets. As a result, allocation to bank capital notes in the U.S. detracted from performance as spreads significantly widened due to falling equity values and funding constraints.
By contrast, curve-steepening strategies have contributed to performance as short-term rates have rallied on reports of slowing growth, moderating inflation, a weakening housing market and expectations of lower monetary policy rates. An above-benchmark duration in the U.S. and interest rate exposure globally were positive for performance as such position mitigated the negative impact of the Lehman Brothers bankruptcy and fears of additional bank failures.
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For the year ended December 31, 2008, the Balanced Fund engaged in the State Street Bank securities lending program as described under Item 1, Certain Information with Respect to the FundsLoans of Portfolio Securities. For the reasons described under Effect on Performance of Certain Funds and Retirement Date Funds that Participate in Securities Lending, the financial statement-reported performance of the Balanced Fund was lower by 0.34 percentage point than it otherwise would have been.
Effect on Performance of Certain Funds and Retirement Date Funds that Participate in Securities Lending
The per Unit net asset values of the Funds and Retirement Date Funds reflected in the financial statements are based on United States generally accepted accounting principles (GAAP) and differ from the per Unit net asset values calculated for purposes of transactions experienced by Participants in their accounts. The difference is driven by the valuation of securities lending cash collateral funds referred to below as (cash collateral funds).
The Funds and Retirement Date Funds referred to above, either directly or indirectly through their investment in other funds and accounts managed by State Street Bank or its affiliates, participate in the State Street Bank securities lending program as described under Item 1, Certain Information with Respect to the FundsLoans of Portfolio Securities. The Funds and Retirement Date Funds participating in this program typically receive cash collateral at the time of lending in excess of that of the loaned securities, and collateral is increased or decreased, respectively, as the value of the loaned securities increases or decreases. The cash collateral is invested for the account and risk of the participating funds in the cash collateral funds, which are managed by State Street Bank or its affiliates. For purposes of normal daily transaction activity, these cash collateral funds, as permitted under their governing agreements, value their investments on the basis of amortized cost, rather than current market values, to the extent that an investment is not in default or considered to be impaired. State Street Bank has informed the Collective Trust that none of the securities in the cash collateral funds was in default or considered to be impaired at December 31, 2008 and therefore purchases and redemptions of units in the cash collateral funds continue to be effected at a value equivalent to 100% of principal invested, even though, on a market basis at December 31, 2008, the related funds had net asset values ranging from $0.908 to $0.935 per unit.
For financial reporting purposes under GAAP each of these Funds and Retirement Date Funds have valued their direct and indirect investments in the cash collateral funds at their market values, and have recognized unrealized losses in the December 31, 2008 financial statements. These losses adversely affected reported performance of each Fund and Retirement Date Fund to the extent stated in their respective Managements Discussion and Analysis. These unrealized losses could reverse, in whole or in part, over time to the extent that principal is eventually recovered on maturities or higher prices are realized upon sale of the underlying securities, although, as with any investment, such events are not assured of occurring. However, these Funds and Retirement Date Funds have continued to value their investments in the cash collateral funds for purposes of Participant transactions at the amortized-cost based value used by the cash collateral funds for daily transactions. Accordingly, actual returns experienced by Participants in the Funds and Retirement Date Funds based on net asset values for transaction purposes do not reflect these unrealized losses.
For information on the effect of the unrealized losses described above on the performance for financial reporting purposes of a particular Fund or Retirement Date Fund, see the discussion related to performance of such Fund or Retirement Date Fund above.
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Year Ended December 31, 2007
Stable Asset Return Fund
The Stable Asset Return Fund invests primarily in investment contracts issued by insurance companies, banks or other financial institutions. The Stable Asset Return Fund also invests in high quality money market instruments, including obligations of the United States government, notes, bonds and similar debt instruments of corporations, commercial paper, certificates of deposit and time deposits, bankers acceptances, variable and indexed notes and repurchase agreements.
For the year ended December 31, 2007, the Stable Asset Return Fund experienced a total return, net of expenses, of 4.43%. By comparison, a combination of the Ryan Labs Three Year GIC Index and the iMoneyNet MFR Prime Institutional Money Market Fund Average, weighted 70%/30%, respectively, produced an investment record of 4.68% for the same period. The Ryan Labs Three Year GIC Index portion of the combination benchmark does not include an allowance for the fees that an investor would pay for investing in the instruments that comprise that index or for fund expenses.
The Stable Asset Return Fund underperformed the combination benchmark for the year ended December 31, 2007. The underperformance was due in part to an underweight allocation to money market securities in an environment of relatively high money market rates, which resulted in out-performance of money market securities versus longer dated securities. The effect of Fund expenses also lowered total return as compared to the combination benchmark. During the year, the yield curve steepened overall and treasury yields fell across the curve. The uncertainty and market volatility during the year drove a flight to quality, pushing yields down. At year-end 2006, the yield curve was inverted by approximately 20 basis points, and the five-year point on the curve reflected the lowest rate. The year 2007 ended with a yield curve that had become steeper by approximately 122 basis points at dramatically lower rates, but the two-year part of the curve remained slightly inverted. During the latter part of the year, the Federal Reserve eased the federal funds rate 100 basis points.
In this environment, the focus of the Funds trades in the earliest part of 2007 was primarily on short-dated assets. During this period, yields were higher in the short end and, as the yield curve steepened, maturing cash flow was reinvested at higher yield levels obtainable at longer durations. These strategies resulted in an overall positive effect on Fund performance as compared to the combination benchmark. However, with many securities lengthening in duration, near year-end 2007 the focus shifted back to shorter-dated assets.
Intermediate Bond Fund
The Intermediate Bond Funds investment objective is to achieve a total return from current income and capital appreciation by investing primarily in a diversified portfolio of fixed income securities.
For the year ended December 31, 2007, the Intermediate Bond Fund experienced a total return, net of expenses, of 8.00%. By comparison, the Lehman Brothers Aggregate Bond Index produced an investment record of 6.97% for the same period. The Lehman Brothers Aggregate Bond Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise the index or for fund expenses.
For the year ended December 31, 2007, the Intermediate Bond Fund, which is advised with the assistance of Pacific Investment Management Company LLC, outperformed the Lehman Brothers Aggregate Bond Index. For the first part of 2007, the main detractors from the Funds performance were an above-benchmark duration, curve steepening strategies outside the United States (specifically in the United Kingdom), and an underweight position in investment-grade corporate bonds. Strong
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monthly payroll and gross domestic product figures in the U.S., a booming British economy and strong earnings results meant higher yields in the U.S., expectations for rate increases in the U.K. and further tightening of investment-grade spreads. In the second part of 2007, however, problems in the sub-prime home mortgage market increased, a credit crunch ensued and volatility in the equity markets soared. In July and August, corporate bonds sold off, driving spreads significantly higher. Investors sought the quality of U.S. Treasury bonds and raised expectations of interest rate cuts by the Federal Reserve. In August 2007, the Federal Reserve cut the discount rate by 50 basis points, to 5.75%, to help alleviate liquidity concerns in the financial markets. Subsequently, at its September 18 meeting, the Federal Reserve cut both the federal funds rate and discount rate by 50 basis points, to 4.75% and 5.25%, respectively. Credit markets seized up again late in the fourth quarter after a partial recovery from the initial sub-prime-related downturn in August and September. To deal with this crisis, the Federal Reserve cut the federal funds rate by another 50 basis points during the fourth quarter, bringing its total rate reductions in 2007 to 100 basis points. In the U.K., investors cut expectations of rate hikes by the Bank of England. As a result, curve-steepening strategies in the U.S. and U.K. and an underweight to corporate bonds proved valuable.
International Equity Fund
The International Equity Funds investment objective is to seek long-term growth of capital through investment primarily in common stocks of established non-U.S. companies. The Fund seeks to diversify investments broadly among developed and emerging countries and generally to have at least three different countries represented in the Fund. The International Equity Fund seeks to achieve, over an extended period of time, total returns comparable to or superior to broad measures of the international (non-U.S.) stock market.
For the year ended December 31, 2007, the International Equity Fund experienced a total return, net of expenses, of 8.89%. By comparison, the Morgan Stanley Capital International All-Country World Ex-U.S. Free (MSCI ACWI ex-USA) Index produced an investment record of 16.65% for the same period. The MSCI ACWI ex-USA Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that index or for fund expenses.
The portion of the International Equity Fund advised with the assistance of JP Morgan Asset Management (UK) Limited (JP Morgan) underperformed the MSCI ACWI ex-USA Index for the year ended December 31, 2007.
2007 was a challenging year characterized by market volatility and a significant shift in investor sentiment. The year started off on a strong note, with investors displaying much of the same general optimism that they had in previous years. As the year progressed, however, that optimism gave way to caution as concerns about U.S. sub-prime lending rocked the credit markets and increasingly raised fears about the possibility of a global recession.
The portion of the Fund managed by JP Morgan underperformed particularly in the early part of the year. Stock selection hurt results as predictions of a recovery in Japan failed to materialize and as the portions underweight position in emerging markets combined with its emphasis on high quality clashed with investors appetite for risk.
As the environment started to turn, however, so did performance. The portion outperformed the benchmark MSCI ACWI ex-USA Index in the fourth quarter as increased economic uncertainty caused investors to re-focus on characteristics like earnings, valuations and balance sheet quality. The fourth quarter showing, however, was not enough to make up for the underperformance during the previous quarters.
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Holdings in the materials, financials and technology sectors in particular detracted from full-year performance. Stock selection in energy, on the other hand, added value.
From a geographic perspective, stock selection in Continental Europe and Canada was the largest detractor. Underweight positions in both emerging markets and Pacific ex-Japan also hurt, although, in both cases, the impact was mitigated by stock selection.
The portion of the International Equity Fund advised with the assistance of Philadelphia International Advisors, LP lagged the investment record of the MSCI ACWI ex-USA Index for the year ended December 31, 2007. The main reasons for the underperformance in this portion of the Fund were poor comparative returns in the financials, consumer and technology sectors and the portions underweight in the hot emerging markets. Although the portion benefited from strong comparative returns in telecom and utility holdings, these positives were not sufficient to offset underperformance elsewhere. Overall returns were aided by currency appreciation against the U.S. dollar.
Index Equity Fund
The Index Equity Fund seeks to replicate the total return of the Russell 3000 Index by investing in stocks included in the Russell 3000 Index, with the overall objective of achieving long-term growth of capital. The Russell 3000 Index represents approximately 98% of the U.S. equity market based on market capitalization of the companies in the Russell 3000 Index.
For the year ended December 31, 2007, the Index Equity Fund experienced a total return, net of expenses, of 4.71%. By comparison, the Russell 3000 Index produced an investment record of 5.14% for the same period. The Russell 3000 Index does not include an allowance for the fees that an investor would pay for investing in the securities that comprise that index or for fund expenses.
The performance of the Index Equity Fund for the year ended December 31, 2007 was consistent with the Russell 3000 Index after taking into account expenses.
Retirement Date Funds
The Retirement Date Funds provide a series of balanced investment funds each of which is designed by State Street Bank to correspond to a particular time horizon to retirement. The five Retirement Date Funds, designated as the Lifetime Income Retirement Date Fund, 2010 Retirement Date Fund, 2020 Retirement Date Fund, 2030 Retirement Date Fund and 2040 Retirement Date Fund, respectively, offer five separate target retirement date strategies, each with a distinct asset mix. With the exception of the Lifetime Income Retirement Date Fund, which is designed for those currently retired, each Retirement Date Funds asset mix will, over time, become progressively more conservative as the specified target retirement date draws nearer. The Retirement Date Funds utilize a broad range of asset classes and an annual rebalancing process to provide diversification of returns and risks consistent with the stated time horizon to retirement. Investment in each such asset class is obtained by investing in index strategies or other pooled strategies designed for low tracking error.
Each Retirement Date Fund has a different initial investment strategy representing different risk and reward characteristics that reflect the remaining time horizon to the most conservative investment mix. The longer the time horizon to the year in which a Retirement Date Fund will reach its most conservative investment mix, the greater is the Retirement Date Funds initial risk and potential reward profile. The Lifetime Income Retirement Date Fund seeks to avoid significant loss of principal for investors who have reached or are beyond their retirement date and is comprised primarily of bonds and shorter-term high-quality debt instruments to provide stability and income. The 2010 Retirement Date Fund currently seeks to provide a blend of capital appreciation and stability of principal for participants
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planning to retire in or around the year 2010. The 2020 Retirement Date Fund currently seeks to provide long-term capital appreciation and more limited stability of principal for participants planning to retire in or around the year 2020. The 2030 Retirement Date Fund currently seeks to provide long-term capital appreciation for participants planning to retire in or around the year 2030 and is comprised mainly of stocks for higher growth potential. The 2040 Retirement Date Fund currently seeks to provide long-term capital appreciation for participants planning to retire in or around the year 2040 and is comprised mainly of stocks for maximum growth potential.
Effective May 1, 2007, the Retirement Date Funds implemented a number of changes, including (i) a deferral of the year in which each Retirement Date Fund (other than the Lifetime Income Retirement Date Fund) will reach its most conservative investment mix until five years after the target retirement date, and (ii) changes in certain of the asset classes to which the Retirement Date Funds maintain exposure and the weightings of exposures to asset classes at various time horizons to most conservative investment mix. For instance, aggregate exposure to equity asset classes generally increased at any given time horizon.
The Retirement Date Funds seek to achieve their objectives by investing in various index or other collective investment funds maintained by State Street Bank. During the period from January 1, 2007 through April 30, 2007, these funds included S&P 500 Flagship Securities Lending Fund (S&P 500 Index Fund), Daily MSCI EAFE Fund, S&P MidCap® Index Securities Lending Fund (S&P MidCap Index Fund), Russell 2000 Index Securities Lending Fund (Russell 2000 Index Fund), Long U.S. Government Index Securities Lending Fund (Lehman Long Government Bond Fund), Limited Duration Bond Non-Lending Fund (Limited Duration Bond Fund) and Short Term Investment Fund.
From and after May 1, 2007, these funds included the S&P 500 Index Fund, Daily MSCI ACWI ex-USA Index Fund (MSCI ACWI ex-US Index Fund); S&P MidCap Index Fund; Russell 2000 Index Fund; Lehman Long Government Bond Fund; Passive Bond Market Index Securities Lending Series Fund (Lehman Aggregate Index Fund); U.S. Treasury Inflation Protected Securities Lending Series Fund (TIPS Fund) and Principal Accumulation Return Fund (Principal Accumulation Fund).
During the period from January 1, 2007 to April 30, 2007, funds in the Lifetime Income Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 19.0%; Daily MSCI EAFE Index Fund, 3.0%; S&P Mid-Cap 400 Index Fund, 2.0%; Russell 2000 Index Fund, 1.0%; Lehman Long Government Bond Fund, 25.0%; Limited Duration Bond Fund, 40.0%; and Short Term Investment Fund, 10.0%. Funds in the 2010 Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 28.2%; Daily MSCI EAFE Index Fund, 4.7%; S&P Mid-Cap 400 Index Fund, 2.8%; Russell 2000 Index Fund, 1.8%; Lehman Long Government Bond Fund, 37.5%; Limited Duration Bond Fund, 19.2%; and Short Term Investment Fund, 5.8%. Funds in the 2020 Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 39.0%; Daily MSCI EAFE Index Fund, 14.0%; S&P Mid-Cap 400 Index Fund, 5.7%; Russell 2000 Index Fund, 3.8%; Lehman Long Government Bond Fund, 31.0%; Limited Duration Bond Fund, 1.5%; and Short Term Investment Fund, 5.0%. Funds in the 2030 Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 44.5%; Daily MSCI EAFE Index Fund, 19.5%; S&P Mid-Cap 400 Index Fund, 7.4%; Russell 2000 Index Fund, 7.1%; Lehman Long Government Bond Fund, 21.0%; and Short Term Investment Fund, 0.5%. Funds in the 2040 Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 45.0%; Daily MSCI EAFE Index Fund, 24.5%; S&P MidCap Index Fund, 9.8%; Russell 2000 Index Fund, 9.7%; and Lehman Long Government Bond Fund, 11.0%.
From and after May 1, 2007, funds in the Lifetime Income Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 26.0%; MSCI ACWI ex-US Index Fund, 4.0%; S&P MidCap Index Fund, 3.0%; Russell 2000 Index Fund, 2.0%; Lehman Aggregate Index Fund, 25.0%; TIPS Fund, 20.0%; and Principal Accumulation Fund, 20.0%. Funds in the 2010 Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 36.0%; MSCI ACWI ex-US Index Fund, 11.0%; S&P MidCap Index Fund,
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4.8%; Russell 2000 Index Fund, 3.2%; Lehman Long Government Bond Fund, 20.0%; Lehman Aggregate Index Fund, 18.0%; and TIPS Fund, 7.0%. Funds in the 2020 Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 43.0%; MSCI ACWI ex-US Index Fund, 18.0%; S&P MidCap Index Fund, 6.9%; Russell 2000 Index Fund, 6.1%; Lehman Long Government Index Fund, 20.0%; Lehman Aggregate Index Fund, 4.0%; and TIPS Fund, 2.0%. Funds in the 2030 Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 45.0%; MSCI ACWI ex-US Index Fund, 23.0%; S&P MidCap Index Fund, 9.0%; Russell 2000 Index Fund, 9.0%; and Lehman Long Government Bond Fund, 14.0%. Funds in the 2040 Retirement Date Fund were allocated as follows: S&P 500 Index Fund, 45.0%; MSCI ACWI ex-US Index Fund, 25.0%; S&P MidCap Index Fund, 10.0%; Russell 2000 Index Fund, 10.0%; and Lehman Long Government Bond Fund, 10.0%.
For the year ended December 31, 2007, the Retirement Date Funds experienced a total return, net of expenses, of 5.71% for the Lifetime Income Retirement Date Fund, 6.26% for the 2010 Retirement Date Fund, 6.92% for the 2020 Retirement Date Fund, 7.09% for the 2030 Retirement Date Fund and 7.45% for the 2040 Retirement Date Fund. The performance of each Retirement Date Fund for the period ended December 31, 2007 was consistent with the relevant combination benchmarks after taking into account expenses.
Balanced Fund
The Balanced Fund invests in publicly-traded common stocks, other equity-type securities, medium- to long-term debt securities with varying maturities and money market instruments. The Balanced Fund seeks to achieve, over an extended period of time, total returns comparable to or superior to an appropriate combination of broad measures of the domestic stock and bond markets.
For the year ended December 31, 2007, the Balanced Fund experienced a total return, net of expenses, of 2.75%. By comparison, a combination of the Russell 1000 Index and the Lehman Brothers Aggregate Bond Index, weighted 60%/40%, respectively, produced an investment record of 6.39% for the same period. The Russell 1000 Index and the Lehman Brothers Aggregate Bond Index do not include an allowance for the fees that an investor would pay for investing in the securities that comprise the indices or for fund expenses.
For the year ended December 31, 2007, the equity segment of the Balanced Fund, which is advised with the assistance of Capital Guardian Trust Company, underperformed the Russell 1000 Index. The equity segments underperformance was due primarily to stock selection in the information technology and financials sectors during the fourth quarter. Rising investor concern about the U.S. economy and capital spending negatively impacted some technology holdings, including contract manufacturers and semiconductor memory companies SanDisk, Micron Technology and Jabil Circuit. The credit crunch further intensified concerns about the housing market, sub-prime mortgages and collateralized debt obligations, hurting several holdings among thrifts and bond insurers, including Washington Mutual, which was the biggest detractor to portfolio returns. The largest U.S. savings and loan saw its shares tumble as the housing and credit markets deteriorated and after regulators began investigating how the company sets values for mortgages sold to investors. Other decliners in the financials area included Wachovia, Ambac Financial Group, MBIA and SLM Corp. (Sallie Mae), which fell after a $25 billion proposed takeover collapsed. Selection in health care and the underweight position in energy also weighed on returns. The choice of materials stocks, especially Potash Corp. of Saskatchewan, was positive for the segment. The stock gained as demand for fertilizers increased throughout the year. Google was the top contributor to returns as the company posted consistently solid results.
For the year ended December 31, 2007, the debt segment of the Balanced Fund, which is advised with the assistance of Pacific Investment Management Company LLC, underperformed the Lehman Brothers Aggregate Bond Index.
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For the first part of 2007, the main detractors from the performance of the debt segment of the Fund were an above-benchmark duration, curve steepening strategies outside the United States (specifically in the United Kingdom), and an underweight position in investment-grade corporate bonds. Strong monthly payroll and gross domestic product figures in the U.S., a booming British economy and strong earnings results meant higher yields in the U.S., expectations for rate increases in the U.K. and further tightening of investment-grade spreads. In the second part of 2007, however, problems in the sub-prime home mortgage market increased, a credit crunch ensued and volatility in the equity markets soared. In July and August, corporate bonds sold off, driving spreads significantly higher. Investors sought the quality of U.S. Treasury bonds and raised expectations of interest rate cuts by the Federal Reserve. In August 2007, the Federal Reserve cut the discount rate by 50 basis points, to 5.75%, to help alleviate liquidity concerns in the financial markets. Subsequently, at its September 18 meeting, the Federal Reserve cut both the federal funds rate and discount rate by 50 basis points, to 4.75% and 5.25%, respectively. Credit markets seized up again late in the fourth quarter after a partial recovery from the initial sub-prime-related downturn in August and September. To deal with this crisis, the Federal Reserve cut the federal funds rate by another 50 basis points during the fourth quarter, bringing its total rate reductions in 2007 to 100 basis points. In the U.K., investors cut expectations of rate hikes by the Bank of England. As a result, curve-steepening strategies in the U.S. and U.K. and an underweight to corporate bonds proved valuable.
ITEM 7A. | Quantitative and Qualitative Disclosures About Market Risk |
The Funds do not engage in investments in derivative instruments except as described under Item 1, Derivative Instruments. The Retirement Date Funds do not engage in investments in derivative instruments except as described under Item 1, Retirement Date Funds. For additional information, see Note 2 to the Financial Statements included in Item 8, Financial Statements and Supplementary Data.
ITEM 8. | Financial Statements and Supplementary Data |
See p. F-1.
ITEM 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Not applicable.
ITEM 9A. | Controls and Procedures. |
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures: Under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, the Collective Trust conducted an evaluation of its disclosure controls and procedures (as such term is defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act). Based on such evaluation, the Collective Trusts Chief Executive Officer and Chief Financial Officer have concluded that its disclosure controls and procedures are effective as of December 31, 2009.
Managements Report on Internal Control Over Financial Reporting: The Collective Trusts management is responsible for establishing and maintaining adequate internal control over financial reporting (as such term is defined in Rule 13a-15(f) or 15d-15(f) under the Exchange Act) for each of the Funds and the five Retirement Date Funds. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Collective Trusts management conducted evaluations of the effectiveness of the internal control over financial reporting of each of the Funds based on the framework established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on such evaluations, the Collective Trusts management concluded that internal control over financial
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reporting were effective as of December 31, 2009. The effectiveness of our internal control over financial reporting as of December 31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which is included herein.
ITEM 9B. | Other Information. |
None.
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ITEM 10. | Directors, Executive Officers and Corporate Governance. |
Officers of State Street
State Street, as trustee, has primary responsibility for investment management with respect to each of the investment options and the Balanced Fund. As part of its responsibility, it appoints the officers of the Collective Trust, who have responsibility for administering all the investment options and the Balanced Fund. The following is a biographical summary of each of the officers of the Collective Trust, including age as of March 1, 2010:
Monet T. Ewing. Ms. Ewing, age 47, is the President and Chief Executive Officer of the Collective Trust and has served in such capacity since July 2008. Ms. Ewing has also served as a Vice President within the Fiduciary Group of State Street Global Advisors, a division of State Street Bank. From 1994 to 2001, Ms. Ewing served as Vice President and Associate Counsel for State Street Banks Legal Division. Ms. Ewing has 19 years of tax and ERISA experience and has worked in the financial services industry for the past 16 years. Ms. Ewing also acts on behalf of State Street Bank as trustee for several private Employee Stock Ownership Plans (ESOPs). Ms. Ewing has served as a director of State Street since 2008. In the past five years, Ms. Ewing has also served as a Manager of SSgA Capital Management Trust Company, LLC.
Robert E. Fullam. Mr. Fullam, age 48, has been Vice President and Chief Financial Officer of the Collective Trust since July 2008, and an officer of State Street since 2004. Mr. Fullam has been a Principal of State Street Global Advisors, a division of State Street Bank, since July 2008. Mr. Fullam was at CitiStreet LLC (now ING Services) from 2001 to June 2008, most recently as a Vice President. Mr. Fullam also served as Treasurer and Chief Accounting Officer of the Collective Trust from February 2005 to June 2008. Prior to joining CitiStreet LLC (now ING Services) in 2001, Mr. Fullam worked at State Street Bank in various capacities during the period from 1987 through 2001.
Denise R. Sisk. Ms. Sisk, age 43, has been the Treasurer and Chief Accounting Officer of the Collective Trust since November 2008. Ms. Sisk has served as a Vice President of State Street Global Advisors, a division of State Street Bank, since September 2005 and as the Department Head of the Fiduciary Group at State Street Global Advisors since October 2008. From 2001 to 2005, Ms. Sisk served as a Senior Vice President and Division Counsel of the Retirement Services Division of CitiStreet LLC (now ING Services), focusing on all aspects of defined contribution plans, including tax and ERISA matters, as well as general corporate matters. From 1992 to 2000, Ms. Sisk served as Vice President and Associate Counsel of the Legal Division of State Street Bank.
The officers of the Collective Trust receive no direct remuneration from the Collective Trust, but do receive remuneration from State Street Bank or its affiliates.
Directors of State Street
The Collective Trust does not have a board of directors. The Collective Trust is a trust with a corporate trustee, which is State Street, a wholly owned subsidiary of State Street Bank. The board of directors of State Street consists of nine directors. For purposes of the Sarbanes-Oxley Act of 2002 and the rules and regulations of the Securities and Exchange Commission adopted under that Act, the board of directors of State Street has responsibility for the functions with respect to audit matters relating to the Collective Trust. Each member of the board of directors of State Street is an employee of State Street Bank or its affiliates. The following is a biographical summary of each of the directors of State Street, including age as of March 1, 2010:
Daniel J. Bouchard. Mr. Bouchard, age 48, joined State Street Bank in 1997 and served as a Vice President and a Senior Managing Director in the Securities Finance Division. In 2009, he became Chief Administrative Officer for State Street Global Markets, a division of State Street
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Bank. Mr. Bouchard also serves as a Clerk of State Street. Mr. Bouchard has over 23 years of financial services experience in trust and custody, securities lending and global markets. Mr. Bouchard has served as a director of State Street since October 2004. In the past five years, Mr. Bouchard has also served as a Manager of SSgA Capital Management Trust Company, LLC.
Monet T. Ewing. Ms. Ewing, age 47, is the President and Chief Executive Officer of the Collective Trust and has served in such capacity since July 2008. Ms. Ewing has also served as a Vice President within the Fiduciary Group of State Street Global Advisors, a division of State Street Bank. From 1994 to 2001, Ms. Ewing served as Vice President and Associate Counsel for State Street Banks Legal Division. Ms. Ewing has 19 years of tax and ERISA experience and has worked in the financial services industry for the past 16 years. Ms. Ewing also acts on behalf of State Street Bank as trustee for several private Employee Stock Ownership Plans (ESOPs). Ms. Ewing has served as a director of State Street since 2008. In the past five years, Ms. Ewing has also served as a Manager of SSgA Capital Management Trust Company, LLC.
Nancy E. Grady. Ms. Grady, age 49, joined State Street Bank in 1983 and currently serves as a Senior Vice President of State Street Bank . Ms. Grady has 26 years experience servicing collective funds and led operational teams that service both registered and unregistered co-mingled products. Ms. Grady also has experience with the systems used to support these products as well as custody and accounting operations. Ms. Grady is the Chairman of the Board of State Street and has served as a director of State Street since October 2004. Additionally, Ms. Grady has served as a Manager and President of SSgA Capital Management Trust Company, LLC since October 2008.
Thomas P. Kelly. Thomas P. Kelly, 53, joined State Street Bank in 1979, transferred into the Finance team of State Street Global Advisors, a division of State Street Bank, in 1995 and since November 2002 has served as Senior Managing Director and Controller of State Street Global Advisors. Mr. Kelly manages a global finance team of approximately 50 employees that is responsible for monitoring all aspects of State Street Global Advisors revenue, expense and balance sheets, financial reporting and analysis processes. During his more than 30 year tenure at State Street Bank, Mr. Kelly has held the position of Corporate Staff Comptroller, reporting to State Street Banks Chief Financial Officer, and also held positions in the Information Systems Division, Funds Flow Department and the Master Trust Division. Mr. Kelly has worked in the investment management field since 1993. Mr. Kelly holds an MBA from Babson College and a Bachelor of Science in Accounting from Bentley College. Mr. Kelly has served as a director of State Street since January 2005. In the past five years, Mr. Kelly has also served as a Manager of SSgA Capital Management Trust Company, LLC and a director of State Street Investment Research Services Private Limited.
Nancy H. Loucks. Ms. Loucks, age 53, is an Executive Vice President in Enterprise Risk Management at State Street Bank. Ms. Loucks joined State Street Bank in 1980 and has held positions in Enterprise Risk Management since 1995. She has served as a director of State Street since October 2004. In the past five years, Ms. Loucks has also served as a Manager of SSgA Capital Management Trust Company, LLC, as a director of State Street International Holdings, a subsidiary of State Street Bank, a Manager of State Street International Holdings Switzerland GmBH, a subsidiary of State Street International Holdings, and a director of SquashBusters, Inc., a not-for-profit organization.
Scott W. Olson. Mr. Olson, age 50, is the Senior Managing Director and Global Manager of Alternative Products and Structures of State Street Banks Securities Finance Division, and is an Executive Vice President of State Street. Prior to joining the Securities Finance Division of State Street Bank in 2006, Mr. Olson served as the Associate General Counsel in State Street Banks Legal Division, having begun his career with State Street Bank in 1997. During his tenure with the Legal Division of State Street Bank, Mr. Olson had global legal responsibility for securities lending and capital market products, including foreign exchange, securities lending, money markets,
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repurchase transactions, foreign branches, cash collateral vehicles, e-commerce activities and certain broker-dealer activities. Mr. Olson has served as a director of State Street since October 2004. In the past five years, Mr. Olson has also served as a Manager of SSgA Capital Management Trust Company, LLC.
William F. Weihs. Mr. Weihs, age 51, joined State Street Bank in 1998 as Vice President and has served as a Senior Vice President in Corporate Advisory Services, a division of Corporate Finance of State Street Bank, since June 2007. Mr. Weihs has an MBA in Finance and has experience in investment banking, including overseeing many of State Street Banks acquisitions and divestitures. Mr. Weihs has served as a director and Treasurer of State Street since November 2004. In the past five years, Mr. Weihs has also served as a Manager and Treasurer of SSgA Capital Management Trust Company, LLC and as a director of Career Collaborative, a philanthropic organization.
William L. Whitney. Mr. Whitney, age 61, joined State Street Bank in 1982 in commercial lending and since 1996 held positions of increasing responsibility in Enterprise Risk Management until his retirement in December 2008 from the position of Senior Vice President of Enterprise Risk Management. Mr. Whitney has 38 years of experience in banking and financial services. This experience includes risk management and fiduciary experience with commercial lending, securities finance, capital markets, trust/custody and investment management. He also has experience in various risk management disciplines including credit, market, sovereign, operational, interest rate and fiduciary risk as well as risk quantification. Mr. Whitney has served as a director of State Street since April 2009. In the past five years, Mr. Whitney has also served as a Manager of SSgA Capital Management Trust Company, LLC.
Mary Moran Zeven. Ms. Zeven, age 49, joined State Street Bank in June 2000 and since September 2002 has served as Senior Vice President and Senior Managing Counsel. Ms. Zeven manages the legal teams supporting State Street Banks Institutional Investors Services Division and the U.S. Investment Services Division, which also includes Fund Administration, US Mutual Funds and Transfer Agency services. Ms. Zeven has 25 years of experience in the investment management industry, both as in-house counsel and as external counsel to various pooled investment vehicles, including registered investment companies and other products. Ms. Zeven has served as a director of State Street since June 2007. In the past five years, Ms. Zeven has also served as a Manager of SSgA Capital Management Trust Company, LLC and a director of Investors California, LLC.
For purposes of complying with the audit committee requirements of the Sarbanes-Oxley Act, the board of directors of State Street has assigned to its Audit Committee responsibility for overseeing the accounting and financial reporting processes and audits of the financial statements of the Collective Trust. State Streets board has determined that two members of the Audit Committee, William F. Weihs and Thomas P. Kelly, are audit committee financial experts as defined under applicable United States federal securities laws.
State Street Bank has adopted, and State Street has ratified the adoption of, a Code of Ethics for Financial Officers which applies to State Street Banks Chief Executive Officer, Chief Financial Officer, Controller and other financial officers, including all of the officers of the Collective Trust. A copy of the Code of Ethics is available at www.statestreet.com. The Collective Trust will provide a free copy of the Code of Ethics upon written request to State Street Bank and Trust Company, ABA Retirement Funds, One Heritage Drive, North Quincy, Massachusetts 02171. The Collective Trust intends to post on the Web site, www.statestreet.com, any amendments to, or waivers from, the Code of Ethics applicable to the officers referred to above.
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ITEM 11. | Executive Compensation. |
The executive officers of the Collective Trust receive no direct remuneration from the Collective Trust, but do receive remuneration from State Street Bank or its affiliates. For a description of fees received by State Street and others, see Item 1, Deductions and Fees.
ITEM 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
State Street Bank, as sole trustee of each of the American Bar Association Members Retirement Trust and the American Bar Association Members Pooled Trust for Retirement Plans, is the holder of record of all units of beneficial interests of each of the Funds and the Retirement Date Funds. None of State Street, State Street Bank or any officer of the Collective Trust beneficially owns any securities of the Collective Trust.
ITEM 13. | Certain Relationships and Related Transactions, and Director Independence. |
See Item 1, The Program and Deductions and Fees for information regarding certain relationships and transactions. See Item 10, Directors, Executive Officers and Corporate GovernanceDirectors of State Street for information regarding director independence.
ITEM 14. | Principal Accountant Fees and Services. |
The aggregate fees billed for professional services rendered by PricewaterhouseCoopers LLP (PwC), the principal auditor for the Collective Trust, for the audits of the Collective Trusts annual financial statements and the effectiveness of internal control over financial reporting, and for the review of financial statements included in the Collective Trusts quarterly reports filed on Form 10-Q and for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements (such as comfort letters, statutory audits, attest services, consents and services to comply with generally accepted auditing standards) were $711,785 and $687,879 for the fiscal years ended December 31, 2009 and 2008, respectively.
Audit Fees consist of fees for professional services rendered for the audit of the Collective Trusts annual financial statements and review of the interim financial statements included in quarterly reports and services that are normally provided by PwC in connection with statutory and regulatory filings or engagements.
The aggregate fees billed for assurance and related services provided to the Collective Trust by PwC that are reasonably related to the performance of the audit or review of the Collective Trusts financial statements and not reported under Audit Fees were $0 and $0 for the fiscal years ended December 31, 2009 and 2008, respectively.
The aggregate fees billed for professional services rendered by PwC to the Collective Trust for tax compliance, tax advice and tax planning were $0 and $0 for the fiscal years ended December 31, 2009 and 2008, respectively.
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The aggregate fees billed by PwC to the Collective Trust for any products and services not disclosed above were $0 and $0 for the fiscal years ended December 31, 2009 and 2008, respectively.
The Examining and Audit Committee of State Streets Board of Directors has established pre-approval policies and procedures applicable to all services provided by PwC, pursuant to which the Examining and Audit Committee will annually review for pre-approval each particular service expected to be provided by the outside auditor of the annual financial statements of the Collective Trust. Such services may include audit services (including consultation to support such audits), audit-related services (items reasonably related to the performance of the audit or review of the financial statements), tax services (tax compliance, tax planning, tax advice), and other services (services permissible under the auditor independence rules of the Securities and Exchange Commission). In connection with its pre-approval process the Examining and Audit Committee will be provided with sufficient detailed information so that it can make well-reasoned assessments of the impact of the services on the independence of PwC.
Any proposed service that was not known or expected at the time of the annual pre-approval process, but which would exceed pre-approved cost levels or budgeted amounts, would also require pre-approval by the Examining and Audit Committee. Substantive changes in terms, conditions, and fees resulting from changes in the scope, structure, or other items regarding pre-approved services would be subject to pre-approval if necessary.
ITEM 15. | Exhibits and Financial Statement Schedules. |
ITEM 15(a). The | following documents are filed as part of this report: |
1. | Financial Statements. |
See page F-1 for an index to the Financial Statements included in this report.
2. | Financial Statement Schedules. |
A Schedule of Investments for each of the Managed Funds is included in Item 8 of this report.
3. | Exhibits are listed under Item 15(b) below. |
ITEM 15(b). | Exhibits, including those incorporated by reference: |
Exhibit No. |
Description of Document | |
3.1 | American Bar Association Members/State Street Collective Trust, Amended and Restated Declaration of Trust by State Street Bank and Trust Company of New Hampshire, effective as of May 1, 2009, included as Exhibit 3.1 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
3.2 | American Bar Association Members/State Street Collective Trust, Eighth Amended Fund Declaration for the Stable Asset Return Fund, dated June 29, 2009, included as Exhibit 3.2 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. |
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Exhibit No. |
Description of Document | |
3.3 | American Bar Association Members/State Street Collective Trust, Amendment to Fund Declarations effective December 1, 2004, included as Exhibit 3.13 to Registrants Current Report on Form 8-K filed November 5, 2004 and incorporated herein by reference thereto. | |
3.4 | American Bar Association Members/State Street Collective Trust, Amendment to Fund Declarations dated February 17, 2005, included as Exhibit 3.15 to Registrants Current Report on Form 8-K filed February 23, 2005 and incorporated herein by reference thereto. | |
3.5 | American Bar Association Members/State Street Collective Trust, Amendment to Fund Declarations effective as of October 1, 2005, included as Exhibit 3.16 to Registrants Current Report on Form 8-K filed January 26, 2006 and incorporated herein by reference thereto. | |
3.6 | American Bar Association Members/State Street Collective Trust, Second Amended and Restated Fund Declaration for the Retirement Date Funds dated June 29, 2009, included as Exhibit 3.6 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
3.7 | American Bar Association Members/State Street Collective Trust, Amendment to Fund Declarations effective as of August 1, 2006, included as Exhibit 3.18 to Registrants Form S-1 Registration Statement No. 333-132571 and incorporated herein by reference thereto, included as Exhibit 3.7 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
3.8 | American Bar Association Members/State Street Collective Trust, Amended and Restated Fund Declaration for the Index Funds dated June 29, 2009, included as Exhibit 3.8 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
3.9 | American Bar Association Members/State Street Collective Trust, Amendment to Fund Declarations effective as of February 2, 2009, included as Exhibit 3.3 to Registrants Amendment No. 1 to Form S-1 Registration Statement No. 333-155737 and incorporated herein by reference thereto. | |
3.10 | American Bar Association Members/State Street Collective Trust, Fifth Amended and Restated Fund Declaration for the Bond Core Plus Fund dated June 29, 2009, included as Exhibit 3.10 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
3.11 | American Bar Association Members/State Street Collective Trust, First Amended and Restated Fund Declaration for the Large Cap Equity Fund dated December 22, 2009, included as Exhibit 3.1 to Registrants Current Report on Form 8-K filed December 28, 2009 and incorporated herein by reference thereto. | |
3.12 | American Bar Association Members/State Street Collective Trust, Ninth Amended and Restated Fund Declaration for the Balanced Fund dated June 29, 2009, included as Exhibit 3.12 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
3.13 | American Bar Association Members/State Street Collective Trust, Fund Declaration for the Small-Mid Cap Equity Fund dated June 29, 2009, included as Exhibit 3.13 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
3.14 | American Bar Association Members/State Street Collective Trust, Ninth Amended and Restated Fund Declaration for the International All Cap Equity Fund dated December 22, 2009, included as Exhibit 3.2 to Registrants Current Report on Form 8-K filed December 28, 2009 and incorporated herein by reference thereto. |
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Exhibit No. |
Description of Document | |
3.15 | American Bar Association Members/State Street Collective Trust, Fund Declaration for the Real Asset Return Fund dated June 29, 2009, included as Exhibit 3.15 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
3.16 | American Bar Association Members/State Street Collective Trust, Fund Declaration for the Target Risk Funds dated June 29, 2009, included as Exhibit 3.16 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
4.1 | American Bar Association Members/State Street Collective Trust, Declaration of Trust and Fund Declaration for each Fund, included in Exhibits No. 3.1 through 3.16 above. | |
10.1 | Amended and Restated Trust Agreement of the American Bar Association Members Pooled Trust for Retirement Plans effective as of May 1, 2009 by and between the ABA Retirement Funds and State Street Bank and Trust Company, included as Exhibit 10.1 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.2 | Amended and Restated American Bar Association Members Retirement Trust effective as of May 1, 2009 by and between the ABA Retirement Funds and State Street Bank and Trust Company, included as Exhibit 10.2 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.3 | American Bar Association Members Retirement PlanBasic Plan Document No. 1 as amended and related adoption agreements, included as Exhibit 10.5 to Registrants Form 10-K for the year ended December 31, 2001 and incorporated herein by reference thereto. | |
10.4 | American Bar Association Members Defined Benefit Pension PlanBasic Plan Document No. 02 and related adoption agreements, included as Exhibit 10.6 to Registrants Form 10-K for the year ended December 31, 2001 and incorporated herein by reference thereto. | |
10.5 | Amended and Restated Administrative and Investment Services Agreement effective May 1, 2009 between State Street Bank and Trust Company and ABA Retirement Funds, included as Exhibit 10.5 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.6 | Investment Advisor Agreement effective as of January 1, 1992 by and between State Street Bank and Trust Company and Capital Guardian Trust Company, included as Exhibit 10.6 to Registrants Annual Report on Form 10-K for the year ended December 31, 1991 and incorporated herein by reference thereto. | |
10.6.1 | Acknowledgement of Assignment effective as of December 1, 2004 by and among State Street Bank and Trust Company, State Street Bank and Trust Company of New Hampshire and Capital Guardian Trust Company, included as Exhibit 10.8.1 to Registrants Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference thereto. | |
10.7 | Investment Advisor Agreement effective as of July 1, 2002 by and between State Street Bank and Trust Company and Pacific Investment Management Company LLC, included as Exhibit 10.13 to Registrants Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2002 and incorporated herein by reference thereto. | |
10.7.1 | Amendment dated July 16, 2004 to Investment Advisor Agreement dated July 1, 2002 by and between State Street Bank and Trust Company and Pacific Investment Management Company LLC, included as Exhibit 10.1 to Registrants Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 and incorporated herein by reference thereto. |
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Exhibit No. |
Description of Document | |
10.7.2 | Acknowledgement of Assignment effective as of December 1, 2004 by and among State Street Bank and Trust Company, State Street Bank and Trust Company of New Hampshire and Pacific Investment Management Company LLC, included as Exhibit 10.13.2 to Registrants Annual Report on Form 10-K for the year ended December 31, 2004 and incorporated herein by reference thereto. | |
10.8 | Investment Advisor Agreement effective as of June 1, 2004 by and between State Street Bank and Trust Company and Pacific Investment Management Company LLC, included as Exhibit 10.22 to Registrants Form S-1 Registration Statement No. 333-113653 and incorporated herein by reference thereto. | |
10.8.1 | Acknowledgement of Assignment effective as of December 1, 2004 by and among State Street Bank and Trust Company, State Street Bank and Trust Company of New Hampshire and Pacific Investment Management Company LLC, included as Exhibit 10.22.1 to Registrants Form 10-K for the year ended December 31, 2004 and incorporated herein by reference thereto. | |
10.9 | Letter Agreement dated March 1, 2004 relating to Investment Advisor Agreement effective as of July 1, 2002 by and between State Street Bank and Trust Company and Pacific Investment Management Company LLC, included as Exhibit 10.23 to Registrants Form S-1 Registration Statement No. 333-113653 and incorporated herein by reference thereto. | |
10.10 | Letter Agreement dated March 1, 2004 relating to Investment Advisor Agreement effective June 1, 2004 by and between State Street Bank and Trust Company and Pacific Investment Management LLC, included as Exhibit 10.24 to Registrants Form S-1 Registration Statement No. 333-113653 and incorporated herein by reference thereto. | |
10.11 | Agreement for Trustee Services between State Street Bank and Trust Company and State Street Bank and Trust Company of New Hampshire effective December 1, 2004, included as Exhibit 10.25 to Registrants Current Report on Form 8-K filed November 5, 2004 and incorporated herein by reference thereto. | |
10.12 | Guaranty made as of December 1, 2004 by State Street Bank and Trust Company in favor of the American Bar Association Member/State Street Collective Trust, included as Exhibit 10.26 to the Registrants Current Report on Form 8-K filed November 5, 2004 and incorporated herein by reference thereto. | |
10.13 | Fiduciary Investment Services Agreement dated August 15, 2008 by and among ABA Retirement Funds, The Northern Trust Company and Northern Trust Investments, N.A., a wholly-owned subsidiary of Northern Trust, included as Exhibit 10.1 to Registrants Quarterly Report on Form 10-Q filed November 14, 2008 and incorporated herein by reference thereto. | |
10.13.1 | Supplement Number One to Fiduciary Investment Services Agreement dated June 29, 2009 between The Northern Trust Company, Northern Trust Investments, N.A. and ABA Retirement Funds, included as Exhibit 10.13.1 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.14 | Program Services Agreement by and among ABA Retirement Funds, ING Life Insurance and Annuity Company and ING Institutional Plan Services, LLC, dated December 6, 2008, included as Exhibit 10.27 to Registrants Current Report on Form 8-K filed December 24, 2008 and incorporated herein by reference thereto. | |
10.15 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Jennison Associates LLC, included as Exhibit 10.15 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. |
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Exhibit No. |
Description of Document | |
10.16 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and C.S. McKee, L.P., included as Exhibit 10.16 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.17 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and LSV Asset Management, included as Exhibit 10.17 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.18 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Frontier Capital Management Co. LLC, included as Exhibit 10.18 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.19 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and TCW Investment Management Company, included as Exhibit 10.19 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.20 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and OFI Institutional Asset Management, Inc., included as Exhibit 10.20 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.21 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Denver Investment Advisors LLC, included as Exhibit 10.21 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.22 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Riverbridge Partners, included as Exhibit 10.22 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.23 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Oppenheimer Capital LLC, included as Exhibit 10.23 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.24 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Altrinsic Global Advisors, LLC, included as Exhibit 10.24 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.25 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Eagle Global Advisors LLC, included as Exhibit 10.25 to Registrants Form S-1 Registration Statement No. 333-159466 and incorporated herein by reference thereto. | |
10.26 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Systematic Financial Management, L.P., included as Exhibit 10.26 to Registrants Current Report on Form 8-K filed July 7, 2009 and incorporated herein by reference thereto. |
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Exhibit No. |
Description of Document | |
10.27 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and Martin Currie Inc., included as Exhibit 10.27 to Registrants Current Report on Form 8-K filed July 7, 2009 and incorporated herein by reference thereto. | |
10.28 | Investment Advisor Agreement effective as of July 6, 2009 by and between State Street Bank and Trust Company of New Hampshire and First State Investments International Limited, included as Exhibit 10.28 to Registrants Current Report on Form 8-K filed July 7, 2009 and incorporated herein by reference thereto. | |
10.29 | Investment Advisor Agreement effective as of January 19, 2010 by and between State Street Bank and Trust Company of New Hampshire and Delaware Investment Advisers, included as Exhibit 10.1 to Registrants Current Report on Form 8-K filed December 28, 2009 and incorporated herein by reference thereto. | |
10.30 | Investment Advisor Agreement effective as of January 19, 2010 by and between State Street Bank and Trust Company of New Hampshire and Columbus Circle Investors, included as Exhibit 10.2 to Registrants Current Report on Form 8-K filed December 28, 2009 and incorporated herein by reference thereto. | |
10.31 | Investment Advisor Agreement effective as of January 19, 2010 by and between State Street Bank and Trust Company of New Hampshire and LSV Asset Management, included as Exhibit 10.3 to Registrants Current Report on Form 8-K filed December 28, 2009 and incorporated herein by reference thereto. | |
24.1* | Power of Attorney. | |
31.1* | Certification of Monet T. Ewing pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2* | Certification of Robert E. Fullam pursuant to Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1* | Certification of Monet T. Ewing pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2* | Certification of Robert E. Fullam pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
99.1 | Determination Letter from the Internal Revenue Service dated March 9, 1992, included as Exhibit 99.1 to Amendment No. 1 to Registrants Form S-1 Registration Statement No. 333-104043 and incorporated herein by reference thereto. |
* | Filed herewith. |
ITEM 14(c). Financial | statement schedules and financial statements. |
See page F-1 for an index to the Financial Statements included in this report.
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST | ||||
Date: March 23, 2010 | By: | /s/ Monet T. Ewing | ||
Name: | Monet T. Ewing | |||
Title: | President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 23, 2010.
Signature |
Title | |
/s/ Monet T. Ewing Monet T. Ewing |
President and Chief Executive Officer of the American Bar Association Members/State Street Collective Trust (Principal Executive Officer) | |
/s/ Robert E. Fullam Robert E. Fullam |
Vice President and Chief Financial Officer of the American Bar Association Members/State Street Collective Trust (Principal Financial Officer) | |
/s/ Denise R. Sisk Denise R. Sisk |
Treasurer and Chief Accounting Officer of the American Bar Association Members/State Street Collective Trust (Principal Accounting Officer) | |
* Daniel J. Bouchard |
Director of State Street Bank and Trust Company of New Hampshire | |
/s/ Monet T. Ewing Monet T. Ewing |
Director of State Street Bank and Trust Company of New Hampshire | |
* Nancy E. Grady |
President, Chairman and Director of State Street Bank and Trust Company of New Hampshire | |
* Thomas P. Kelly |
Director of State Street Bank and Trust Company of New Hampshire | |
* Nancy H. Loucks |
Director of State Street Bank and Trust Company of New Hampshire |
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Signature |
Title | |
* Scott W. Olson |
Executive Vice President and Director of State Street Bank and Trust Company of New Hampshire | |
* William F. Weihs |
Treasurer and Director of State Street Bank and Trust Company of New Hampshire | |
* William L. Whitney |
Director of State Street Bank and Trust Company of New Hampshire | |
* Mary Moran Zeven |
Director of State Street Bank and Trust Company of New Hampshire |
*By | /s/ Robert E. Fullam | |
Name: | Robert E. Fullam | |
Attorney-in-Fact |
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American Bar Association Members/State Street Collective Trust
F-4 | ||
Financial Statements: |
||
Stable Asset Return Fund |
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F-6 | ||
F-7 | ||
F-8 | ||
F-9 | ||
F-10 | ||
Bond Core Plus Fund |
||
F-17 | ||
F-18 | ||
F-19 | ||
F-20 | ||
F-21 | ||
Large Cap Equity Fund |
||
F-29 | ||
F-30 | ||
F-31 | ||
F-32 | ||
F-33 | ||
Small-Mid Cap Equity Fund |
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F-39 | ||
F-40 | ||
F-41 | ||
F-42 | ||
F-43 | ||
International All Cap Equity Fund |
||
F-62 | ||
F-63 | ||
F-64 | ||
F-65 | ||
F-66 | ||
Bond Index Fund |
||
F-74 | ||
F-75 | ||
F-76 | ||
F-77 | ||
Large Cap Index Equity Fund |
||
F-78 | ||
F-79 | ||
F-80 | ||
F-81 |
F-1
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All Cap Index Equity Fund |
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F-82 | ||
F-83 | ||
F-84 | ||
F-85 | ||
Mid Cap Index Equity Fund |
||
F-86 | ||
F-87 | ||
F-88 | ||
F-89 | ||
Small Cap Index Equity Fund |
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F-90 | ||
F-91 | ||
F-92 | ||
F-93 | ||
International Index Equity Fund |
||
F-94 | ||
F-95 | ||
F-96 | ||
F-97 | ||
Real Asset Return Fund |
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F-98 | ||
F-99 | ||
F-100 | ||
F-101 | ||
Lifetime Income Retirement Date Fund |
||
F-102 | ||
F-103 | ||
F-104 | ||
F-105 | ||
2010 Retirement Date Fund |
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F-106 | ||
F-107 | ||
F-108 | ||
F-109 | ||
2020 Retirement Date Fund |
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F-110 | ||
F-111 | ||
F-112 | ||
F-113 | ||
2030 Retirement Date Fund |
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F-114 | ||
F-115 | ||
F-116 | ||
F-117 | ||
2040 Retirement Date Fund |
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F-118 | ||
F-119 | ||
F-120 | ||
F-121 |
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Conservative Risk Fund |
||
F-122 | ||
F-123 | ||
F-124 | ||
F-125 | ||
Moderate Risk Fund |
||
F-126 | ||
F-127 | ||
F-128 | ||
F-129 | ||
Aggressive Risk Fund |
||
F-130 | ||
F-131 | ||
F-132 | ||
F-133 | ||
Balanced Fund |
||
F-134 | ||
F-135 | ||
F-136 | ||
F-137 | ||
F-138 - F-176 |
F-3
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Trustee and Unitholders
of the American Bar Association Members/
State Street Collective Trust:
In our opinion, the accompanying financial statements listed in the index referenced under Item 15(a)(1) present fairly, in all material respects, the financial position of each of the Stable Asset Return Fund, Bond Core Plus Fund, Large Cap Equity Fund, Small-Mid Cap Equity Fund, International All Cap Equity Fund, Bond Index Fund, Large Cap Index Equity Fund, All Cap Index Equity Fund, Mid Cap Index Equity Fund, Small Cap Index Equity Fund, International Index Equity Fund, Real Asset Return Fund, Lifetime Income Retirement Date Fund, 2010 Retirement Date Fund, 2020 Retirement Date Fund, 2030 Retirement Date Fund, 2040 Retirement Date Fund, Conservative Risk Fund, Moderate Risk Fund, Aggressive Risk Fund, and Balanced Fund (each hereafter referred to as a Fund) constituting the American Bar Association Members/State Street Collective Trust (hereafter referred to as the Collective Trust) at December 31, 2009, and the results of each of their operations, the changes in each of their net assets, and the financial highlights for each of the periods indicated in conformity with accounting principles generally accepted in the United States of America (GAAP). Also in our opinion, the Collective Trust maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Collective Trusts management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Managements Report on Internal Control Over Financial Reporting appearing under Item 9(a). Our responsibility is to express opinions on these financial statements and on the Collective Trusts internal control over financial reporting based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
F-4
Table of Contents
the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 23, 2010
F-5
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Statement of Assets and Liabilities
December 31, 2009 |
||||
Assets | ||||
American Bar Association Members/State Street Collective Trust investment funds, at value: |
||||
Stable Asset Fund Trust (cost $1,007,414,692 and units of 1,007,414,692) |
$ | 1,015,748,076 | ||
Receivable for fund units sold |
2,768,010 | |||
Total assets |
1,018,516,086 | |||
Liabilities | ||||
Payable for fund units redeemed |
2,271,991 | |||
INGprogram fee payable |
429,866 | |||
Trustee, management and administration fees payable |
82,482 | |||
ABA Retirement Fundsprogram fee payable |
61,393 | |||
Payable for legal and audit services |
165,575 | |||
Payable for compliance consultant fees |
81,100 | |||
Other accruals |
97,699 | |||
Total liabilities |
3,190,106 | |||
Net Assets at fair value |
1,015,325,980 | |||
Adjustment from fair value to contract value for fully benefit responsive contracts |
(8,333,384 | ) | ||
Net Assets (equivalent to $35.22 per unit based on 28,591,946 units outstanding) |
$ | 1,006,992,596 | ||
The accompanying notes are an integral part of these financial statements.
F-6
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Statement of Operations
For the year ended December 31, 2009 | |||
Investment income |
$ | 27,725,046 | |
Expenses |
|||
INGprogram fee |
3,477,227 | ||
State Street Bank and Trust Companyprogram fee |
1,256,879 | ||
Trustee, management and administration fees |
1,075,159 | ||
ABA Retirement Fundsprogram fee |
624,690 | ||
Legal and audit fees |
584,502 | ||
Compliance consultant fees |
379,125 | ||
Reports to unitholders |
390,606 | ||
Registration fees |
73,900 | ||
Other fees |
303,342 | ||
Total expenses |
8,165,430 | ||
Net increase (decrease) in net assets resulting from operations |
$ | 19,559,616 | |
The accompanying notes are an integral part of these financial statements.
F-7
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | 34,539,787 | $ | 19,559,616 | ||||
Net increase (decrease) in net assets resulting from operations |
34,539,787 | 19,559,616 | ||||||
From unitholder transactions |
||||||||
Proceeds from units issued |
405,239,458 | 314,749,148 | ||||||
Cost of units redeemed |
(351,029,183 | ) | (294,407,770 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
54,210,275 | 20,341,378 | ||||||
Net increase (decrease) in net assets |
88,750,062 | 39,900,994 | ||||||
Net Assets |
||||||||
Beginning of year |
878,341,540 | 967,091,602 | ||||||
End of year |
$ | 967,091,602 | $ | 1,006,992,596 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
26,400,288 | 28,000,795 | ||||||
Issued |
11,953,953 | 9,018,678 | ||||||
Redeemed |
(10,353,446 | ) | (8,427,527 | ) | ||||
Outstanding-end of year |
28,000,795 | 28,591,946 | ||||||
The accompanying notes are an integral part of these financial statements.
F-8
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Financial Highlights
(For a unit outstanding throughout the year)
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income |
$ | 1.18 | $ | 1.45 | $ | 1.59 | $ | 1.47 | $ | 0.96 | ||||||||||
Expenses() |
(0.16 | ) | (0.17 | ) | (0.18 | ) | (0.20 | ) | (0.28 | ) | ||||||||||
Net investment income (loss) |
1.02 | 1.28 | 1.41 | 1.27 | 0.68 | |||||||||||||||
Net increase (decrease) in unit value |
1.02 | 1.28 | 1.41 | 1.27 | 0.68 | |||||||||||||||
Net asset value at beginning of year |
29.56 | 30.58 | 31.86 | 33.27 | 34.54 | |||||||||||||||
Net asset value at end of year |
$ | 30.58 | $ | 31.86 | $ | 33.27 | $ | 34.54 | $ | 35.22 | ||||||||||
Ratios/Supplemental Data: |
||||||||||||||||||||
Ratio of expenses to average net assets |
0.52 | % | 0.57 | % | 0.54 | % | 0.58 | % | 0.81 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
3.42 | % | 4.07 | % | 4.35 | % | 3.73 | % | 1.95 | % | ||||||||||
Total return |
3.45 | % | 4.19 | % | 4.43 | % | 3.82 | % | 1.97 | % | ||||||||||
Net assets at end of year (in thousands) |
$ | 870,500 | $ | 845,842 | $ | 878,342 | $ | 967,092 | $ | 1,006,993 |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests a portion of its assets. |
The accompanying notes are an integral part of these financial statements.
F-9
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Schedule of Investments
December 31, 2009
INVESTMENT CONTRACTS(3.78%) | Issuer Rating |
Contract ID | Maturity Date |
Rate Frequency |
Effective Annual Rate (%) |
Investments at Fair Value ($) |
Wrapper Contracts at Fair Value ($) |
Adjustments of Fair Value to Contract ($) |
Investments at Contract Value ($) | ||||||||||
Issuer Name |
|||||||||||||||||||
GENWORTH LIFE INSURANCE COMPANY |
A | GS3798GECA-02 | 07/06/2010 | Fixed | 4.60 | 13,231,378 | (207,539 | ) | 13,023,839 | ||||||||||
METROPOLITAN LIFE |
AA- | GAC-29396 | 09/07/2010 | Fixed | 4.59 | 18,564,904 | (388,898 | ) | 18,176,006 | ||||||||||
UNITED OF OMAHA INSURANCE COMPANY |
AA- | SDGA-12976-2 | 05/04/2010 | Fixed | 4.35 | 6,983,136 | (58,605 | ) | 6,924,531 | ||||||||||
TOTAL INVESTMENT CONTRACTS |
38,779,418 | | (655,042 | ) | 38,124,376 | ||||||||||||||
GLOBAL WRAP SYNTHETIC INVESTMENT |
Issuer Rating |
Contract ID | Maturity Date |
Rate Frequency |
Effective Annual Rate (%) |
Investments at Fair Value ($) |
Wrapper Contracts at Fair Value ($) |
Adjustments of Fair Value to Contract ($) |
Investments at Contract Value ($) | ||||||||||
Issuer Name |
|||||||||||||||||||
BANK OF AMERICA NT & SA(1)(2) |
A+ | 02-085 | GW | Variable | 3.44 | 159,077,716 | 196,011 | (2,017,126 | ) | 157,256,601 | |||||||||
JP MORGAN CHASE(1)(2) |
A+ | AABA06 | GW | Variable | 3.36 | 159,077,716 | | (1,844,998 | ) | 157,232,718 | |||||||||
ROYAL BANK OF CANADA(1)(2) |
AA- | SSABRA01 | GW | Variable | 3.37 | 159,077,716 | | (1,837,937 | ) | 157,239,779 | |||||||||
UNION BANK OF SWITZERLAND(1)(2) |
A+ | 4264 | GW | Variable | 3.44 | 159,077,716 | 143,227 | (1,978,281 | ) | 157,242,662 |
The accompanying notes are an integral part of these financial statements.
F-10
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Schedule of Investments
December 31, 2009
UNDERLYING SECURITIES OF GLOBAL WRAP SYNTHETIC INVESTMENT CONTRACTS(3) |
Principal/ Units |
Rate (%) |
Investments at Fair Value ($) |
Wrapper Contracts at Fair Value ($) |
Adjustments of Fair Value to Contract ($) |
Investments at Contract Value ($) | ||||||
Description | ||||||||||||
Agency20.0% |
||||||||||||
FHLB 5.75 05/15/2012 |
3,200,000 | 5.75 | 3,538,519 | |||||||||
FHLB 5.25 06/18/2014 |
1,510,000 | 5.25 | 1,680,382 | |||||||||
FHLB 4S-2012 1 01/25/2012 |
502,541 | 4.84 | 529,263 | |||||||||
FHLB 4.88 06/13/2014 |
1,160,000 | 4.88 | 1,276,287 | |||||||||
FHLB QR-9012 1 08/15/2012 |
12,698,467 | 5.00 | 13,048,116 | |||||||||
FHLB 3.63 05/29/2013 |
2,080,000 | 3.63 | 2,188,102 | |||||||||
FHLB 3.63 07/01/2011 |
9,200,000 | 3.63 | 9,724,249 | |||||||||
FHLB 3.63 10/18/2013 |
2,505,000 | 3.63 | 2,642,401 | |||||||||
FHLMC 5.63 03/15/2011 |
13,600,000 | 5.63 | 14,620,034 | |||||||||
FHLMC 4.88 11/15/2013 |
6,030,000 | 4.88 | 6,636,673 | |||||||||
FHLMC 4.5 01/15/2014 |
4,525,000 | 4.50 | 4,985,148 | |||||||||
FNMA 6 05/15/2011 |
10,200,000 | 6.00 | 10,998,626 | |||||||||
FNMA 4.38 03/15/2013 |
7,660,000 | 4.38 | 8,330,801 | |||||||||
FNMA 4.63 10/15/2013 |
5,920,000 | 4.63 | 6,473,603 | |||||||||
FHLMC 4.63 10/25/2012 |
4,400,000 | 4.63 | 4,776,944 | |||||||||
FHLMC 5.13 11/17/2017 |
3,075,000 | 5.13 | 3,367,168 | |||||||||
FHLMC 3.25 02/25/2011 |
1,000,000 | 3.25 | 1,038,875 | |||||||||
FHLMC 3.75 06/28/2013 |
4,275,000 | 3.75 | 4,506,673 | |||||||||
FHLMC 3.88 06/29/2011 |
9,200,000 | 3.88 | 9,601,629 | |||||||||
FHLMC 4.13 09/27/2013 |
6,900,000 | 4.13 | 7,427,167 | |||||||||
FHR 2639 HC 09/15/2026 |
1,131,239 | 3.50 | 1,145,040 | |||||||||
FNMA 4.75 11/19/2012 |
4,400,000 | 4.75 | 4,787,384 | |||||||||
FNMA 2.75 04/11/2011 |
3,400,000 | 2.75 | 3,505,778 | |||||||||
FNMA 3.88 07/12/2013 |
410,000 | 3.88 | 443,341 | |||||||||
127,272,203 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
F-11
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Schedule of Investments
December 31, 2009
UNDERLYING SECURITIES OF GLOBAL WRAP SYNTHETIC INVESTMENT CONTRACTS(3)(Continued) |
Principal/ Units |
Rate (%) |
Investments at Fair Value ($) |
Wrapper Contracts at Fair Value ($) |
Adjustments of Fair Value to Contract ($) |
Investments at Contract Value ($) | ||||||
Description | ||||||||||||
Asset Backed1.2% |
||||||||||||
CHAIT 2009-A3 A3 06/17/2013 |
2,500,000 | 2.40 | 2,540,353 | |||||||||
FORDO 2009-B A2 11/15/2011 |
835,000 | 2.10 | 841,013 | |||||||||
HAROT 2009-2 A2 08/15/2011 |
1,800,000 | 2.22 | 1,813,995 | |||||||||
USAOT 2009-1 A2 08/15/2011 |
2,370,000 | 2.64 | 2,385,486 | |||||||||
7,580,847 | ||||||||||||
Collaterized Mortgage Obligations2.1% |
||||||||||||
BSCMS 2005-T20 A1 10/12/2042 |
1,911,857 | 4.94 | 1,928,121 | |||||||||
CSFB 2004-C3 A3 07/15/2036 |
2,072,939 | 4.30 | 2,084,632 | |||||||||
FHR 2764 UE 10/15/2032 |
630,000 | 5.00 | 652,795 | |||||||||
FHR 2984 NB 11/15/2027 |
1,307,629 | 5.50 | 1,367,494 | |||||||||
FHR 3072 A 12/15/2031 |
6,121,560 | 5.50 | 6,352,665 | |||||||||
MLMT 2004-KEY2 A2 08/12/2039 |
1,152,503 | 4.17 | 1,158,422 | |||||||||
13,544,129 | ||||||||||||
Commercial Mortgage-Backed Securities1.7% |
||||||||||||
BSCMS 2002-PBW1 A1 11/11/2035 |
668,618 | 3.97 | 679,663 | |||||||||
CCMSC 2000-1 A2 04/15/2032 |
1,086,289 | 7.76 | 1,092,257 | |||||||||
CSFB 2002-CKP1 A2 12/15/2035 |
176,002 | 6.22 | 178,445 | |||||||||
CSFB 2003-C3 A3 05/15/2038 |
429,723 | 3.38 | 431,421 | |||||||||
CSFB 2003-C5 A3 12/15/2036 |
1,631,974 | 4.43 | 1,668,438 | |||||||||
LBUBS 2001-C3 A1 06/15/2020 |
702,209 | 6.06 | 718,356 | |||||||||
MSC 2004-IQ7 A2 06/15/2038 |
2,169,767 | 5.02 | 2,192,994 | |||||||||
PSSF 2000-C1 A2 05/17/2032 |
2,433,561 | 7.73 | 2,447,748 | |||||||||
WBCMT 2003-C8 A2 11/15/2035 |
1,755,361 | 3.89 | 1,758,087 | |||||||||
11,167,409 | ||||||||||||
The accompanying notes are an integral part of these financial statements.
F-12
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Schedule of Investments
December 31, 2009
UNDERLYING SECURITIES OF GLOBAL WRAP |
Principal/ Units |
Rate (%) |
Investments at Fair Value ($) |
Wrapper Contracts at Fair Value ($) |
Adjustments of Fair Value to Contract ($) |
Investments at Contract Value ($) | ||||||
Description |
||||||||||||
Corporate1.8% |
||||||||||||
GS 3.25 06/15/2012 06/15/2012 |
2,410,000 | 3.25 | 2,507,302 | |||||||||
MSFT 2.95 06/01/2014 |
3,925,000 | 2.95 | 3,976,686 | |||||||||
WFC 2.13 06/15/2012 |
4,810,000 | 2.13 | 4,870,483 | |||||||||
11,354,471 | ||||||||||||
Mortgage Pass-Through13.1% |
||||||||||||
FG G04774 01/01/2038 |
8,075,131 | 4.50 | 8,116,391 | |||||||||
FH 1J1467 12/01/2036 |
4,007,301 | 6.22 | 4,299,435 | |||||||||
FH 1J1516 02/01/2037 |
10,967,088 | 6.48 | 11,757,011 | |||||||||
FH 1N0273 08/01/2036 |
1,860,928 | 6.45 | 2,000,386 | |||||||||
FHR 2630 AE 12/15/2025 |
2,409,170 | 3.50 | 2,429,401 | |||||||||
FNR 2005-8 CA 10/25/2023 |
2,807,064 | 5.00 | 2,942,512 | |||||||||
FNR 2004-83 AB 07/25/2030 |
5,798,967 | 4.50 | 6,025,979 | |||||||||
FHR 2684 PE 01/15/2033 |
2,284,000 | 5.00 | 2,381,083 | |||||||||
FNR 2005-100 BA 04/25/2024 |
5,704,750 | 5.50 | 6,004,312 | |||||||||
FHR 2797 PG 01/15/2033 |
695,000 | 5.50 | 733,374 | |||||||||
FHR 2810 PD 06/15/2033 |
435,000 | 6.00 | 464,779 | |||||||||
FHR 2864 LE 06/15/2033 |
335,000 | 5.00 | 347,276 | |||||||||
FHR 2902 QC 07/15/2028 |
355,326 | 5.50 | 370,058 | |||||||||
FNR 2006-64 PB 09/25/2033 |
6,993,000 | 5.50 | 7,386,341 | |||||||||
FHR 2955 OG 07/15/2033 |
295,000 | 5.00 | 304,017 | |||||||||
FHR 2962 JQ 01/15/2034 |
270,000 | 5.50 | 284,613 | |||||||||
FHR 2980 LC 08/15/2030 |
3,350,000 | 5.50 | 3,542,797 | |||||||||
FHRR R003 AG 10/15/2015 |
5,077,756 | 5.13 | 5,230,377 | |||||||||
FHRR R003 VA 08/15/2016 |
1,997,970 | 5.50 | 2,135,043 | |||||||||
FHRR R007 AC 05/15/2016 |
2,046,718 | 5.88 | 2,111,908 | |||||||||
FHRR R011 AB 12/15/2030 |
2,184,500 | 5.50 | 2,304,954 | |||||||||
FHR 3351 PK 01/15/2032 |
9,274,000 | 5.50 | 9,845,899 |
The accompanying notes are an integral part of these financial statements.
F-13
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Schedule of Investments
December 31, 2009
UNDERLYING SECURITIES OF GLOBAL WRAP |
Principal/ Units |
Rate (%) |
Investments at Fair Value ($) |
Wrapper Contracts at Fair Value ($) |
Adjustments of Fair Value to Contract ($) |
Investments at Contract Value ($) | |||||||
Description |
|||||||||||||
Mortgage Pass-Through(Continued) |
|||||||||||||
FNR 2008-80 ME 05/25/2032 |
545,000 | 5.00 | 569,200 | ||||||||||
FN 791030 07/01/2034 |
1,975,527 | 3.54 | 2,053,156 | ||||||||||
83,640,302 | |||||||||||||
US Treasury13.8% |
|||||||||||||
US Treasury Note 2 11/30/2013 |
39,500,000 | 2.00 | 39,359,516 | ||||||||||
US Treasury Note 2.38 09/30/2014 |
18,250,000 | 2.38 | 18,205,243 | ||||||||||
US Treasury Note 2.75 10/31/2013 |
29,295,000 | 2.75 | 30,139,025 | ||||||||||
87,703,784 | |||||||||||||
Yankee0.5% |
|||||||||||||
IFC 3 04/22/2014 |
2,885,000 | 3.00 | 2,908,080 | ||||||||||
State Street Bank and Trust Company |
|||||||||||||
Collective Investment Funds45.8% |
|||||||||||||
SSBT SSGA U.S. MORTGAGE |
11,258,841 | N/A | 268,422,040 | ||||||||||
BACKED INDEX SECURITIES |
|||||||||||||
NON-LENDING FUND(4) |
|||||||||||||
SSBT SHORT TERM |
22,717,599 | N/A | 22,717,599 | ||||||||||
INVESTMENT FUND(4) |
|||||||||||||
TOTAL GLOBAL WRAP SYNTHETIC INVESTMENT CONTRACTS |
636,310,864 | 339,238 | (7,678,342 | ) | 628,971,760 | ||||||||
The accompanying notes are an integral part of these financial statements.
F-14
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Schedule of Investments
December 31, 2009
SHORT TERM INVESTMENTS(33.78%) |
Units | Investments at Fair Value ($) |
Wrapper Contracts at Fair Value ($) |
Adjustments of Fair Value to Contract ($) |
Investments at Contract Value ($) | ||||||||||
Description |
|||||||||||||||
State Street Bank Short Term Investment Fund(4) |
340,324,430 | 340,324,430 | | | 340,324,430 | ||||||||||
(Cost $340,324,430) |
|||||||||||||||
TOTAL INVESTMENTS (100%)(a) |
$ | 1,015,414,712 | $ | 339,238 | $ | (8,333,384 | ) | $ | 1,007,420,566 | ||||||
(1) | Variable rate contract. Rate disclosed is as of December 31, 2009. |
(2) | Global wrap contract. A global wrap investment contract holds multiple underlying securities and provides for a crediting rate, with periodic resets, based on the actual performance of the underlying securities. This contract structure does not have a stated maturity date. |
(3) | Represents underlying securities for the global wrap synthetic investment contracts. |
(4) | State Street Bank and Trust Company (SSBT) collective investment funds advised by State Street Global Advisors. |
(a) | Amounts represent holdings of the Stable Asset Fund Trust in which the Stable Asset Return Fund invests. |
The accompanying notes are an integral part of these financial statements.
F-15
Table of Contents
American Bar Association Members/State Street Collective Trust
Stable Asset Return Fund
Schedule of Investments
December 31, 2009
Other Information
The following is a summary of the inputs used, as of December 31, 2009, involving the Funds assets and liabilities carried at fair value. The inputs or methodologies used for valuing investments and other financial instruments may not be an indication of the risk associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Valuation of Investments section in the accompanying notes to these financial statements.
Level 1 | Level 2 | Level 3 | Total | |||||||||
Investments in securities |
||||||||||||
Short term instruments |
$ | | $ | 363,042,029 | $ | | $ | 363,042,029 | ||||
Investment contracts |
38,779,418 | 38,779,418 | ||||||||||
Fixed income |
345,171,225 | 345,171,225 | ||||||||||
Collective Investment Funds |
268,422,040 | 268,422,040 | ||||||||||
Wrapper contracts |
339,238 | 339,238 | ||||||||||
Total |
$ | | $ | 976,974,532 | $ | 38,779,418 | $ | 1,015,753,950 | ||||
The following is a reconciliation for assets for which Level 3 inputs were used in determining fair value:
Beginning Balance |
$ | 120,433,285 | ||
Change in unrealized appreciation (depreciation) |
(1,722,162 | ) | ||
Net purchases (sales) |
(79,931,705 | ) | ||
Ending Balance |
$ | 38,779,418 |
The accompanying notes are an integral part of these financial statements.
F-16
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Statement of Assets and Liabilities
December 31, 2009 |
||||
Assets | ||||
Investments, at value (cost $298,803,384) |
$ | 298,112,622 | (a) | |
Investments in affiliated issuers, at value (cost $23,955,522) |
23,610,139 | |||
Foreign currency, at value (cost $261,907) |
262,126 | |||
Cash |
24,084 | |||
Deposit with broker for open futures contracts |
18,000 | |||
Deposit with broker for open swap contracts |
140,000 | |||
Receivable for investments sold on delayed delivery basis |
116,407,500 | |||
Receivable for investments sold |
587,169 | |||
Receivable for fund units sold |
5,209,683 | |||
Interest receivable |
2,645,949 | |||
Gross unrealized appreciation of forward currency exchange contracts |
111,827 | |||
Tax reclaims receivable |
12,766 | |||
Interest receivable for closed swap contracts |
128 | |||
Swap contracts, at value (cost $5,066) |
74,447 | |||
Total assets |
447,216,440 | |||
Liabilities | ||||
Payable for cash collateral received on securities loaned |
21,790,756 | |||
Payable for investments purchased on a delayed delivery basis |
21,248,984 | |||
Payable for investments purchased |
13,842,948 | |||
Payable for fund units redeemed |
167,494 | |||
Swap contracts, at value (proceeds $97,228) |
233,933 | |||
Due to broker for open forward currency exchange contracts |
881,000 | |||
Due to broker for open swap contracts |
310,000 | |||
Due to broker for investments purchased or sold on a delayed delivery basis |
1,976,250 | |||
Payable for futures variation margin |
73,925 | |||
Gross unrealized depreciation of forward currency exchange contracts |
863 | |||
Investment advisory fee payable |
89,967 | |||
INGprogram fee payable |
165,454 | |||
Trustee, management and administration fees payable |
31,786 | |||
ABA Retirement Fundsprogram fee payable |
23,632 | |||
Other accruals |
132,954 | |||
Total liabilities |
60,969,946 | |||
Net Assets (equivalent to $24.09 per unit based on 16,032,577 units outstanding) |
$ | 386,246,494 | ||
(a) | Includes securities on loan with a value of $21,352,312 (see Note 6). |
The accompanying notes are an integral part of these financial statements.
F-17
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
||||
Dividends (net of foreign tax expense of $691) |
$ | 169,547 | ||
Dividendsaffiliated issuers |
39,940 | |||
Interestunaffiliated issuers |
18,986,861 | |||
Securities lending net income |
70,694 | |||
Total investment income |
19,267,042 | |||
Expenses |
||||
INGprogram fee |
1,333,017 | |||
State Street Bank and Trust Companyprogram fee |
494,388 | |||
Trustee, management and administration fees |
415,733 | |||
Investment advisory fee |
1,062,238 | |||
ABA Retirement Fundsprogram fee |
240,863 | |||
Legal and audit fees |
226,489 | |||
Compliance consultant fees |
147,478 | |||
Reports to unitholders |
151,932 | |||
Registration fees |
28,620 | |||
Other fees |
116,826 | |||
Total expenses |
4,217,584 | |||
Net investment income (loss) |
15,049,458 | |||
Net realized and unrealized gain (loss) |
||||
Net realized gain (loss) on: |
||||
Investments |
(6,928,238 | ) | ||
Foreign currency transactions |
(783,073 | ) | ||
Futures contracts |
10,880,883 | |||
Swap contracts |
(8,429,358 | ) | ||
Net realized gain (loss) |
(5,259,786 | ) | ||
Change in net unrealized appreciation (depreciation) on: |
||||
Investments |
11,931,317 | |||
Foreign currency transactions |
625,803 | |||
Futures contracts |
(8,155,101 | ) | ||
Swap contracts |
21,070,534 | |||
Change in net unrealized appreciation (depreciation) |
25,472,553 | |||
Net realized and unrealized gain (loss) |
20,212,767 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 35,262,225 | ||
The accompanying notes are an integral part of these financial statements.
F-18
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | 20,883,869 | $ | 15,049,458 | ||||
Net realized gain (loss) from investments and foreign currency transactions |
25,976,022 | (5,259,786 | ) | |||||
Change in net unrealized appreciation (depreciation) |
(37,146,336 | ) | 25,472,553 | |||||
Net increase (decrease) in net assets resulting from operations |
9,713,555 | 35,262,225 | ||||||
From unitholder transactions |
||||||||
Proceeds from units issued |
162,645,169 | 61,429,511 | ||||||
Cost of units redeemed |
(257,996,679 | ) | (109,168,920 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
(95,351,510 | ) | (47,739,409 | ) | ||||
Net increase (decrease) in net assets |
(85,637,955 | ) | (12,477,184 | ) | ||||
Net Assets |
||||||||
Beginning of year |
484,361,633 | 398,723,678 | ||||||
End of year |
$ | 398,723,678 | $ | 386,246,494 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
22,558,121 | 18,136,087 | ||||||
Issued |
7,381,564 | 2,667,799 | ||||||
Redeemed |
(11,803,598 | ) | (4,771,309 | ) | ||||
Outstanding-end of year |
18,136,087 | 16,032,577 | ||||||
The accompanying notes are an integral part of these financial statements.
F-19
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Financial Highlights
(For a unit outstanding throughout the year)
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income |
$ | 0.81 | $ | 0.96 | $ | 1.06 | $ | 1.21 | $ | 1.14 | ||||||||||
Expenses() |
(0.15 | ) | (0.16 | ) | (0.16 | ) | (0.18 | ) | (0.25 | ) | ||||||||||
Net investment income (loss) |
0.66 | 0.80 | 0.90 | 1.03 | 0.89 | |||||||||||||||
Net realized and unrealized gain (loss) |
(0.29 | ) | (0.08 | ) | 0.69 | (0.51 | ) | 1.21 | ||||||||||||
Net increase (decrease) in unit value |
0.37 | 0.72 | 1.59 | 0.52 | 2.10 | |||||||||||||||
Net asset value at beginning of year |
18.79 | 19.16 | 19.88 | 21.47 | 21.99 | |||||||||||||||
Net asset value at end of year |
$ | 19.16 | $ | 19.88 | $ | 21.47 | $ | 21.99 | $ | 24.09 | ||||||||||
Ratios/Supplemental Data: |
||||||||||||||||||||
Ratio of expenses to average net assets |
0.79 | % | 0.84 | % | 0.81 | % | 0.84 | % | 1.09 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
3.48 | % | 4.14 | % | 4.42 | % | 4.73 | % | 3.88 | % | ||||||||||
Portfolio turnover |
458 | % | 389 | % | 489 | % | 806 | % | 1,422 | % | ||||||||||
Total return |
1.97 | % | 3.76 | % | 8.00 | % | 2.42 | % | 9.55 | % | ||||||||||
Net assets at end of year (in thousands) |
$ | 454,045 | $ | 457,719 | $ | 484,362 | $ | 398,724 | $ | 386,246 |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
The accompanying notes are an integral part of these financial statements.
F-20
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Schedule of Investments
December 31, 2009
Principal Amount |
Value | |||||
U.S. CORPORATE ASSET-BACKED SECURITIES1.3% |
||||||
Collateralized Mortgage Obligations (CMO)0.7% |
||||||
Bear Stearns Adjustable Rate Mortgage Trust 5.63% 2/25/2033(a) |
$ | 109,721 | $ | 107,292 | ||
Bear Stearns Alt-A Trust 5.31% 5/25/2035(a) |
840,179 | 595,213 | ||||
Bear Stearns Second Lien Trust 0.45% 12/25/2036(a)(b) |
1,080,667 | 747,434 | ||||
CS First Boston Mortgage Securities Corp. 2.34% 5/25/2032(a) |
11,887 | 11,289 | ||||
Merrill Lynch Mortgage Investors Trust 0.44% 2/25/2036(a) |
659,122 | 451,527 | ||||
Residential Asset Securitization Trust 5.50% 1/25/2034 |
176,554 | 171,906 | ||||
Residential Funding Mortgage Securities I 6.50% 3/25/2032 |
73,871 | 73,970 | ||||
Salomon Brothers Mortgage Securities VII, Inc. 0.73% 5/25/2032(a)(b) |
70,557 | 64,543 | ||||
Washington Mutual Mortgage Pass Through Certificates 0.52% 7/25/2045(a) |
542,497 | 395,780 | ||||
Washington Mutual Mortgage Securities Corp 4.41% 2/25/2033(a) |
12,319 | 9,819 | ||||
2,628,773 | ||||||
Other Asset-Backed0.6% |
||||||
CVS Caremark Corp. 6.20% 10/10/2025(b) |
58,269 | 55,818 | ||||
Ford Credit Auto Owner Trust 0.36% 9/15/2010(b) |
1,933,314 | 1,933,753 | ||||
Ras Laffan Liquefied Natural Gas Co., Ltd. 8.29% 3/15/2014(b) |
229,500 | 248,571 | ||||
2,238,142 | ||||||
TOTAL U.S. CORPORATE ASSET-BACKED SECURITIES (cost $5,619,886) |
4,866,915 | |||||
U.S. GOVERNMENT & AGENCY OBLIGATIONS53.6% |
||||||
AGENCY MORTGAGE BACKED SECURITIES36.5% |
||||||
Federal Home Loan Bank (FHLB)0.5% |
||||||
FHLB Zero Coupon, 1/13/2010 |
1,800,000 | 1,799,976 | ||||
Federal Home Loan Mortgage Corp. (FHLMC)1.8% |
||||||
FHLMC |
||||||
Zero Coupon 2/8/2010 |
299,981 | 299,981 | ||||
2.03% 7/25/2044(a) |
2,566,458 | 2,444,360 | ||||
5.00% 11/1/2036 |
2,262,075 | 2,324,046 | ||||
7.00% 9/1/2037 |
1,034,746 | 1,121,851 | ||||
7.50% 7/1/20219/1/2032 |
517,229 | 580,587 | ||||
8.00% 11/1/20296/1/2031 |
148,465 | 170,121 | ||||
8.50% 3/1/203010/1/2030 |
38,926 | 45,059 | ||||
9.50% 4/15/2020 |
6,184 | 6,715 | ||||
10.00% 9/1/201711/1/2020 |
24,624 | 27,025 | ||||
10.50% 12/1/20202/1/2021 |
4,385 | 4,946 | ||||
11.00% 9/1/2020 |
2,551 | 2,929 | ||||
7,027,620 | ||||||
The accompanying notes are an integral part of these financial statements.
F-21
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Schedule of Investments
December 31, 2009
Principal Amount |
Value | |||||
AGENCY MORTGAGE BACKED SECURITIES (Continued) |
||||||
Federal National Mortgage Association (FNMA)30.1% |
||||||
FNMA |
||||||
Zero Coupon 1/27/20103/10/2010 |
$ | 1,100,000 | $ | 1,099,787 | ||
1.54% 4/1/2032(a) |
89,941 | 92,857 | ||||
4.00% 8/1/20399/1/2039 |
9,947,908 | 9,613,202 | ||||
4.50% 2/1/203510/1/2039 |
75,716,631 | 75,672,417 | ||||
5.00% 8/1/20207/1/2035 TBA |
1,726,425 | 1,868,032 | ||||
5.50% 5/1/20338/1/2037 TBA(d) |
1,820,377 | 2,172,431 | ||||
6.00% 8/1/20121/1/2039 TBA |
20,265,697 | 21,564,080 | ||||
6.50% 4/1/20293/1/2038 TBA |
1,065,244 | 1,170,051 | ||||
7.00% 1/1/20306/1/2032 |
911,553 | 1,017,376 | ||||
7.50% 3/1/20302/1/2032 |
201,817 | 227,736 | ||||
8.00% 5/1/20294/1/2032 |
595,229 | 682,709 | ||||
8.50% 9/25/20201/1/2031 |
726,530 | 837,349 | ||||
9.50% 4/1/2030 |
90,240 | 105,494 | ||||
10.00% 5/1/202211/1/2024 |
55,939 | 61,998 | ||||
10.50% 10/1/2018 |
8,865 | 9,985 | ||||
11.00% 9/1/2019 |
12,856 | 14,576 | ||||
11.50% 11/1/2019 |
2,446 | 2,812 | ||||
116,212,892 | ||||||
Government National Mortgage Association (GNMA)4.1% |
||||||
GNMA |
||||||
3.63% 7/20/20259/20/2027(a) |
74,082 | 76,256 | ||||
4.13% 10/20/202512/20/2027(a) |
45,158 | 46,212 | ||||
4.38% 2/20/20255/20/2025(a) |
104,688 | 108,035 | ||||
5.50% 7/1/2036 TBA |
1,000,000 | 1,047,500 | ||||
6.00% 3/15/20361/15/2039 |
13,150,920 | 13,909,344 | ||||
9.00% 12/15/2017 |
30,963 | 34,895 | ||||
9.50% 12/15/201712/15/2021 |
75,290 | 84,281 | ||||
10.00% 3/15/20182/15/2025 |
269,450 | 303,950 | ||||
10.50% 9/15/20153/15/2020 |
42,956 | 47,759 | ||||
11.00% 8/15/20102/15/2025 |
42,113 | 45,272 | ||||
15,703,504 | ||||||
140,743,992 | ||||||
U.S. GOVERNMENT OBLIGATIONS17.1% |
||||||
U.S. Treasury Bonds4.2% |
||||||
United States Treasury Bonds |
||||||
3.50% 2/15/2039(c) |
1,200,000 | 982,874 |
The accompanying notes are an integral part of these financial statements.
F-22
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Schedule of Investments
December 31, 2009
Principal Amount |
Value | |||||
U.S. GOVERNMENT OBLIGATIONS (Continued) |
||||||
U.S. Treasury Bonds (Continued) |
||||||
4.25% 5/15/2039(c) |
$ | 4,900,000 | $ | 4,596,813 | ||
4.38% 2/15/2038(c) |
700,000 | 672,000 | ||||
4.50% 8/15/2039(c) |
1,500,000 | 1,466,016 | ||||
7.88% 2/15/2021(c) |
2,400,000 | 3,225,749 | ||||
8.13% 8/15/2021 |
3,100,000 | 4,251,842 | ||||
8.13% 5/15/2021(c) |
800,000 | 1,094,375 | ||||
16,289,669 | ||||||
U.S. Treasury Notes12.9% |
||||||
United States Treasury Notes |
||||||
1.00% 7/31/2011(d) |
586,000 | 586,892 | ||||
2.38% 9/30/2014(c) |
14,500,000 | 14,377,620 | ||||
3.13% 10/31/2016(c) |
21,600,000 | 21,328,315 | ||||
3.25% 12/31/2016 |
5,300,000 | 5,255,279 | ||||
3.25% 7/31/2016(c) |
6,800,000 | 6,812,220 | ||||
3.88% 5/15/2018(c) |
1,600,000 | 1,624,626 | ||||
49,984,952 | ||||||
66,274,621 | ||||||
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS (cost $203,758,930) |
207,018,613 | |||||
FOREIGN GOVERNMENT OBLIGATIONS1.6% |
||||||
France0.4% |
||||||
Government of France 5.75% 10/25/2032 |
EUR | 600,000 | 1,046,488 | |||
Societe Financement de lEconomie Francaise 3.38% 5/5/2014(b)(c) |
700,000 | 713,622 | ||||
1,760,110 | ||||||
Germany1.2% |
||||||
Federal Republic of Germany |
||||||
3.75% 1/4/2019 |
EUR | 2,600,000 | 3,852,583 | |||
6.25% 1/4/2030 |
EUR | 400,000 | 731,957 | |||
4,584,540 | ||||||
TOTAL FOREIGN GOVERNMENT OBLIGATIONS (cost $6,424,912) |
6,344,650 | |||||
MUNICIPALS2.3% |
||||||
California0.3% |
||||||
California, State General Obligation Build America Bonds |
||||||
7.50% 4/1/2034 |
400,000 | 388,244 | ||||
7.55% 4/1/2039 |
900,000 | 872,163 | ||||
1,260,407 | ||||||
The accompanying notes are an integral part of these financial statements.
F-23
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Schedule of Investments
December 31, 2009
Principal Amount |
Value | |||||
MUNICIPALS (Continued) |
||||||
Illinois0.9% |
||||||
Chicago, IL, Transit Authority Transfer Tax Receipts Revenue |
||||||
Series A 6.90% 12/1/2040 |
$ | 1,600,000 | $ | 1,697,248 | ||
Series B 6.90% 12/1/2040 |
1,600,000 | 1,697,248 | ||||
3,394,496 | ||||||
Indiana0.2% |
||||||
Purdue University Revenues Student Fees Series W 5.00% 7/1/2024 |
500,000 | 532,955 | ||||
North Carolina0.9% |
||||||
North Carolina Infrastructure Finance Corp. Certificates of Participation Series A 5.00% 5/1/2025(f) |
3,300,000 | 3,572,712 | ||||
TOTAL MUNICIPALS (cost $8,211,312) |
8,760,570 | |||||
The accompanying notes are an integral part of these financial statements.
F-24
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Schedule of Investments
December 31, 2009
Principal Amount |
Value | |||||
CORPORATE BONDS15.4% |
||||||
COMMUNICATIONS0.9% |
||||||
Telecommunication0.9% |
||||||
Motorola, Inc. 6.00% 11/15/2017(c) |
$ | 2,100,000 | $ | 2,031,844 | ||
Qwest Corp. 6.50% 6/1/2017 |
1,500,000 | 1,473,750 | ||||
3,505,594 | ||||||
ENERGY0.2% |
||||||
Coal0.1% |
||||||
Peabody Energy Corp. 7.88% 11/1/2026(c) |
300,000 | 304,875 | ||||
Pipelines0.1% |
||||||
El Paso Corp. 7.00% 5/15/2011 |
450,000 | 459,876 | ||||
764,751 | ||||||
FINANCIAL14.2% |
||||||
Banks4.4% |
||||||
American Express Centurion Bank 6.00% 9/13/2017 |
4,100,000 | 4,248,649 | ||||
Barclays Bank PLC 6.05% 12/4/2017(b) |
3,000,000 | 3,053,106 | ||||
Citigroup, Inc. 6.13% 11/21/2017 |
900,000 | 907,177 | ||||
Commonwealth Bank of Australia 2.40% 1/12/2012(b) |
600,000 | 615,187 | ||||
Fortis Bank (Nederland) NV 1.25% 6/10/2011(a) |
EUR | 900,000 | 1,292,614 | |||
Lloyds TSB Bank PLC |
||||||
0.87% 6/9/2011(a) |
EUR | 700,000 | 1,005,649 | |||
12.00% 12/16/2024(a)(b) |
3,800,000 | 3,731,177 | ||||
NIBC Bank NV 3.63% 12/19/2011 |
400,000 | 592,600 | ||||
Royal Bank of Scotland PLC 2.63% 5/11/2012(b) |
500,000 | 507,158 | ||||
Wachovia Bank NA 0.58% 3/15/2016(a) |
300,000 | 269,173 | ||||
Wells Fargo & Co. Series K 7.98% 12/31/2049(a) |
600,000 | 601,500 | ||||
16,823,990 | ||||||
Diversified Financial Services8.4% |
||||||
Bear Stearns Cos. LLC |
||||||
5.70% 11/15/2014 |
900,000 | 990,300 | ||||
6.40% 10/2/2017 |
400,000 | 436,032 | ||||
6.95% 8/10/2012 |
2,900,000 | 3,240,100 | ||||
7.25% 2/1/2018 |
900,000 | 1,033,068 | ||||
Caterpillar Financial Services Corp. 1.00% 6/24/2011(a) |
3,400,000 | 3,428,118 | ||||
Goldman Sachs Group, Inc. |
||||||
0.46% 2/6/2012(a) |
600,000 | 595,524 | ||||
0.70% 3/22/2016(a) |
1,600,000 | 1,473,506 | ||||
6.25% 9/1/2017(c) |
6,500,000 | 6,970,691 |
The accompanying notes are an integral part of these financial statements.
F-25
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Schedule of Investments
December 31, 2009
Principal Amount |
Value | |||||
FINANCIAL (Continued) |
||||||
Diversified Financial Services (Continued) |
||||||
6.75% 10/1/2037(c) |
200,000 | 205,577 | ||||
International Lease Finance Corp. Series Q 5.75% 6/15/2011 |
900,000 | 826,920 | ||||
LeasePlan Corp. NV 3.13% 2/10/2012 |
EUR | 300,000 | 439,816 | |||
Lehman Brothers Holdings, Inc. |
||||||
5.63% 1/24/2013(g) |
$ | 5,300,000 | $ | 1,086,500 | ||
6.88% 5/2/2018(g) |
2,300,000 | 477,250 | ||||
Merrill Lynch & Co., Inc. 6.40% 8/28/2017 |
4,100,000 | 4,314,750 | ||||
Morgan Stanley |
||||||
0.58% 1/9/2014(a)(c) |
400,000 | 381,900 | ||||
5.55% 4/27/2017(c) |
4,400,000 | 4,419,479 | ||||
Series F 6.00% 4/28/2015 |
2,100,000 | 2,236,966 | ||||
32,556,497 | ||||||
Insurance1.4% |
||||||
American International Group, Inc. |
||||||
8.25% 8/15/2018 |
4,600,000 | 4,318,710 | ||||
Series G 5.85% 1/16/2018 |
1,400,000 | 1,148,741 | ||||
5,467,451 | ||||||
54,847,938 | ||||||
UTILITIES0.1% |
||||||
Electric0.1% |
||||||
PSEG Power LLC 6.95% 6/1/2012 |
400,000 | 436,982 | ||||
TOTAL CORPORATE BONDS (cost $62,583,890) |
59,555,265 | |||||
BANK LOANS2.4% |
||||||
CONSUMER, CYCLICAL1.0% |
||||||
Chrysler Financial Corp. 4.24% 8/3/2012(a) |
3,896,500 | 3,808,829 | ||||
CONSUMER, NON-CYCLICAL0.6% |
||||||
Allison Transmission, Inc. |
||||||
3.00% 8/7/2014(a) |
362,299 | 333,586 | ||||
2.99% 8/7/2014(a) |
212,634 | 195,783 | ||||
Community Health Systems, Inc. |
||||||
2.51% 7/25/2014(a) |
65,714 | 62,118 | ||||
1.51% 7/25/2014(a) |
1,287,609 | 1,217,148 | ||||
HCA, Inc. 2.50% 11/17/2013(a) |
744,073 | 712,171 | ||||
2,520,806 | ||||||
The accompanying notes are an integral part of these financial statements.
F-26
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Schedule of Investments
December 31, 2009
Principal Amount |
Value | |||||
ENERGY0.8% |
||||||
TXU Corp. |
||||||
3.78% 10/10/2014(a) |
386,383 | 312,777 | ||||
3.74% 10/10/2014(a) |
3,248,705 | 2,629,827 | ||||
2,942,604 | ||||||
TOTAL BANK LOANS (cost $9,784,459) |
9,272,239 | |||||
Shares | Value | |||||
CONVERTIBLE PREFERRED STOCK0.4% |
||||||
FINANCIAL0.4% |
||||||
Banks0.4% |
||||||
Wells Fargo & Co. Series L 7.50% 12/31/2049 |
1,500 | $ | 1,374,375 | |||
TOTAL CONVERTIBLE PREFERRED STOCK (cost $1,500,000) |
1,374,375 | |||||
Principal Amount |
Value | |||||
SHORT-TERM INVESTMENTS0.2% |
||||||
U.S. GOVERNMENT & AGENCY OBLIGATIONS0.2% |
||||||
U.S. Treasury Bills0.2% |
||||||
United States Treasury Bills |
||||||
0.043% 3/11/2010 |
$ | 100,000 | 99,995 | |||
0.18% 6/17/2010(e) |
820,000 | 820,000 | ||||
TOTAL SHORT-TERM INVESTMENTS (cost $919,995) |
919,995 | |||||
Units | Value | |||||
INVESTMENT FUNDS6.1% |
||||||
Affiliated Funds6.1% |
||||||
State Street Bank and Trust Company Short Term Investment Fund(h) |
2,164,766 | 2,164,766 | ||||
State Street Quality D Short Term Investment Fund(h)(i) |
21,790,756 | 21,445,373 | ||||
TOTAL INVESTMENT FUNDS (cost $23,955,522) |
23,610,139 | |||||
TOTAL INVESTMENTS83.3% (cost $322,758,906) |
321,722,761 | |||||
Assets in excess of other liabilities16.7% |
64,523,733 | |||||
NET ASSETS100.0% |
$ | 386,246,494 | ||||
(a) | Indicates a variable rate security. The rate shown reflects the current rate in effect at year end. |
(b) | Security is exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors. The total cost and market value of Rule 144A securities owned at year end were $11,789,612 and $11,670,370, respectively. |
The accompanying notes are an integral part of these financial statements.
F-27
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Core Plus Fund
Schedule of Investments
December 31, 2009
(c) | All or a portion of security is on loan. |
(d) | All or a portion of security has been segregated as collateral for futures. |
(e) | All or a portion of security has been segregated as collateral for TBAs. |
(f) | Security insured by Assured Guaranty Municipal Corp. |
(g) | Defaulted Security. |
(h) | Collective investment fund advised by State Street Global Advisors, a division of State Street Bank and Trust Company. |
(i) | Represents security purchased with cash collateral received for securities on loan. |
EUR | Euro Denominated Bond. |
TBA | To Be Announced. See Note 2(h). |
The accompanying notes are an integral part of these financial statements.
F-28
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Statement of Assets and Liabilities
December 31, 2009 |
||||
Assets | ||||
Investments, at value (cost $560,810,404) |
$ | 685,748,034 | (a) | |
Investments in affiliated issuers, at value (cost $235,246,370) |
240,281,755 | |||
Cash |
34,484 | |||
Receivable for investments sold |
5,424,512 | |||
Receivable for fund units sold |
328,659 | |||
Interest and dividends receivable |
847,306 | |||
Tax reclaims receivable |
24,859 | |||
Total assets |
932,689,609 | |||
Liabilities | ||||
Payable for cash collateral received on securities loaned |
113,688,207 | |||
Payable for investments purchased |
833,102 | |||
Payable for fund units redeemed |
5,462,587 | |||
Investment advisory fee payable |
325,053 | |||
INGprogram fee payable |
349,473 | |||
Trustee, management and administration fees payable |
69,935 | |||
ABA Retirement Fundsprogram fee payable |
49,871 | |||
Payable for legal and audit services |
132,427 | |||
Other accruals |
143,004 | |||
Total liabilities |
121,053,659 | |||
Net Assets (equivalent to $12.15 per unit based on 66,821,577 units outstanding) |
$ | 811,635,950 | ||
(a) | Includes securities on loan with a value of $111,134,684 (see Note 6). |
The accompanying notes are an integral part of these financial statements.
F-29
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Statement of Operations
For the period July 2, 2009(a) to December 31, 2009 |
||||
Investment income |
||||
Dividends (net of foreign tax expense of $18,551) |
$ | 4,914,589 | ||
Dividendsaffiliated issuers |
29,609 | |||
Securities lending income, net |
154,894 | |||
Total investment income |
5,099,092 | |||
Expenses |
||||
INGprogram fee |
2,053,047 | |||
Trustee, management and administration fees |
406,879 | |||
Investment advisory fee |
871,145 | |||
ABA Retirement Fundsprogram fee |
291,360 | |||
State Street Global Marketstransition management |
318,563 | |||
Legal and audit fees |
273,417 | |||
Compliance consultant fees |
158,848 | |||
Reports to unitholders |
92,004 | |||
Registration fees |
38,533 | |||
Other fees |
163,553 | |||
Total expenses |
4,667,349 | |||
Net investment income (loss) |
431,743 | |||
Net realized and unrealized gain (loss) |
||||
Net realized gain (loss) on: |
||||
Investments |
(1,368,281 | ) | ||
Investmentsaffiliated issuers |
24,566,786 | |||
Foreign currency transactions |
(46 | ) | ||
Net realized gain (loss) |
23,198,459 | |||
Change in net unrealized appreciation (depreciation) on: |
||||
Investments |
129,973,015 | |||
Foreign currency transactions |
27 | |||
Change in net unrealized appreciation (depreciation) |
129,973,042 | |||
Net realized and unrealized gain (loss) |
153,171,501 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 153,603,244 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-30
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Statement of Changes in Net Assets
For the period July 2, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | 431,743 | ||
Net realized gain (loss) from investments and foreign currency transactions |
23,198,459 | |||
Change in net unrealized appreciation (depreciation) |
129,973,042 | |||
Net increase (decrease) in net assets resulting from operations |
153,603,244 | |||
From unitholder transactions |
||||
Proceeds from units issued |
773,222,274 | |||
Cost of units redeemed |
(115,189,568 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
658,032,706 | |||
Net increase (decrease) in net assets |
811,635,950 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 811,635,950 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
77,536,006 | |||
Redeemed |
(10,714,429 | ) | ||
Outstanding-end of period |
66,821,577 | |||
(a) Commencement of operations.
The accompanying notes are an integral part of these financial statements.
F-31
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period July 2, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | 0.07 | ||
Expenses() |
(0.07 | ) | ||
Net investment income (loss) |
| |||
Net realized and unrealized gain (loss) |
2.15 | |||
Net increase (decrease) in unit value |
2.15 | |||
Net asset value at beginning of period |
10.00 | |||
Net asset value at end of period |
$ | 12.15 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
1.17 | % | ||
Ratio of net investment income (loss) to average net assets* |
0.11 | % | ||
Portfolio turnover** |
68 | % | ||
Total return** |
21.50 | % | ||
Net assets at end of period (in thousands) |
$ | 811,636 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| With respect to a portion of the Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-32
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK84.1% |
|||||
BASIC MATERIALS1.7% |
|||||
Chemicals0.4% |
|||||
Praxair, Inc. |
39,500 | $ | 3,172,245 | ||
Mining1.3% |
|||||
Freeport-McMoRan Copper & Gold, Inc.*(a) |
131,100 | 10,526,019 | |||
13,698,264 | |||||
COMMUNICATIONS8.9% |
|||||
Internet4.2% |
|||||
Amazon.com, Inc.* |
98,200 | 13,209,864 | |||
Baidu, Inc. (ADR)*(a) |
7,300 | 3,001,979 | |||
Google, Inc.*(a) |
25,900 | 16,057,482 | |||
Tencent Holdings Ltd. (ADR)(a) |
115,900 | 2,517,348 | |||
34,786,673 | |||||
Media0.9% |
|||||
Walt Disney Co.(a) |
218,600 | 7,049,850 | |||
Telecommunication3.8% |
|||||
AT&T, Inc. |
275,600 | 7,725,068 | |||
Cisco Systems, Inc.* |
377,900 | 9,046,926 | |||
Juniper Networks, Inc.*(a) |
93,700 | 2,498,979 | |||
Qualcomm, Inc. |
247,400 | 11,444,724 | |||
30,715,697 | |||||
72,552,220 | |||||
CONSUMER, CYCLICAL8.0% |
|||||
Apparel1.9% |
|||||
Coach, Inc.(a) |
53,500 | 1,954,355 | |||
Nike, Inc. Class B(a) |
202,200 | 13,359,354 | |||
15,313,709 | |||||
Auto Parts & Equipment0.2% |
|||||
Johnson Controls, Inc.(a) |
71,200 | 1,939,488 | |||
Lodging0.4% |
|||||
Marriott International, Inc.(a) |
113,887 | 3,103,421 | |||
Retail5.5% |
|||||
AutoZone, Inc.*(a) |
65,300 | 10,321,971 | |||
Best Buy Co., Inc.(a) |
144,600 | 5,705,916 | |||
Costco Wholesale Corp.(a) |
104,900 | 6,206,933 |
The accompanying notes are an integral part of these financial statements.
F-33
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
CONSUMER, CYCLICAL (Continued) |
|||||
Retail (Continued) |
|||||
Dollar General Corp.*(a) |
35,300 | $ | 791,779 | ||
Kohls Corp.*(a) |
69,800 | 3,764,314 | |||
Staples, Inc.(a) |
53,100 | 1,305,729 | |||
Starbucks Corp.*(a) |
117,900 | 2,718,774 | |||
Target Corp.(a) |
85,100 | 4,116,287 | |||
Tiffany & Co.(a) |
49,600 | 2,132,800 | |||
Wal-Mart Stores, Inc.(a) |
143,300 | 7,659,385 | |||
44,723,888 | |||||
65,080,506 | |||||
CONSUMER, NON-CYCLICAL22.7% |
|||||
Agriculture2.0% |
|||||
Altria Group, Inc.(a) |
576,500 | 11,316,695 | |||
Philip Morris International, Inc. |
102,200 | 4,925,018 | |||
16,241,713 | |||||
Beverages0.5% |
|||||
PepsiCo, Inc. |
64,800 | 3,939,840 | |||
Biotechnology1.1% |
|||||
Celgene Corp.*(a) |
95,500 | 5,317,440 | |||
Illumina, Inc.*(a) |
48,600 | 1,489,590 | |||
Vertex Pharmaceuticals, Inc.*(a) |
55,700 | 2,386,745 | |||
9,193,775 | |||||
Commercial Services2.2% |
|||||
MasterCard, Inc. Class A(a) |
32,800 | 8,396,144 | |||
Visa, Inc. Class A(a) |
110,900 | 9,699,314 | |||
18,095,458 | |||||
Cosmetics/Personal Care2.1% |
|||||
Colgate-Palmolive Co.(a) |
52,400 | 4,304,660 | |||
Procter & Gamble Co. |
208,800 | 12,659,544 | |||
16,964,204 | |||||
Food0.6% |
|||||
Cadbury PLC (ADR) |
16,300 | 837,657 | |||
Unilever PLC (ADR) |
126,500 | 4,035,350 | |||
4,873,007 | |||||
The accompanying notes are an integral part of these financial statements.
F-34
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
CONSUMER, NON-CYCLICAL (Continued) |
|||||
Healthcare-Products2.7% |
|||||
Alcon, Inc. |
52,400 | $ | 8,611,940 | ||
Baxter International, Inc.(a) |
224,100 | 13,150,188 | |||
21,762,128 | |||||
Healthcare-Services3.5% |
|||||
Covance, Inc.*(a) |
108,300 | 5,909,931 | |||
Express Scripts, Inc.*(a) |
13,500 | 1,167,075 | |||
Humana, Inc.* |
212,300 | 9,317,847 | |||
Laboratory Corp. of America Holdings*(a) |
85,200 | 6,376,368 | |||
Quest Diagnostics, Inc.(a) |
86,500 | 5,222,870 | |||
27,994,091 | |||||
Household Products\Wares0.7% |
|||||
Fortune Brands, Inc.(a) |
130,900 | 5,654,880 | |||
Pharmaceuticals7.3% |
|||||
Abbott Laboratories |
99,500 | 5,372,005 | |||
AmerisourceBergen Corp.(a) |
322,500 | 8,407,575 | |||
Gilead Sciences, Inc.*(a) |
160,600 | 6,950,768 | |||
Medco Health Solutions, Inc.* |
125,400 | 8,014,314 | |||
Mylan, Inc.*(a) |
143,500 | 2,644,705 | |||
Novartis AG(ADR) |
61,100 | 3,325,673 | |||
Pfizer, Inc. |
175,200 | 3,186,888 | |||
Roche Holding AG (ADR) |
109,800 | 4,633,560 | |||
Shire PLC (ADR)(a) |
60,200 | 3,533,740 | |||
Teva Pharmaceutical Industries Ltd. (ADR) |
106,600 | 5,988,788 | |||
Watson Pharmaceuticals, Inc.*(a) |
178,900 | 7,086,229 | |||
59,144,245 | |||||
183,863,341 | |||||
ENERGY11.6% |
|||||
Oil & Gas10.8% |
|||||
Apache Corp. |
179,400 | 18,508,698 | |||
Chevron Corp. |
225,900 | 17,392,041 | |||
ConocoPhillips |
230,200 | 11,756,314 | |||
Marathon Oil Corp. |
421,200 | 13,149,864 | |||
Occidental Petroleum Corp.(a) |
71,400 | 5,808,390 | |||
Petroleo Brasileiro SA (ADR)(a) |
94,900 | 4,524,832 | |||
Southwestern Energy Co.*(a) |
76,500 | 3,687,300 | |||
Transocean Ltd.* |
154,600 | 12,800,880 | |||
87,628,319 | |||||
The accompanying notes are an integral part of these financial statements.
F-35
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
ENERGY (Continued) |
|||||
Oil & Gas Services0.8% |
|||||
Schlumberger Ltd.(a) |
77,000 | $ | 5,011,930 | ||
Weatherford International Ltd.* |
77,800 | 1,393,398 | |||
6,405,328 | |||||
94,033,647 | |||||
FINANCIAL8.4% |
|||||
Banks3.9% |
|||||
Bank of America Corp.(a) |
719,700 | 10,838,682 | |||
Bank of New York Mellon Corp.(a) |
365,100 | 10,211,847 | |||
SunTrust Banks, Inc.(a) |
239,100 | 4,851,339 | |||
US Bancorp(a) |
263,000 | 5,920,130 | |||
31,821,998 | |||||
Diversified Financial Services3.5% |
|||||
Charles Schwab Corp.(a) |
309,800 | 5,830,436 | |||
Goldman Sachs Group, Inc. |
50,100 | 8,458,884 | |||
JPMorgan Chase & Co.(a) |
311,400 | 12,976,038 | |||
Morgan Stanley |
38,700 | 1,145,520 | |||
28,410,878 | |||||
Insurance1.0% |
|||||
Allstate Corp.(a) |
264,700 | 7,951,588 | |||
68,184,464 | |||||
INDUSTRIAL9.0% |
|||||
Aerospace & Defense1.7% |
|||||
United Technologies Corp.(a) |
197,700 | 13,722,357 | |||
Electrical Components & Equipment0.9% |
|||||
Emerson Electric Co.(a) |
166,500 | 7,092,900 | |||
Electronics0.4% |
|||||
Agilent Technologies, Inc.*(a) |
107,700 | 3,346,239 | |||
MachineryDiversified0.1% |
|||||
Cummins, Inc. |
28,000 | 1,284,080 | |||
Metal Fabrication & Hardware0.3% |
|||||
Precision Castparts Corp.(a) |
20,300 | 2,240,105 | |||
Miscellaneous Manufacturing3.8% |
|||||
Dover Corp.(a) |
205,200 | 8,538,372 | |||
General Electric Co. |
710,600 | 10,751,378 |
The accompanying notes are an integral part of these financial statements.
F-36
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
INDUSTRIAL (Continued) |
|||||
Miscellaneous Manufacturing (Continued) |
|||||
Honeywell International, Inc. |
174,900 | $ | 6,856,080 | ||
Ingersoll-Rand PLC(a) |
123,700 | 4,421,038 | |||
30,566,868 | |||||
Transportation1.8% |
|||||
Burlington Northern Santa Fe Corp. |
115,000 | 11,341,300 | |||
Union Pacific Corp.(a) |
51,700 | 3,303,630 | |||
14,644,930 | |||||
72,897,479 | |||||
TECHNOLOGY11.8% |
|||||
Computers4.8% |
|||||
Apple, Inc.* |
74,400 | 15,687,984 | |||
Dell, Inc.*(a) |
397,800 | 5,712,408 | |||
Hewlett-Packard Co. |
176,800 | 9,106,968 | |||
International Business Machines Corp. |
24,100 | 3,154,690 | |||
NetApp, Inc.*(a) |
159,600 | 5,488,644 | |||
39,150,694 | |||||
Semiconductors2.8% |
|||||
Analog Devices, Inc.(a) |
121,300 | 3,830,654 | |||
Cree, Inc.*(a) |
37,300 | 2,102,601 | |||
Intel Corp. |
814,500 | 16,615,800 | |||
22,549,055 | |||||
Software4.2% |
|||||
Adobe Systems, Inc.*(a) |
221,800 | 8,157,804 | |||
Microsoft Corp.(a) |
642,600 | 19,592,874 | |||
Salesforce.com, Inc.*(a) |
57,400 | 4,234,398 | |||
Solarwinds, Inc.*(a) |
66,300 | 1,525,563 | |||
VMware, Inc. Class A*(a) |
24,600 | 1,042,548 | |||
34,553,187 | |||||
96,252,936 | |||||
UTILITIES2.0% |
|||||
Electric2.0% |
|||||
FPL Group, Inc.(a) |
86,500 | 4,568,930 | |||
Public Service Enterprise Group, Inc.(a) |
344,200 | 11,444,650 | |||
16,013,580 | |||||
TOTAL COMMON STOCK (cost $557,648,090) |
682,576,437 | ||||
The accompanying notes are an integral part of these financial statements.
F-37
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | |||||
CONVERTIBLE PREFERRED0.3% |
||||||
FINANCIAL0.3% |
||||||
Banks0.3% |
||||||
Bank of America Corp. 10.0% 12/31/2049 |
142,100 | $ | 2,120,132 | |||
TOTAL CONVERTIBLE PREFERRED (cost $2,280,648) |
2,120,132 | |||||
INVESTMENT FUNDS14.6% |
||||||
Affiliated Funds14.5% |
||||||
SSgA Russell Large Cap® Index Non-Lending Series Fund Class A(b) |
1,817,583 | 19,131,881 | ||||
SSgA Russell 1000® Index Non-Lending Fund(b) |
494,777 | 6,504,831 | ||||
SSgA Russell Large Cap® Index Securities Lending Series Fund |
2,812,023 | 92,172,479 | ||||
117,809,191 | ||||||
Closed-End Investment Company0.1% |
||||||
John Hancock Bank and Thrift Opportunity Fund(c) |
74,572 | 1,051,465 | ||||
TOTAL INVESTMENT FUNDS (cost $111,853,514) |
118,860,656 | |||||
Units | Value | |||||
SHORT-TERM INVESTMENTS15.1% |
||||||
Affiliated Funds15.1% |
||||||
State Street Bank and Trust Company Short Term Investment Fund(b) |
10,586,315 | 10,586,315 | ||||
State Street Quality D Short Term Investment Fund(b)(d) |
113,688,207 | 111,886,249 | ||||
TOTAL SHORT-TERM INVESTMENTS (cost $124,274,522) |
122,472,564 | |||||
TOTAL INVESTMENTS114.1% (cost $796,056,774) |
926,029,789 | |||||
Liabilities in excess of other assets(14.1)% |
(114,393,839 | ) | ||||
NET ASSETS100.0% |
$ | 811,635,950 | ||||
* | Non-income producing security. |
(a) | All or a portion of security is on loan. |
(b) | Collective investment fund advised by State Street Global Advisors, a division of State Street Bank and Trust Company. |
(c) | This Fund is a regulated investment company (RIC). |
(d) | Represents security purchased with cash collateral received for securities on loan. |
ADRAmerican Depositary Receipt
The accompanying notes are an integral part of these financial statements.
F-38
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Statement of Assets and Liabilities
December 31, 2009 |
||||
Assets | ||||
Investments, at value (cost $231,148,892) |
$ | 277,342,396 | (a) | |
Investments in affiliated issuers, at value (cost $168,948,504) |
166,729,954 | |||
Cash |
31,339 | |||
Receivable for investments sold |
1,476,462 | |||
Receivable for fund units sold |
144,872 | |||
Interest and dividends receivable |
300,916 | |||
Tax reclaims receivable |
1,101 | |||
Total assets |
446,027,040 | |||
Liabilities | ||||
Due to custodian |
1,106 | |||
Payable for cash collateral received on securities loaned |
160,659,953 | |||
Payable for investments purchased |
1,490,432 | |||
Payable for fund units redeemed |
297,061 | |||
Investment advisory fee payable |
123,407 | |||
INGprogram fee payable |
120,516 | |||
Trustee, management and administration fees payable |
23,843 | |||
ABA Retirement Fundsprogram fee payable |
17,148 | |||
Other accruals |
94,953 | |||
Total liabilities |
162,828,419 | |||
Net Assets (equivalent to $13.32 per unit based on 21,254,601 units outstanding) |
$ | 283,198,621 | ||
(a) | Includes securities on loan with a value of $156,458,735 (see Note 6). |
The accompanying notes are an integral part of these financial statements.
F-39
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Statement of Operations
For the period July 2, 2009(a) to December 31, 2009 |
||||
Investment income |
||||
Dividends (net of foreign tax expense of $4,207) |
$ | 2,166,952 | ||
Dividendsaffiliated issuers |
11,942 | |||
Securities lending income, net |
225,244 | |||
Total investment income |
2,404,138 | |||
Expenses |
||||
INGprogram fee |
714,923 | |||
Trustee, management and administration fees |
141,651 | |||
Investment advisory fee |
681,906 | |||
ABA Retirement Fundsprogram fee |
101,432 | |||
State Street Global Marketstransition management |
111,334 | |||
Legal and audit fees |
94,952 | |||
Compliance consultant fees |
55,165 | |||
Reports to unitholders |
31,951 | |||
Registration fees |
13,382 | |||
Other fees |
57,335 | |||
Total expenses |
2,004,031 | |||
Net investment income (loss) |
400,107 | |||
Net realized and unrealized gain (loss) |
||||
Net realized gain (loss) on: |
||||
Investments |
7,006,119 | |||
Investmentsaffiliated issuers |
1,128,164 | |||
Foreign currency transactions |
(10,585 | ) | ||
Net realized gain (loss) |
8,123,698 | |||
Change in net unrealized appreciation (depreciation) on: |
||||
Investments |
43,974,954 | |||
Foreign currency transactions |
125 | |||
Change in net unrealized appreciation (depreciation) |
43,975,079 | |||
Net realized and unrealized gain (loss) |
52,098,777 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 52,498,884 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-40
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Statement of Changes in Net Assets
For the period July 2, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | 400,107 | ||
Net realized gain (loss) from investments and foreign currency transactions |
8,123,698 | |||
Change in net unrealized appreciation (depreciation) |
43,975,079 | |||
Net increase (decrease) in net assets resulting from operations |
52,498,884 | |||
From unitholder transactions |
||||
Proceeds from units issued |
275,621,690 | |||
Cost of units redeemed |
(44,921,953 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
230,699,737 | |||
Net increase (decrease) in net assets |
283,198,621 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 283,198,621 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
24,956,782 | |||
Redeemed |
(3,702,181 | ) | ||
Outstanding-end of period |
21,254,601 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-41
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period July 2, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | 0.11 | ||
Expenses() |
(0.09 | ) | ||
Net investment income (loss) |
0.02 | |||
Net realized and unrealized gain (loss) |
2.30 | |||
Net increase (decrease) in unit value |
2.32 | |||
Net asset value at beginning of period |
11.00 | |||
Net asset value at end of period |
$ | 13.32 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
1.44 | % | ||
Ratio of net investment income (loss) to average net assets* |
0.29 | % | ||
Portfolio turnover** |
61 | % | ||
Total return** |
21.09 | % | ||
Net assets at end of period (in thousands) |
$ | 283,199 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| With respect to a portion of the Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-42
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK97.9% |
|||||
BASIC MATERIALS4.3% |
|||||
Chemicals2.8% |
|||||
A. Schulman, Inc.(a) |
39,200 | $ | 791,056 | ||
Airgas, Inc.(a) |
18,600 | 885,360 | |||
Albemarle Corp.(a) |
15,300 | 556,461 | |||
Cabot Corp.(a) |
23,900 | 626,897 | |||
Celanese Corp. Series A(a) |
26,800 | 860,280 | |||
CF Industries Holdings, Inc.(a) |
4,600 | 417,588 | |||
Eastman Chemical Co.(a) |
14,600 | 879,504 | |||
Ecolab, Inc.(a) |
4,100 | 182,778 | |||
FMC Corp.(a) |
5,800 | 323,408 | |||
Intrepid Potash, Inc.*(a) |
7,984 | 232,893 | |||
Landec Corp.*(a) |
38,875 | 242,580 | |||
Lubrizol Corp.(a) |
8,100 | 590,895 | |||
OM Group, Inc.*(a) |
9,400 | 295,066 | |||
PolyOne Corp.*(a) |
115,437 | 862,314 | |||
Zoltek Cos., Inc.*(a) |
27,025 | 256,738 | |||
8,003,818 | |||||
Forest Products & Paper0.7% |
|||||
Buckeye Technologies, Inc.*(a) |
73,117 | 713,622 | |||
Domtar Corp.* |
5,000 | 277,050 | |||
Glatfelter |
48,200 | 585,630 | |||
Rock-Tenn Co.(a) |
3,400 | 171,394 | |||
Schweitzer-Mauduit International, Inc.(a) |
3,950 | 277,883 | |||
2,025,579 | |||||
Iron/Steel0.6% |
|||||
Allegheny Technologies, Inc.(a) |
4,700 | 210,419 | |||
Carpenter Technology Corp. |
10,000 | 269,500 | |||
Cliffs Natural Resources, Inc.(a) |
11,200 | 516,208 | |||
Schnitzer Steel Industries, Inc. Class A(a) |
12,900 | 615,330 | |||
1,611,457 | |||||
Mining0.2% |
|||||
Brush Engineered Materials, Inc.*(a) |
22,300 | 413,442 | |||
Thompson Creek Metals Co., Inc.*(a) |
26,600 | 311,752 | |||
725,194 | |||||
12,366,048 | |||||
The accompanying notes are an integral part of these financial statements.
F-43
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMUNICATIONS6.0% |
|||||
Advertising0.1% |
|||||
Omnicom Group, Inc.(a) |
7,100 | $ | 277,965 | ||
Internet2.0% |
|||||
Akamai Technologies, Inc.*(a) |
24,900 | 630,717 | |||
Archipelago Learning, Inc.*(a) |
12,580 | 260,406 | |||
Baidu, Inc.(ADR)*(a) |
1,250 | 514,037 | |||
Ctrip.com International Ltd. (ADR)* |
3,550 | 255,103 | |||
DealerTrack Holdings, Inc.*(a) |
25,950 | 487,601 | |||
Digital River, Inc.*(a) |
13,700 | 369,763 | |||
EarthLink, Inc.(a) |
23,100 | 191,961 | |||
Equinix, Inc.*(a) |
7,400 | 785,510 | |||
F5 Networks, Inc.*(a) |
16,125 | 854,302 | |||
McAfee, Inc.*(a) |
5,400 | 219,078 | |||
MercadoLibre, Inc.*(a) |
5,550 | 287,879 | |||
Perfect World Co., Ltd. (ADR)* |
7,500 | 295,800 | |||
Sapient Corp.*(a) |
55,650 | 460,226 | |||
5,612,383 | |||||
Media0.8% |
|||||
DISH Network Corp. Class A |
14,400 | 299,088 | |||
FactSet Research Systems, Inc.(a) |
2,800 | 184,436 | |||
Gannett Co., Inc.(a) |
33,200 | 493,020 | |||
Mediacom Communications Corp. Class A*(a) |
89,769 | 401,267 | |||
Time Warner Cable, Inc.(a) |
11,100 | 459,429 | |||
Viacom, Inc. Class B*(a) |
16,900 | 502,437 | |||
2,339,677 | |||||
Telecommunication3.1% |
|||||
ADTRAN, Inc.(a) |
56,300 | 1,269,565 | |||
Amdocs Ltd.* |
36,100 | 1,029,933 | |||
American Tower Corp. Class A*(a) |
9,100 | 393,211 | |||
Anaren, Inc.*(a) |
40,500 | 609,525 | |||
Atheros Communications*(a) |
10,075 | 344,968 | |||
Atlantic Tele-Network, Inc. |
5,000 | 275,050 | |||
Cincinnati Bell, Inc.*(a) |
211,900 | 731,055 | |||
CommScope, Inc.*(a) |
6,300 | 167,139 | |||
Harris Corp.(a) |
9,100 | 432,705 | |||
JDS Uniphase Corp.*(a) |
64,750 | 534,187 | |||
NII Holdings, Inc.*(a) |
28,900 | 970,462 | |||
NTELOS Holdings Corp.(a) |
35,400 | 630,828 |
The accompanying notes are an integral part of these financial statements.
F-44
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMUNICATIONS (Continued) |
|||||
Telecommunication (Continued) |
|||||
Qwest Communications International, Inc.(a) |
220,200 | $ | 927,042 | ||
Symmetricom, Inc.*(a) |
84,973 | 441,860 | |||
8,757,530 | |||||
16,987,555 | |||||
CONSUMER, CYCLICAL12.7% |
|||||
Airlines0.7% |
|||||
Airtran Holdings, Inc.*(a) |
106,538 | 556,128 | |||
Copa Holdings SA Class A |
4,000 | 217,880 | |||
Republic Airways Holdings, Inc.*(a) |
46,400 | 342,896 | |||
SkyWest, Inc.(a) |
59,100 | 999,972 | |||
2,116,876 | |||||
Apparel0.8% |
|||||
Columbia Sportswear Co.(a) |
15,400 | 601,216 | |||
Guess?, Inc.(a) |
7,050 | 298,215 | |||
Iconix Brand Group, Inc.*(a) |
26,975 | 341,234 | |||
Jones Apparel Group, Inc.(a) |
23,500 | 377,410 | |||
Perry Ellis International, Inc.* |
19,000 | 286,140 | |||
Under Armour, Inc. Class A*(a) |
9,800 | 267,246 | |||
2,171,461 | |||||
Auto Parts & Equipment0.5% |
|||||
Autoliv, Inc.(a) |
12,200 | 528,992 | |||
Federal-Mogul Corp.*(a) |
14,126 | 244,380 | |||
Titan International, Inc.(a) |
30,448 | 246,933 | |||
WABCO Holdings, Inc.(a) |
17,000 | 438,430 | |||
1,458,735 | |||||
Distribution/Wholesale1.8% |
|||||
Beacon Roofing Supply, Inc.*(a) |
37,450 | 599,200 | |||
Ingram Micro, Inc. Class A* |
8,900 | 155,305 | |||
LKQ Corp.*(a) |
62,975 | 1,233,680 | |||
Owens & Minor, Inc.(a) |
41,200 | 1,768,716 | |||
Tech Data Corp.*(a) |
7,900 | 368,614 | |||
Titan Machinery, Inc.*(a) |
19,429 | 224,211 | |||
United Stationers, Inc.*(a) |
3,800 | 216,030 | |||
W.W. Grainger, Inc.(a) |
4,650 | 450,260 | |||
5,016,016 | |||||
The accompanying notes are an integral part of these financial statements.
F-45
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
CONSUMER, CYCLICAL (Continued) |
|||||
Entertainment0.2% |
|||||
DreamWorks Animation SKG, Inc. Class A*(a) |
7,500 | $ | 299,625 | ||
Pinnacle Entertainment, Inc.*(a) |
43,841 | 393,692 | |||
693,317 | |||||
Home Furnishings0.7% |
|||||
DTS, Inc.*(a) |
8,298 | 283,874 | |||
Harman International Industries, Inc.(a) |
5,900 | 208,152 | |||
La-Z-Boy, Inc.*(a) |
43,100 | 410,743 | |||
Tempur-Pedic International, Inc.*(a) |
17,425 | 411,753 | |||
Whirlpool Corp.(a) |
6,700 | 540,422 | |||
1,854,944 | |||||
Housewares0.4% |
|||||
Newell Rubbermaid, Inc.(a) |
28,300 | 424,783 | |||
Toro Co.(a) |
13,800 | 576,978 | |||
1,001,761 | |||||
Leisure Time0.2% |
|||||
LIFE TIME FITNESS, Inc.*(a) |
22,827 | 569,077 | |||
WMS Industries, Inc.*(a) |
3,400 | 136,000 | |||
705,077 | |||||
Lodging0.6% |
|||||
Orient-Express Hotels Ltd. Class A*(a) |
44,645 | 452,700 | |||
Wyndham Worldwide Corp.(a) |
49,600 | 1,000,432 | |||
Wynn Resorts Ltd.(a) |
4,250 | 247,478 | |||
1,700,610 | |||||
Office Furnishings0.2% |
|||||
Knoll, Inc.(a) |
44,100 | 455,553 | |||
Retail6.3% |
|||||
American Eagle Outfitters, Inc.(a) |
12,500 | 212,250 | |||
Bed Bath & Beyond, Inc.*(a) |
13,500 | 521,505 | |||
Big Lots, Inc.*(a) |
12,600 | 365,148 | |||
Bob Evans Farms, Inc.(a) |
45,800 | 1,325,910 | |||
Brinker International, Inc.(a) |
15,600 | 232,752 | |||
Buffalo Wild Wings, Inc.*(a) |
6,008 | 241,942 | |||
Cabelas, Inc.*(a) |
46,600 | 664,516 | |||
Caseys General Stores, Inc.(a) |
25,500 | 813,960 |
The accompanying notes are an integral part of these financial statements.
F-46
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
CONSUMER, CYCLICAL (Continued) |
|||||
Retail (Continued) |
|||||
Cash America International, Inc.(a) |
26,100 | $ | 912,456 | ||
Chicos FAS, Inc.*(a) |
30,300 | 425,715 | |||
Childrens Place Retail Stores, Inc.*(a) |
6,500 | 214,565 | |||
Chipotle Mexican Grill, Inc.* |
2,060 | 181,610 | |||
Cracker Barrel Old Country Store, Inc.(a) |
27,200 | 1,033,328 | |||
Darden Restaurants, Inc.(a) |
5,100 | 178,857 | |||
Dollar Tree, Inc.*(a) |
4,400 | 212,520 | |||
Foot Locker, Inc.(a) |
62,600 | 697,364 | |||
Jack in the Box, Inc.*(a) |
7,700 | 151,459 | |||
Kohls Corp.*(a) |
16,200 | 873,666 | |||
Lululemon Athletica, Inc.*(a) |
9,960 | 299,796 | |||
Nu Skin Enterprises, Inc. Class A(a) |
15,750 | 423,202 | |||
OReilly Automotive, Inc.*(a) |
4,600 | 175,352 | |||
PetSmart, Inc.(a) |
11,400 | 304,266 | |||
Phillips-Van Heusen Corp. |
25,400 | 1,033,272 | |||
RadioShack Corp.(a) |
13,700 | 267,150 | |||
Regis Corp.(a) |
36,600 | 569,862 | |||
Sears Holdings Corp.*(a) |
2,700 | 225,315 | |||
Stage Stores, Inc.(a) |
53,800 | 664,968 | |||
Starbucks Corp.*(a) |
14,400 | 332,064 | |||
Stein Mart, Inc.*(a) |
22,000 | 234,520 | |||
Texas Roadhouse, Inc.*(a) |
20,425 | 229,373 | |||
The Cheesecake Factory, Inc.*(a) |
28,900 | 623,951 | |||
The Finish Line, Inc. Class A(a) |
94,900 | 1,190,995 | |||
The Gap, Inc.(a) |
22,900 | 479,755 | |||
The Mens Wearhouse, Inc.(a) |
21,500 | 452,790 | |||
TJX Cos., Inc.(a) |
15,600 | 570,180 | |||
Ulta Salon, Cosmetics & Fragrance, Inc.*(a) |
13,324 | 241,964 | |||
World Fuel Services Corp.(a) |
14,400 | 385,776 | |||
17,964,074 | |||||
Storage & Warehousing0.1% |
|||||
Mobile Mini, Inc.*(a) |
17,300 | 243,757 | |||
Textiles0.1% |
|||||
UniFirst Corp. |
4,400 | 211,684 | |||
Toys/Games/Hobbies0.1% |
|||||
RC2 Corp.*(a) |
19,000 | 280,250 | |||
35,874,115 | |||||
The accompanying notes are an integral part of these financial statements.
F-47
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
CONSUMER, NON-CYCLICAL20.5% |
|||||
Agriculture0.4% |
|||||
Archer-Daniels-Midland Co.(a) |
10,300 | $ | 322,493 | ||
Bunge Ltd.(a) |
3,600 | 229,788 | |||
Reynolds American, Inc.(a) |
10,150 | 537,646 | |||
1,089,927 | |||||
Beverages0.4% |
|||||
Coca-Cola Enterprises, Inc.(a) |
8,400 | 178,080 | |||
Dr Pepper Snapple Group, Inc.(a) |
9,400 | 266,020 | |||
Hansen Natural Corp.*(a) |
15,600 | 599,040 | |||
1,043,140 | |||||
Biotechnology1.1% |
|||||
AMAG Pharmaceuticals, Inc.*(a) |
17,494 | 665,297 | |||
Amylin Pharmaceuticals, Inc.*(a) |
30,350 | 430,666 | |||
Genzyme Corp.*(a) |
12,700 | 622,427 | |||
Human Genome Sciences, Inc.*(a) |
19,800 | 605,880 | |||
Illumina, Inc.*(a) |
5,200 | 159,380 | |||
InterMune, Inc.*(a) |
10,500 | 136,920 | |||
Life Technologies Corp.*(a) |
8,000 | 417,840 | |||
Millipore Corp.*(a) |
2,300 | 166,405 | |||
3,204,815 | |||||
Commercial Services6.3% |
|||||
Aarons, Inc.(a) |
15,700 | 435,361 | |||
Advance America Cash Advance Centers, Inc.(a) |
64,000 | 355,840 | |||
Aegean Marine Petroleum Network, Inc.(a) |
23,512 | 646,110 | |||
AerCap Holdings NV*(a) |
64,533 | 584,669 | |||
Alliance Data Systems Corp.*(a) |
6,450 | 416,606 | |||
American Public Education, Inc.*(a) |
21,275 | 731,009 | |||
Capella Education Co.*(a) |
6,300 | 474,390 | |||
CDI Corp.(a) |
35,400 | 458,430 | |||
Chemed Corp.(a) |
20,500 | 983,385 | |||
China Real Estate Information Corp.(ADR)*(a) |
31,517 | 346,057 | |||
Convergys Corp.*(a) |
38,000 | 408,500 | |||
Corporate Executive Board Co. |
11,092 | 253,119 | |||
CoStar Group, Inc.*(a) |
8,525 | 356,089 | |||
Deluxe Corp.(a) |
54,000 | 798,660 | |||
DynCorp International, Inc. Class A*(a) |
37,800 | 542,430 | |||
Education Management Corp.*(a) |
33,550 | 738,435 | |||
Ennis, Inc.(a) |
41,691 | 699,992 |
The accompanying notes are an integral part of these financial statements.
F-48
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
CONSUMER, NON-CYCLICAL (Continued) |
|||||
Commercial Services (Continued) |
|||||
Forrester Research, Inc.*(a) |
17,650 | $ | 458,018 | ||
FTI Consulting, Inc.*(a) |
12,275 | 578,889 | |||
Global Payments, Inc. |
3,000 | 161,580 | |||
K12, Inc.*(a) |
15,875 | 321,786 | |||
MAXIMUS, Inc.(a) |
11,725 | 586,250 | |||
McGrath Rentcorp(a) |
9,000 | 201,240 | |||
Monster Worldwide, Inc.*(a) |
13,850 | 240,990 | |||
PHH Corp.*(a) |
27,000 | 434,970 | |||
Quanta Services, Inc.*(a) |
24,300 | 506,412 | |||
Resources Connection, Inc.*(a) |
62,750 | 1,331,555 | |||
Ritchie Bros. Auctioneers, Inc.(a) |
26,315 | 590,245 | |||
Robert Half International, Inc.(a) |
13,900 | 371,547 | |||
Rollins, Inc.(a) |
48,150 | 928,332 | |||
SAIC, Inc.*(a) |
9,200 | 174,248 | |||
Strayer Education, Inc.(a) |
3,950 | 839,335 | |||
SuccessFactors, Inc.*(a) |
14,150 | 234,607 | |||
United Rentals, Inc.*(a) |
14,500 | 142,245 | |||
Universal Technical Institute, Inc.*(a) |
11,950 | 241,390 | |||
VistaPrint NV* |
4,057 | 229,870 | |||
17,802,591 | |||||
Cosmetics/Personal Care0.5% |
|||||
Alberto-Culver Co.(a) |
7,900 | 231,391 | |||
Avon Products, Inc.(a) |
15,500 | 488,250 | |||
Bare Escentuals, Inc.*(a) |
30,100 | 368,123 | |||
Herbalife Ltd.(a) |
6,700 | 271,819 | |||
1,359,583 | |||||
Food2.3% |
|||||
Cal-Maine Foods, Inc.(a) |
8,200 | 279,456 | |||
ConAgra Foods, Inc.(a) |
27,700 | 638,485 | |||
Del Monte Foods Co.(a) |
29,600 | 335,664 | |||
Kroger Co.(a) |
7,900 | 162,187 | |||
Lancaster Colony Corp.(a) |
15,500 | 770,350 | |||
Nash Finch Co.(a) |
24,300 | 901,287 | |||
Safeway, Inc.(a) |
19,900 | 423,671 | |||
Sara Lee Corp.(a) |
73,000 | 889,140 | |||
Smart Balance, Inc.*(a) |
81,981 | 491,886 | |||
The J.M. Smucker Co.(a) |
13,250 | 818,187 | |||
United Natural Foods, Inc.*(a) |
34,600 | 925,204 | |||
6,635,517 | |||||
The accompanying notes are an integral part of these financial statements.
F-49
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
CONSUMER, NON-CYCLICAL (Continued) |
|||||
Healthcare-Products3.8% |
|||||
Abaxis, Inc.*(a) |
26,142 | $ | 667,928 | ||
AngioDynamics, Inc.*(a) |
43,250 | 695,460 | |||
Beckman Coulter, Inc.(a) |
6,100 | 399,184 | |||
Cepheid, Inc.*(a) |
84,600 | 1,055,808 | |||
Edwards Lifesciences Corp.* |
3,100 | 269,235 | |||
Hill-Rom Holdings, Inc.(a) |
19,700 | 472,603 | |||
Intuitive Surgical, Inc.*(a) |
2,850 | 864,462 | |||
Kinetic Concepts, Inc.*(a) |
6,600 | 248,490 | |||
Masimo Corp.*(a) |
29,075 | 884,462 | |||
MEDTOX Scientific, Inc.*(a) |
12,424 | 96,286 | |||
Meridian Bioscience, Inc.(a) |
28,400 | 612,020 | |||
Neogen Corp.*(a) |
25,530 | 602,763 | |||
NuVasive, Inc.*(a) |
14,629 | 467,835 | |||
QIAGEN NV*(a) |
28,900 | 645,048 | |||
STERIS Corp.(a) |
19,400 | 542,618 | |||
Techne Corp.(a) |
9,825 | 673,602 | |||
The Cooper Cos., Inc.(a) |
17,800 | 678,536 | |||
Thoratec Corp.*(a) |
28,198 | 759,090 | |||
VCA Antech, Inc.*(a) |
8,500 | 211,820 | |||
10,847,250 | |||||
Healthcare-Services2.0% |
|||||
Amedisys, Inc.*(a) |
8,725 | 423,686 | |||
Bio-Reference Laboratories, Inc.*(a) |
10,960 | 429,523 | |||
Health Management Associates, Inc. Class A*(a) |
122,300 | 889,121 | |||
Health Net, Inc.*(a) |
14,200 | 330,718 | |||
Healthsouth Corp.*(a) |
31,000 | 581,870 | |||
Healthspring, Inc.*(a) |
36,300 | 639,243 | |||
IPC The Hospitalist Co.*(a) |
21,796 | 724,717 | |||
MEDNAX, Inc.* |
15,175 | 912,169 | |||
Phase Forward, Inc.*(a) |
23,300 | 357,655 | |||
Universal Health Services, Inc. Class B(a) |
12,400 | 378,200 | |||
5,666,902 | |||||
Household Products/Wares1.2% |
|||||
American Greetings Corp. Class A(a) |
27,600 | 601,404 | |||
Fortune Brands, Inc.(a) |
12,100 | 522,720 | |||
Jarden Corp.(a) |
19,700 | 608,927 | |||
Oil-Dri Corp. of America(a) |
22,400 | 347,200 | |||
Tupperware Brands Corp.(a) |
26,900 | 1,252,733 | |||
3,332,984 | |||||
The accompanying notes are an integral part of these financial statements.
F-50
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American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
CONSUMER, NON-CYCLICAL (Continued) |
|||||
Pharmaceuticals2.5% |
|||||
AmerisourceBergen Corp. |
15,500 | $ | 404,085 | ||
BioMarin Pharmaceutical, Inc.*(a) |
46,180 | 868,646 | |||
Biovail Corp.(a) |
30,400 | 424,384 | |||
Cardiome Pharma Corp.*(a) |
88,496 | 393,807 | |||
Catalyst Health Solutions, Inc.*(a) |
8,000 | 291,760 | |||
Durect Corp.*(a) |
112,380 | 277,579 | |||
Endo Pharmaceuticals Holdings, Inc.* |
21,700 | 445,067 | |||
Forest Laboratories, Inc.*(a) |
19,700 | 632,567 | |||
McKesson Corp. |
4,000 | 250,000 | |||
Medivation, Inc.*(a) |
4,050 | 152,483 | |||
Mylan, Inc.*(a) |
64,600 | 1,190,578 | |||
Par Pharmaceutical Cos., Inc.*(a) |
14,925 | 403,870 | |||
POZEN, Inc.*(a) |
48,032 | 287,712 | |||
United Therapeutics Corp.*(a) |
13,900 | 731,835 | |||
USANA Health Sciences, Inc.*(a) |
5,250 | 167,475 | |||
XenoPort, Inc.*(a) |
8,750 | 162,400 | |||
7,084,248 | |||||
58,066,957 | |||||
ENERGY6.1% |
|||||
Coal0.4% |
|||||
Alpha Natural Resources, Inc.*(a) |
18,550 | 804,699 | |||
Massey Energy Co.(a) |
4,200 | 176,442 | |||
981,141 | |||||
Energy-Alternate Sources0.2% |
|||||
First Solar, Inc.*(a) |
2,950 | 399,430 | |||
Oil & Gas3.9% |
|||||
Berry Petroleum Co. Class A(a) |
14,900 | 434,335 | |||
Cabot Oil & Gas Corp.(a) |
3,900 | 170,001 | |||
Comstock Resources, Inc.*(a) |
11,475 | 465,541 | |||
Concho Resources, Inc.*(a) |
6,700 | 300,830 | |||
Contango Oil & Gas Co.*(a) |
8,200 | 385,482 | |||
Continental Resources, Inc.*(a) |
9,600 | 411,744 | |||
Denbury Resources, Inc.*(a) |
12,700 | 187,960 | |||
Diamond Offshore Drilling, Inc.(a) |
3,600 | 354,312 | |||
GMX Resources, Inc.*(a) |
25,632 | 352,184 | |||
Harvest Natural Resources, Inc.*(a) |
61,584 | 325,779 | |||
Holly Corp.(a) |
25,200 | 645,876 |
The accompanying notes are an integral part of these financial statements.
F-51
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
ENERGY (Continued) |
|||||
Oil & Gas (Continued) |
|||||
InterOil Corp.*(a) |
6,200 | $ | 476,222 | ||
Newfield Exploration Co.*(a) |
22,750 | 1,097,232 | |||
Noble Corp. |
21,300 | 866,910 | |||
Petrohawk Energy Corp.*(a) |
36,412 | 873,524 | |||
PetroQuest Energy, Inc.*(a) |
43,085 | 264,111 | |||
Quicksilver Resources, Inc.*(a) |
35,289 | 529,688 | |||
SandRidge Energy, Inc.*(a) |
74,961 | 706,882 | |||
St. Mary Land & Exploration Co.(a) |
22,700 | 777,248 | |||
Sunoco, Inc.(a) |
12,700 | 331,470 | |||
Ultra Petroleum Corp.*(a) |
8,200 | 408,852 | |||
Valero Energy Corp.(a) |
9,400 | 157,450 | |||
Whiting Petroleum Corp.*(a) |
10,400 | 743,080 | |||
11,266,713 | |||||
Oil & Gas Services1.3% |
|||||
Cameron International Corp.*(a) |
4,400 | 183,920 | |||
Core Laboratories NV(a) |
5,650 | 667,378 | |||
Global Industries Ltd.*(a) |
50,000 | 356,500 | |||
National-Oilwell Varco, Inc.(a) |
13,450 | 593,011 | |||
Oceaneering International, Inc.*(a) |
11,950 | 699,314 | |||
Oil States International, Inc.*(a) |
11,200 | 440,048 | |||
SEACOR Holdings, Inc.*(a) |
2,900 | 221,125 | |||
Smith International, Inc.(a) |
23,650 | 642,570 | |||
3,803,866 | |||||
Pipelines0.3% |
|||||
El Paso Corp.(a) |
45,100 | 443,333 | |||
Questar Corp.(a) |
10,300 | 428,171 | |||
871,504 | |||||
17,322,654 | |||||
FINANCIAL18.6% |
|||||
Banks4.4% |
|||||
Banco Latinoamericano de Comercio Exterior SA Class E |
48,300 | 671,370 | |||
Bank of the Ozarks, Inc.(a) |
32,100 | 939,567 | |||
BB&T Corp.(a) |
6,300 | 159,831 | |||
Cass Information Systems, Inc.(a) |
13,267 | 403,317 | |||
Community Bank System, Inc.(a) |
27,300 | 527,163 | |||
CVB Financial Corp.(a) |
24,600 | 212,544 | |||
Fulton Financial Corp.(a) |
61,400 | 535,408 |
The accompanying notes are an integral part of these financial statements.
F-52
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
FINANCIAL (Continued) |
|||||
Banks (Continued) |
|||||
Huntington Bancshares, Inc.(a) |
42,400 | $ | 154,760 | ||
Independent Bank Corp. (MA)(a) |
8,100 | 169,209 | |||
International Bancshares Corp.(a) |
10,900 | 206,337 | |||
Lakeland Financial Corp.(a) |
31,600 | 545,100 | |||
NBT Bancorp, Inc.(a) |
19,200 | 391,104 | |||
Northwest Bancshares, Inc.(a) |
24,850 | 281,302 | |||
Oriental Financial Group, Inc.(a) |
33,000 | 356,400 | |||
PacWest Bancorp(a) |
31,000 | 624,650 | |||
Park National Corp.(a) |
8,400 | 494,592 | |||
PNC Financial Services Group, Inc.(a) |
9,800 | 517,342 | |||
Prosperity Bancshares, Inc.(a) |
34,000 | 1,375,980 | |||
Republic Bancorp, Inc. Class A(a) |
17,500 | 360,500 | |||
Signature Bank*(a) |
17,550 | 559,845 | |||
Tompkins Financial Corp.(a) |
8,200 | 332,100 | |||
United Bankshares, Inc.(a) |
11,300 | 225,661 | |||
Westamerica Bancorp(a) |
11,700 | 647,829 | |||
Whitney Holding Corp.(a) |
48,000 | 437,280 | |||
Wintrust Financial Corp.(a) |
46,400 | 1,428,656 | |||
12,557,847 | |||||
Diversified Financial Services3.6% |
|||||
Ameriprise Financial, Inc.(a) |
43,600 | 1,692,552 | |||
Discover Financial Services(a) |
59,450 | 874,509 | |||
Franklin Resources, Inc.(a) |
7,300 | 769,055 | |||
GFI Group, Inc.(a) |
41,000 | 187,370 | |||
Greenhill & Co., Inc.(a) |
4,882 | 391,732 | |||
IntercontinentalExchange, Inc.*(a) |
3,650 | 409,895 | |||
Invesco Ltd.(a) |
15,800 | 371,142 | |||
National Financial Partners Corp.*(a) |
48,700 | 393,983 | |||
Nelnet, Inc. Class A(a) |
18,000 | 310,140 | |||
Piper Jaffray Cos., Inc.*(a) |
13,300 | 673,113 | |||
Portfolio Recovery Associates, Inc.*(a) |
19,550 | 877,404 | |||
Raymond James Financial, Inc.(a) |
24,600 | 584,742 | |||
Solar Cayman Ltd.*(b) |
33,700 | 308,692 | |||
Stifel Financial Corp.*(a) |
14,550 | 861,942 | |||
SWS Group, Inc.(a) |
25,400 | 307,340 | |||
Waddell & Reed Financial, Inc. Class A(a) |
7,800 | 238,212 | |||
World Acceptance Corp.*(a) |
22,600 | 809,758 | |||
10,061,581 | |||||
The accompanying notes are an integral part of these financial statements.
F-53
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
FINANCIAL (Continued) |
|||||
Insurance6.2% |
|||||
ACE Ltd.* |
11,400 | $ | 574,560 | ||
Allied World Assurance Co. Holdings Ltd.(a) |
5,300 | 244,171 | |||
Allstate Corp.(a) |
10,600 | 318,424 | |||
American Equity Investment Life Holding Co.(a) |
85,964 | 639,572 | |||
American Financial Group, Inc.(a) |
19,800 | 494,010 | |||
American Physicians Capital, Inc.(a) |
13,066 | 396,161 | |||
Arch Capital Group Ltd.*(a) |
9,100 | 651,105 | |||
Assured Guaranty Ltd.(a) |
15,100 | 328,576 | |||
Chubb Corp.(a) |
10,300 | 506,554 | |||
Cincinnati Financial Corp.(a) |
8,700 | 228,288 | |||
CNA Surety Corp.*(a) |
36,537 | 544,036 | |||
Delphi Financial Group, Inc. Class A(a) |
8,500 | 190,145 | |||
Endurance Specialty Holdings Ltd.(a) |
26,700 | 994,041 | |||
Enstar Group Ltd.*(a) |
5,000 | 365,100 | |||
Horace Mann Educators Corp.(a) |
12,000 | 150,000 | |||
Infinity Property & Casualty Corp.(a) |
9,600 | 390,144 | |||
Loews Corp. |
15,800 | 574,330 | |||
Max Capital Group Ltd.(a) |
31,700 | 706,910 | |||
MGIC Investment Corp.*(a) |
113,750 | 657,475 | |||
Montpelier Re Holdings Ltd.(a) |
74,200 | 1,285,144 | |||
Platinum Underwriters Holdings Ltd.(a) |
19,500 | 746,655 | |||
Principal Financial Group, Inc.(a) |
14,400 | 346,176 | |||
Prudential Financial, Inc. |
18,100 | 900,656 | |||
Safety Insurance Group, Inc.(a) |
9,500 | 344,185 | |||
Selective Insurance Group, Inc.(a) |
20,000 | 329,000 | |||
StanCorp Financial Group, Inc.(a) |
26,800 | 1,072,536 | |||
Tower Group, Inc.(a) |
32,800 | 767,848 | |||
United Fire & Casualty Co.(a) |
15,400 | 280,742 | |||
Universal American Financial Corp.*(a) |
21,600 | 252,720 | |||
Unum Group(a) |
34,700 | 677,344 | |||
White Mountains Insurance Group Ltd.(a) |
1,800 | 598,788 | |||
XL Capital Ltd. Class A(a) |
51,700 | 947,661 | |||
17,503,057 | |||||
REITS3.2% |
|||||
American Campus Communities, Inc.(a) |
20,900 | 587,290 | |||
Annaly Capital Management, Inc.(a) |
28,000 | 485,800 | |||
Boston Properties, Inc.(a) |
8,600 | 576,802 | |||
Brandywine Realty Trust(a) |
49,100 | 559,740 | |||
Capstead Mortgage Corp.(a) |
18,100 | 247,065 |
The accompanying notes are an integral part of these financial statements.
F-54
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
REITS (Continued) |
|||||
DiamondRock Hospitality Co.(a) |
104,300 | $ | 883,421 | ||
Equity Lifestyle Properties, Inc.(a) |
9,100 | 459,277 | |||
Health Care REIT, Inc.(a) |
4,500 | 199,440 | |||
Home Properties, Inc.(a) |
6,800 | 324,428 | |||
HRPT Properties Trust(a) |
61,700 | 399,199 | |||
Inland Real Estate Corp.(a) |
62,400 | 508,560 | |||
Mack-Cali Realty Corp.(a) |
30,200 | 1,044,014 | |||
MFA Financial, Inc.(a) |
92,200 | 677,670 | |||
Parkway Properties, Inc.(a) |
20,200 | 420,564 | |||
Pennsylvania Real Estate Investment Trust(a) |
68,700 | 581,202 | |||
Senior Housing Properties Trust(a) |
12,000 | 262,440 | |||
Simon Property Group, Inc.(a) |
12,192 | 972,922 | |||
9,189,834 | |||||
Savings & Loans1.2% |
|||||
Astoria Financial Corp.(a) |
49,400 | 614,042 | |||
First Niagara Financial Group, Inc.(a) |
72,600 | 1,009,866 | |||
Hudson City Bancorp, Inc.(a) |
63,600 | 873,228 | |||
Peoples United Financial, Inc.(a) |
25,400 | 424,180 | |||
Provident Financial Services, Inc.(a) |
46,300 | 493,095 | |||
3,414,411 | |||||
52,726,730 | |||||
INDUSTRIAL14.9% |
|||||
Aerospace & Defense1.8% |
|||||
AAR Corp.*(a) |
24,700 | 567,606 | |||
Aerovironment, Inc.*(a) |
22,025 | 640,487 | |||
BE Aerospace, Inc.*(a) |
8,400 | 197,400 | |||
Esterline Technologies Corp.* |
3,900 | 159,003 | |||
L-3 Communications Holdings, Inc.(a) |
6,900 | 599,955 | |||
National Presto Industries, Inc.(a) |
2,500 | 273,075 | |||
Northrop Grumman Corp. |
6,100 | 340,685 | |||
Raytheon Co.(a) |
10,000 | 515,200 | |||
Spirit AeroSystems Holdings, Inc. Class A*(a) |
26,650 | 529,269 | |||
Teledyne Technologies, Inc.*(a) |
6,400 | 245,504 | |||
Triumph Group, Inc.(a) |
18,800 | 907,100 | |||
4,975,284 | |||||
Building Materials0.5% |
|||||
Comfort Systems USA, Inc.(a) |
53,764 | 663,448 | |||
Gibraltar Industries, Inc.*(a) |
25,900 | 407,407 | |||
Owens Corning, Inc.*(a) |
12,300 | 315,372 | |||
1,386,227 | |||||
The accompanying notes are an integral part of these financial statements.
F-55
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
INDUSTRIAL (Continued) |
|||||
Electrical Components & Equipment0.8% |
|||||
Advanced Energy Industries, Inc.*(a) |
27,819 | $ | 419,511 | ||
Ametek, Inc.(a) |
8,800 | 336,512 | |||
Belden, Inc. |
57,800 | 1,266,976 | |||
EnerSys*(a) |
15,000 | 328,050 | |||
2,351,049 | |||||
Electronics3.0% |
|||||
Amphenol Corp. Class A(a) |
9,600 | 443,328 | |||
Bel Fuse, Inc. Class B(a) |
10,000 | 214,900 | |||
CTS Corp.(a) |
65,145 | 626,695 | |||
FARO Technologies, Inc.*(a) |
13,625 | 292,120 | |||
Gentex Corp.(a) |
51,425 | 917,936 | |||
Jabil Circuit, Inc.(a) |
24,100 | 418,617 | |||
Methode Electronics, Inc.(a) |
31,500 | 273,420 | |||
Napco Security Technologies, Inc.*(a) |
23,400 | 39,078 | |||
National Instruments Corp.(a) |
32,575 | 959,334 | |||
Newport Corp.*(a) |
93,821 | 862,215 | |||
Park Electrochemical Corp.(a) |
31,000 | 856,840 | |||
Technitrol, Inc. |
29,000 | 127,020 | |||
Thermo Fisher Scientific, Inc.*(a) |
11,500 | 548,435 | |||
Thomas & Betts Corp.* |
13,700 | 490,323 | |||
Tyco Electronics Ltd. |
55,400 | 1,360,069 | |||
Vishay Intertechnology, Inc.*(a) |
22,700 | 189,545 | |||
8,619,875 | |||||
Engineering & Construction1.1% |
|||||
Aecom Technology Corp.*(a) |
8,300 | 228,250 | |||
Chicago Bridge & Iron Co. NV (NY Registered Shares)*(a) |
58,500 | 1,182,870 | |||
EMCOR Group, Inc.*(a) |
30,200 | 812,380 | |||
Fluor Corp.(a) |
10,100 | 454,904 | |||
KBR, Inc. |
12,300 | 233,700 | |||
McDermott International, Inc.* |
13,300 | 319,333 | |||
3,231,437 | |||||
Environmental Control0.4% |
|||||
Clean Harbors, Inc.*(a) |
10,650 | 634,846 | |||
EnergySolutions(a) |
48,800 | 414,312 | |||
Republic Services, Inc. |
6,000 | 169,860 | |||
1,219,018 | |||||
The accompanying notes are an integral part of these financial statements.
F-56
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
INDUSTRIAL (Continued) |
|||||
Hand/Machine Tools0.5% |
|||||
Kennametal, Inc.(a) |
21,000 | $ | 544,320 | ||
Lincoln Electric Holdings, Inc.(a) |
6,500 | 347,490 | |||
The Stanley Works(a) |
11,500 | 592,365 | |||
1,484,175 | |||||
MachineryConstruction & Mining0.1% |
|||||
Terex Corp.*(a) |
11,550 | 228,805 | |||
Machinery-Diversified0.8% |
|||||
Alamo Group, Inc.(a) |
12,400 | 212,660 | |||
Albany International Corp. Class A(a) |
18,900 | 424,494 | |||
Cummins, Inc.(a) |
11,850 | 543,441 | |||
Rockwell Automation, Inc.(a) |
14,200 | 667,116 | |||
Twin Disc, Inc.(a) |
24,000 | 250,560 | |||
Wabtec Corp.(a) |
6,850 | 279,754 | |||
2,378,025 | |||||
Metal Fabricate & Hardware0.4% |
|||||
Ampco-Pittsburgh Corp.(a) |
14,500 | 457,185 | |||
Worthington Industries, Inc.(a) |
44,200 | 577,694 | |||
1,034,879 | |||||
Miscellaneous Manufacturing2.8% |
|||||
AO Smith Corp.(a) |
21,700 | 941,563 | |||
CLARCOR, Inc.(a) |
4,600 | 149,224 | |||
Cooper Industries PLC |
28,300 | 1,206,712 | |||
Crane Co.(a) |
12,500 | 382,750 | |||
GP Strategies Corp.*(a) |
36,400 | 274,092 | |||
Ingersoll-Rand PLC(a) |
24,300 | 868,482 | |||
ITT Corp.(a) |
7,600 | 378,024 | |||
Koppers Holdings, Inc.(a) |
6,000 | 182,640 | |||
Myers Industries, Inc.(a) |
40,000 | 364,000 | |||
Pall Corp. |
24,700 | 894,140 | |||
Sturm Ruger & Co., Inc.(a) |
54,000 | 523,800 | |||
Textron, Inc.(a) |
19,200 | 361,152 | |||
The Brinks Co.(a) |
24,800 | 603,632 | |||
Trinity Industries, Inc.(a) |
15,200 | 265,088 | |||
Tyco International Ltd.* |
15,100 | 538,768 | |||
7,934,067 | |||||
The accompanying notes are an integral part of these financial statements.
F-57
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
INDUSTRIAL (Continued) |
|||||
Packaging & Containers1.0% |
|||||
Ball Corp.(a) |
4,800 | $ | 248,160 | ||
Crown Holdings, Inc.* |
13,000 | 332,540 | |||
Sealed Air Corp.(a) |
12,000 | 262,320 | |||
Temple-Inland, Inc.(a) |
86,300 | 1,821,793 | |||
2,664,813 | |||||
Transportation1.7% |
|||||
Arkansas Best Corp.(a) |
14,700 | 432,621 | |||
Atlas Air Worldwide Holdings, Inc.*(a) |
12,073 | 449,719 | |||
Celadon Group, Inc.*(a) |
20,825 | 225,951 | |||
CH Robinson Worldwide, Inc.(a) |
10,000 | 587,300 | |||
Dynamex, Inc.*(a) |
13,400 | 242,540 | |||
Expeditors International of Washington, Inc.(a) |
16,400 | 569,572 | |||
Forward Air Corp.(a) |
13,975 | 350,074 | |||
Genesee & Wyoming, Inc. Class A*(a) |
6,700 | 218,688 | |||
Hub Group, Inc. Class A*(a) |
12,800 | 343,424 | |||
Old Dominion Freight Line, Inc.*(a) |
12,875 | 395,263 | |||
Overseas Shipholding Group, Inc.(a) |
5,000 | 219,750 | |||
Tidewater, Inc.(a) |
10,800 | 517,860 | |||
Vitran Corp., Inc.*(a) |
18,252 | 198,399 | |||
4,751,161 | |||||
42,258,815 | |||||
TECHNOLOGY10.6% |
|||||
Computers2.9% |
|||||
CACI International, Inc. Class A*(a) |
10,500 | 512,925 | |||
CIBER, Inc.*(a) |
160,100 | 552,345 | |||
Cognizant Technology Solutions Corp. Class A*(a) |
16,600 | 751,980 | |||
Cogo Group, Inc.*(a) |
22,000 | 162,140 | |||
Computer Sciences Corp.*(a) |
10,200 | 586,806 | |||
COMSYS IT Partners, Inc.*(a) |
25,000 | 222,250 | |||
Echelon Corp.*(a) |
30,150 | 348,534 | |||
Imation Corp.*(a) |
48,700 | 424,664 | |||
Mercury Computer Systems, Inc.*(a) |
27,000 | 297,270 | |||
Seagate Technology(a) |
34,000 | 618,460 | |||
Stratasys, Inc.*(a) |
26,300 | 454,464 | |||
Telvent GIT SA(a) |
13,855 | 540,068 | |||
Unisys Corp.*(a) |
24,900 | 960,144 | |||
VanceInfo Technologies, Inc.(ADR)*(a) |
14,325 | 275,183 | |||
Western Digital Corp.*(a) |
32,100 | 1,417,215 | |||
8,124,448 | |||||
The accompanying notes are an integral part of these financial statements.
F-58
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
TECHNOLOGY (Continued) |
|||||
Office/Business Equipment0.3% |
|||||
Pitney Bowes, Inc.(a) |
10,300 | $ | 234,428 | ||
Xerox Corp.(a) |
87,600 | 741,096 | |||
975,524 | |||||
Semiconductors2.9% |
|||||
Analog Devices, Inc.(a) |
12,600 | 397,908 | |||
Avago Technologies Ltd.*(a) |
26,230 | 479,747 | |||
Broadcom Corp. Class A*(a) |
14,400 | 452,880 | |||
Cabot Microelectronics Corp.*(a) |
12,200 | 402,112 | |||
Cavium Networks, Inc.*(a) |
24,350 | 580,260 | |||
FormFactor, Inc.*(a) |
23,175 | 504,288 | |||
Marvell Technology Group Ltd.*(a) |
15,600 | 323,700 | |||
Micron Technology, Inc.*(a) |
69,000 | 728,640 | |||
Netlogic Microsystems, Inc.*(a) |
9,081 | 420,087 | |||
Power Integrations, Inc.(a) |
20,150 | 732,654 | |||
Rudolph Technologies, Inc.*(a) |
15,950 | 107,184 | |||
Semtech Corp.*(a) |
44,675 | 759,922 | |||
Skyworks Solutions, Inc.*(a) |
58,700 | 832,953 | |||
Teradyne, Inc.*(a) |
100,350 | 1,076,755 | |||
Verigy Ltd.*(a) |
38,094 | 490,270 | |||
8,289,360 | |||||
Software4.5% |
|||||
Allscripts-Misys Healthcare Solutions, Inc.*(a) |
38,750 | 783,912 | |||
ANSYS, Inc.*(a) |
25,875 | 1,124,527 | |||
Ariba, Inc.*(a) |
27,057 | 338,754 | |||
Blackbaud, Inc.(a) |
40,600 | 959,378 | |||
Blackboard, Inc.*(a) |
4,800 | 217,872 | |||
Check Point Software Technologies Ltd.*(a) |
6,400 | 216,832 | |||
CommVault Systems, Inc.*(a) |
9,775 | 231,570 | |||
Concur Technologies, Inc.*(a) |
8,050 | 344,137 | |||
Digi International, Inc.*(a) |
60,550 | 552,216 | |||
Eclipsys Corp.*(a) |
17,800 | 329,656 | |||
Electronic Arts, Inc.*(a) |
26,600 | 472,150 | |||
Guidance Software, Inc.*(a) |
28,825 | 151,331 | |||
Informatica Corp.*(a) |
7,000 | 181,020 | |||
Innerworkings, Inc.*(a) |
118,685 | 700,241 | |||
Intuit, Inc.*(a) |
7,700 | 236,467 | |||
JDA Software Group, Inc.*(a) |
14,600 | 371,862 |
The accompanying notes are an integral part of these financial statements.
F-59
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
TECHNOLOGY (Continued) |
|||||
Software (Continued) |
|||||
Longtop Financial Technologies Ltd.(ADR)* |
11,950 | $ | 442,389 | ||
MicroStrategy, Inc. Class A*(a) |
2,475 | 232,700 | |||
MSCI, Inc. Class A*(a) |
12,150 | 386,370 | |||
NetSuite, Inc.*(a) |
22,673 | 362,315 | |||
Quality Systems, Inc.(a) |
6,601 | 414,477 | |||
Rosetta Stone, Inc.*(a) |
18,250 | 327,588 | |||
Salesforce.com, Inc.*(a) |
13,000 | 959,010 | |||
Taleo Corp. Class A*(a) |
10,196 | 239,810 | |||
THQ, Inc.*(a) |
33,300 | 167,832 | |||
Ultimate Software Group, Inc.*(a) |
25,350 | 744,529 | |||
Verint Systems, Inc.*(a) |
21,331 | 410,622 | |||
VMware, Inc. Class A*(a) |
15,800 | 669,604 | |||
12,569,171 | |||||
29,958,503 | |||||
UTILITIES4.2% |
|||||
Electric2.8% |
|||||
AES Corp.*(a) |
63,000 | 838,530 | |||
Alliant Energy Corp.(a) |
9,100 | 275,366 | |||
American Electric Power Co., Inc.(a) |
25,900 | 901,061 | |||
Avista Corp.(a) |
15,700 | 338,963 | |||
CH Energy Group, Inc.(a) |
7,964 | 338,629 | |||
CMS Energy Corp.(a) |
94,200 | 1,475,172 | |||
DTE Energy Co.(a) |
13,250 | 577,568 | |||
Edison International(a) |
5,800 | 201,724 | |||
EnerNOC, Inc.*(a) |
8,300 | 252,237 | |||
MDU Resources Group, Inc. |
10,900 | 257,240 | |||
Mirant Corp.*(a) |
30,100 | 459,627 | |||
NorthWestern Corp.(a) |
24,600 | 640,092 | |||
NSTAR(a) |
9,200 | 338,560 | |||
NV Energy, Inc. |
19,750 | 244,505 | |||
UIL Holdings Corp. |
17,200 | 482,976 | |||
Xcel Energy, Inc.(a) |
9,400 | 199,468 | |||
7,821,718 | |||||
Gas1.4% |
|||||
AGL Resources, Inc.(a) |
10,400 | 379,288 | |||
Atmos Energy Corp.(a) |
13,100 | 385,140 | |||
Energen Corp. |
8,800 | 411,840 |
The accompanying notes are an integral part of these financial statements.
F-60
Table of Contents
American Bar Association Members/State Street Collective Trust
Small-Mid Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | |||||
UTILITIES (Continued) |
||||||
Gas (Continued) |
||||||
NiSource, Inc.(a) |
35,100 | 539,838 | ||||
Northwest Natural Gas Co.(a) |
15,200 | 684,608 | ||||
Sempra Energy(a) |
3,000 | 167,940 | ||||
South Jersey Industries, Inc.(a) |
23,700 | 904,866 | ||||
Southern Union Co.(a) |
21,400 | $ | 485,781 | |||
3,959,301 | ||||||
11,781,019 | ||||||
TOTAL COMMON STOCK (cost $231,148,892) |
277,342,396 | |||||
INVESTMENT FUNDS1.7% |
||||||
Affiliated Funds1.7% |
||||||
SSgA Russell Small Cap® Index Securities Lending Series Fund Class I(c) |
33 | 691 | ||||
SSgA S&P MidCap® Index Non-Lending Series Fund Class A(c) |
178,899 | 4,774,819 | ||||
TOTAL INVESTMENT FUNDS (cost $4,447,600) |
4,775,510 | |||||
Units | Value | |||||
SHORT-TERM INVESTMENTS57.2% |
||||||
Affiliated Funds57.2% |
||||||
State Street Bank and Trust Company Short Term Investment Fund(c) |
3,840,951 | 3,840,951 | ||||
State Street Quality D Short Term Investment Fund(c)(d) |
160,659,953 | 158,113,493 | ||||
TOTAL SHORT-TERM INVESTMENTS (cost $164,500,904) |
161,954,444 | |||||
TOTAL INVESTMENTS156.8 % (cost $400,097,396) |
444,072,350 | |||||
Liabilities in excess of other assets(56.8)% |
(160,873,729 | ) | ||||
NET ASSETS100.0 % |
$ | 283,198,621 | ||||
* | Non-income producing security. |
(a) | All or a portion of security is on loan. |
(b) | Security is exempt from registration under rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional investors. The total cost and market value of Rule 144A securities owned at year end were $299,256 and $308,692, respectively. |
(c) | Collective investment fund advised by State Street Global Advisors, a division of State Street Bank and Trust Company. |
(d) | Represents security purchased with cash collateral received for securities on loan. |
ADRAmerican | Depositary Receipt |
The accompanying notes are an integral part of these financial statements.
F-61
Table of Contents
American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Statement of Assets and Liabilities
December 31, 2009 |
||||
Assets | ||||
Investments, at value (cost $134,076,316) |
$ | 154,469,830 | (a) | |
Investments in affiliated issuers, at value (cost $27,780,802) |
27,581,673 | |||
Foreign currency, at value (cost $1,500,976) |
1,496,910 | |||
Receivable for investments sold |
826,515 | |||
Receivable for fund units sold |
308,033 | |||
Interest and dividends receivable |
186,306 | |||
Tax reclaims receivable |
191,215 | |||
Total assets |
185,060,482 | |||
Liabilities | ||||
Due to custodian |
785,276 | |||
Payable for cash collateral received on securities loaned |
18,122,836 | |||
Payable for investments purchased |
116,825 | |||
Payable for fund units redeemed |
251,681 | |||
Investment advisory fee payable |
83,038 | |||
INGprogram fee payable |
71,010 | |||
Trustee, management and administration fees payable |
13,723 | |||
ABA Retirement Fundsprogram fee payable |
10,127 | |||
Payable for legal and audit services |
24,073 | |||
Other liabilities |
27,960 | |||
Other accruals |
25,996 | |||
Total liabilities |
19,532,545 | |||
Net Assets (equivalent to $24.91 per unit based on 6,644,427 units outstanding) |
$ | 165,527,937 | ||
(a) | Includes securities on loan with a value of $17,507,960 (see Note 6). |
The accompanying notes are an integral part of these financial statements.
F-62
Table of Contents
American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
||||
Dividends (net of foreign tax expense of $269,045) |
$ | 4,413,577 | ||
Dividendsaffiliated issuers |
19,187 | |||
Securities lending income, net |
128,702 | |||
Total investment income |
4,561,466 | |||
Expenses |
||||
INGprogram fee |
540,141 | |||
State Street Bank and Trust Companyprogram fee |
153,681 | |||
Trustee, management and administration fees |
154,053 | |||
Investment advisory fee |
743,903 | |||
ABA Retirement Fundsprogram fee |
91,907 | |||
State Street Global Marketstransition management |
62,103 | |||
Legal and audit fees |
83,410 | |||
Compliance consultant fees |
53,094 | |||
Reports to unitholders |
53,686 | |||
Registration fees |
10,621 | |||
Other fees |
44,110 | |||
Total expenses |
1,990,709 | |||
Net investment income (loss) |
2,570,757 | |||
Net realized and unrealized gain (loss) |
||||
Net realized gain (loss) on: |
||||
Investments |
(39,082,612 | ) | ||
Foreign currency transactions |
1,080,605 | |||
Net realized gain (loss) |
(38,002,007 | ) | ||
Change in net unrealized appreciation (depreciation) on: |
||||
Investments |
79,002,676 | |||
Foreign currency transactions |
48,691 | |||
Change in net unrealized appreciation (depreciation) |
79,051,367 | |||
Net realized and unrealized gain (loss) |
41,049,360 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 43,620,117 | ||
The accompanying notes are an integral part of these financial statements.
F-63
Table of Contents
American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | 7,830,771 | $ | 2,570,757 | ||||
Net realized gain (loss) from investments and foreign currency transactions |
2,801,342 | (38,002,007 | ) | |||||
Change in net unrealized appreciation (depreciation) |
(136,366,310 | ) | 79,051,367 | |||||
Net increase (decrease) in net assets resulting from operations |
(125,734,197 | ) | 43,620,117 | |||||
From unitholder transactions |
||||||||
Proceeds from units issued |
100,300,570 | 30,122,425 | ||||||
Cost of units redeemed |
(149,768,013 | ) | (42,174,988 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
(49,467,443 | ) | (12,052,563 | ) | ||||
Net increase (decrease) in net assets |
(175,201,640 | ) | 31,567,554 | |||||
Net Assets |
||||||||
Beginning of year |
309,162,023 | 133,960,383 | ||||||
End of year |
$ | 133,960,383 | $ | 165,527,937 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
9,112,453 | 7,265,059 | ||||||
Issued |
3,379,464 | 1,469,909 | ||||||
Redeemed |
(5,226,858 | ) | (2,090,541 | ) | ||||
Outstanding-end of year |
7,265,059 | 6,644,427 | ||||||
The accompanying notes are an integral part of these financial statements.
F-64
Table of Contents
American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Financial Highlights
(For a unit outstanding throughout the year)
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income |
$ | 0.59 | $ | 0.79 | $ | 1.06 | $ | 1.27 | $ | 0.66 | ||||||||||
Expenses() |
(0.25 | ) | (0.32 | ) | (0.36 | ) | (0.31 | ) | (0.29 | ) | ||||||||||
Net investment income (loss) |
0.34 | 0.47 | 0.70 | 0.96 | 0.37 | |||||||||||||||
Net realized and unrealized gain (loss) |
2.64 | 5.84 | 2.07 | (16.45 | ) | 6.10 | ||||||||||||||
Net increase (decrease) in unit value |
2.98 | 6.31 | 2.77 | (15.49 | ) | 6.47 | ||||||||||||||
Net asset value at beginning of year |
21.87 | 24.85 | 31.16 | 33.93 | 18.44 | |||||||||||||||
Net asset value at end of year |
$ | 24.85 | $ | 31.16 | $ | 33.93 | $ | 18.44 | $ | 24.91 | ||||||||||
Ratios/Supplemental Data: |
||||||||||||||||||||
Ratio of expenses to average net assets |
1.11 | % | 1.14 | % | 1.08 | % | 1.13 | % | 1.37 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
1.50 | % | 1.69 | % | 2.12 | % | 3.45 | % | 1.77 | % | ||||||||||
Portfolio turnover |
35 | % | 30 | % | 30 | % | 33 | % | 160 | % | ||||||||||
Total return |
13.63 | % | 25.39 | % | 8.89 | % | (45.65 | )% | 35.09 | % | ||||||||||
Net assets at end of year (in thousands) |
$ | 202,106 | $ | 273,525 | $ | 309,162 | $ | 133,960 | $ | 165,528 |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| With respect to a portion of the Funds assets invested in collective investment funds, portfolio turnover reflects purchases and sales of such collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-65
Table of Contents
American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK92.0% |
|||||
Australia1.2% |
|||||
Fosters Group Ltd. |
44,100 | $ | 216,876 | ||
Incitec Pivot Ltd. |
172,413 | 546,057 | |||
National Australia Bank Ltd.(a) |
20,291 | 493,443 | |||
Newcrest Mining Ltd. |
24,350 | 762,681 | |||
2,019,057 | |||||
Austria0.7% |
|||||
OMV AG |
5,200 | 227,692 | |||
Wienerberger AG* |
54,294 | 985,418 | |||
1,213,110 | |||||
Belgium0.7% |
|||||
Anheuser-Busch InBev NV |
11,077 | 572,224 | |||
KBC Groep NV* |
13,300 | 575,909 | |||
1,148,133 | |||||
Brazil1.6% |
|||||
All America Latina Logistica (Units) |
129,880 | 1,202,710 | |||
Tele Norte Leste Participacoes SA |
44,900 | 1,141,465 | |||
Weg SA |
30,800 | 322,423 | |||
2,666,598 | |||||
Canada2.6% |
|||||
Agrium, Inc.(a) |
24,530 | 1,508,595 | |||
Cenovus Energy, Inc.(a) |
19,100 | 483,660 | |||
EnCana Corp. |
20,800 | 677,963 | |||
Inmet Mining Corp.(a) |
4,542 | 276,817 | |||
Thompson Creek Metals Co., Inc.*(a) |
28,500 | 334,020 | |||
TMX Group, Inc.(a) |
16,912 | 535,398 | |||
Yamana Gold, Inc.(a) |
43,400 | 493,892 | |||
4,310,345 | |||||
China0.5% |
|||||
Bank of China Ltd. Class H(b) |
795,000 | 425,624 | |||
China Telecom Corp. Ltd. Class H(b) |
1,112,000 | 460,076 | |||
885,700 | |||||
Czech Republic0.7% |
|||||
CEZ A/S |
12,100 | 567,235 | |||
Telefonica O2 Czech Republic A/S |
26,227 | 595,841 | |||
1,163,076 | |||||
The accompanying notes are an integral part of these financial statements.
F-66
Table of Contents
American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK (Continued) |
|||||
Denmark0.3% |
|||||
Carlsberg A/S Class B |
7,773 | $ | 573,555 | ||
Finland0.6% |
|||||
Nokia OYJ(a) |
81,880 | 1,051,052 | |||
France8.2% |
|||||
Alstom SA |
7,893 | 548,336 | |||
AXA SA |
25,600 | 605,383 | |||
BNP Paribas |
7,337 | 578,929 | |||
Carrefour SA |
27,280 | 1,311,470 | |||
Cie de Saint-Gobain(a) |
9,143 | 490,723 | |||
Credit Agricole SA |
11,300 | 196,980 | |||
France Telecom SA |
44,702 | 1,115,976 | |||
Gemalto NV*(a) |
11,205 | 482,176 | |||
LOreal SA |
8,860 | 983,578 | |||
Sanofi-Aventis |
35,749 | 2,801,953 | |||
Societe Generale |
15,556 | 1,076,245 | |||
Total SA |
36,920 | 2,365,643 | |||
UbiSoft Entertainment SA*(a) |
47,790 | 675,136 | |||
Vinci SA(a) |
7,200 | 403,230 | |||
13,635,758 | |||||
Germany6.1% |
|||||
Adidas AG |
20,220 | 1,091,597 | |||
Allianz AG |
6,930 | 862,507 | |||
BASF AG |
6,360 | 394,447 | |||
E.ON AG |
39,178 | 1,635,419 | |||
Henkel AG & Co. KGaA |
4,300 | 192,015 | |||
MAN SE |
6,370 | 496,064 | |||
Metro AG(a) |
6,500 | 396,155 | |||
RWE AG |
7,600 | 738,472 | |||
SAP AG |
24,620 | 1,161,055 | |||
Siemens AG |
21,168 | 1,941,388 | |||
Symrise AG |
53,970 | 1,157,887 | |||
10,067,006 | |||||
Greece0.9% |
|||||
Coca-Cola Hellenic Bottling Co. SA |
38,457 | 876,032 | |||
National Bank of Greece SA* |
27,100 | 690,952 | |||
1,566,984 | |||||
The accompanying notes are an integral part of these financial statements.
F-67
Table of Contents
American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK (Continued) |
|||||
Hong Kong2.3% |
|||||
BOC Hong Kong (Holdings) Ltd. |
308,000 | $ | 695,811 | ||
Cheung Kong (Holdings) Ltd. |
86,483 | 1,113,384 | |||
Hong Kong & China Gas Co. Ltd. |
551,000 | 1,375,592 | |||
Sun Hung Kai Properties Ltd. |
38,000 | 563,825 | |||
3,748,612 | |||||
Hungary0.3% |
|||||
Richter Gedeon Nyrt. |
2,000 | 451,648 | |||
India0.6% |
|||||
HDFC Bank Ltd. (ADR)(a) |
5,300 | 689,424 | |||
Infosys Technologies Ltd. (ADR)(a) |
5,500 | 303,985 | |||
993,409 | |||||
Ireland1.7% |
|||||
Covidien PLC(c) |
37,450 | 1,793,481 | |||
Experian PLC(d) |
98,040 | 969,876 | |||
2,763,357 | |||||
Israel0.7% |
|||||
Check Point Software Technologies Ltd.*(a)(c) |
33,100 | 1,121,428 | |||
Italy2.0% |
|||||
Ansaldo STS SpA |
17,100 | 324,434 | |||
Intesa Sanpaolo SpA* |
154,600 | 692,633 | |||
ENI SpA |
56,500 | 1,438,288 | |||
Fiat SpA* |
10,500 | 152,799 | |||
UniCredito Italiano SpA* |
187,070 | 622,201 | |||
3,230,355 | |||||
Japan17.0% |
|||||
Bridgestone Corp. |
24,700 | 433,060 | |||
Canon, Inc. |
27,850 | 1,177,930 | |||
Fanuc Ltd. |
7,150 | 665,166 | |||
Fujifilm Holdings Corp. |
23,300 | 696,421 | |||
Honda Motor Co. Ltd. |
21,100 | 713,779 | |||
INPEX Corp. |
57 | 428,019 | |||
Japan Tobacco, Inc. |
84 | 283,566 | |||
JGC Corp. |
27,000 | 497,287 | |||
Keyence Corp. |
4,198 | 865,882 | |||
Kose Corp.(a) |
40,290 | 813,862 | |||
Mitsubishi Corp. |
65,415 | 1,627,189 |
The accompanying notes are an integral part of these financial statements.
F-68
Table of Contents
American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK (Continued) |
|||||
Japan (Continued) |
|||||
Mitsubishi UFJ Financial Group, Inc. |
195,889 | $ | 959,573 | ||
Mitsui & Co. Ltd. |
133,880 | 1,896,270 | |||
Mitsui Fudosan Co. Ltd. |
28,000 | 470,426 | |||
Mitsui Sumitomo Insurance Group Holdings, Inc. |
25,714 | 652,926 | |||
Nikon Corp. |
27,000 | 532,769 | |||
Nintendo Co. Ltd. |
5,391 | 1,278,642 | |||
Nipponkoa Insurance Co. Ltd. |
191,000 | 1,080,821 | |||
Nissan Motor Co. Ltd.* |
41,000 | 358,513 | |||
Nomura Holdings, Inc. |
201,977 | 1,489,203 | |||
Nomura Research Institute Ltd.(a) |
43,261 | 847,768 | |||
ORIX Corp.(a) |
5,500 | 374,211 | |||
Panasonic Corp. |
29,900 | 427,794 | |||
Secom Co. Ltd. |
15,536 | 735,207 | |||
Seven & I Holdings Co. Ltd. |
59,491 | 1,208,078 | |||
Shin-Etsu Chemical Co. Ltd. |
11,700 | 659,795 | |||
SMC Corp. |
7,494 | 847,446 | |||
Sugi Holdings Co. Ltd.(a) |
36,700 | 804,159 | |||
Sumitomo Metal Mining Co. Ltd. |
66,348 | 978,539 | |||
Sumitomo Trust & Banking Co. Ltd. |
108,238 | 526,444 | |||
Suzuki Motor Corp. |
31,274 | 768,309 | |||
The Bank of Yokohama Ltd. |
232,000 | 1,051,156 | |||
The Joyo Bank Ltd. |
74,738 | 298,568 | |||
Toshiba Corp.* |
46,000 | 253,811 | |||
Toyota Motor Corp. |
35,300 | 1,483,877 | |||
28,186,466 | |||||
Korea, Republic of2.1% |
|||||
LG Corp.* |
10,710 | 669,256 | |||
Samsung Electronics Co. Ltd. |
1,716 | 1,171,999 | |||
Samsung Fire & Marine Insurance Co. Ltd. |
3,796 | 648,295 | |||
Shinsegae Co. Ltd.* |
2,099 | 968,935 | |||
3,458,485 | |||||
Luxembourg0.8% |
|||||
ArcelorMittal |
10,449 | 473,864 | |||
ArcelorMittal (NY Registered)(a) |
10,000 | 457,500 | |||
Tenaris SA (ADR)(a) |
9,600 | 409,440 | |||
1,340,804 | |||||
The accompanying notes are an integral part of these financial statements.
F-69
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American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK (Continued) |
|||||
Malaysia0.4% |
|||||
IOI Corp. Bhd. |
444,400 | $ | 709,733 | ||
Mexico1.1% |
|||||
Grupo Modelo SAB de CV Series C* |
204,100 | 1,134,471 | |||
Grupo Televisa SA (ADR) |
32,800 | 680,928 | |||
1,815,399 | |||||
Netherlands2.6% |
|||||
ASML Holding NV |
19,136 | 650,804 | |||
Heineken NV |
39,634 | 1,877,802 | |||
Koninklijke (Royal) KPN NV |
29,200 | 495,230 | |||
SBM Offshore NV |
22,693 | 443,990 | |||
Unilever NV (CVA) |
27,236 | 887,399 | |||
4,355,225 | |||||
New Zealand0.1% |
|||||
Fisher & Paykel Appliances Holdings Ltd.* |
360,000 | 150,456 | |||
Norway1.1% |
|||||
StatoilHydro ASA |
56,870 | 1,417,500 | |||
Storebrand ASA* |
50,161 | 340,076 | |||
1,757,576 | |||||
Papua New Guinea0.1% |
|||||
Oil Search Ltd.(e) |
16,261 | 88,662 | |||
Philippines0.5% |
|||||
Philippine Long Distance Telephone Co. |
8,820 | 499,429 | |||
Philippine Long Distance Telephone Co. (ADR) |
5,000 | 283,350 | |||
782,779 | |||||
Portugal1.1% |
|||||
EDPEnergias de Portugal SA |
145,010 | 641,746 | |||
Galp Energia, SGPS SA Class B(a) |
30,641 | 527,419 | |||
Portugal Telecom, SGPS SA (Registered) |
50,405 | 612,685 | |||
1,781,850 | |||||
Singapore1.7% |
|||||
DBS Group Holdings Ltd. |
184,598 | 2,008,687 | |||
Keppel Corp. Ltd. |
141,000 | 821,080 | |||
2,829,767 | |||||
The accompanying notes are an integral part of these financial statements.
F-70
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American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK (Continued) |
|||||
South Africa1.6% |
|||||
AngloGold Ashanti Ltd. |
31,910 | $ | 1,292,540 | ||
Shoprite Holdings Ltd. |
155,176 | 1,366,802 | |||
2,659,342 | |||||
Spain2.5% |
|||||
Banco Santander Central Hispano SA |
159,150 | 2,614,544 | |||
Iberdrola Renovables SA |
95,637 | 455,600 | |||
Telefonica SA(a) |
37,100 | 1,033,926 | |||
4,104,070 | |||||
Sweden0.5% |
|||||
Telefonaktiebolaget LM Ericsson Class B |
85,640 | 787,663 | |||
Switzerland5.8% |
|||||
ABB Ltd.* |
36,831 | 703,624 | |||
ABB Ltd. (ADR)*(a) |
25,800 | 492,780 | |||
Credit Suisse Group AG (Registered) |
12,258 | 603,050 | |||
Foster Wheeler AG*(a)(f) |
16,911 | 497,860 | |||
Nestle SA |
65,090 | 3,158,743 | |||
Novartis AG |
35,450 | 1,929,250 | |||
Petroplus Holdings AG* |
22,072 | 401,817 | |||
Roche Holding AG |
6,190 | 1,051,850 | |||
Zurich Financial Services AG |
3,903 | 847,674 | |||
9,686,648 | |||||
Taiwan2.3% |
|||||
Chunghwa Telecom Co. Ltd. (ADR) |
56,649 | 1,051,972 | |||
Delta Electronics, Inc. |
274,000 | 852,272 | |||
Taiwan Semiconductor Manufacturing Co. Ltd. |
353,000 | 708,096 | |||
Taiwan Semiconductor Manufacturing Co. Ltd. (ADR) |
67,829 | 775,964 | |||
Uni-President Enterprises Corp. |
372,000 | 456,299 | |||
3,844,603 | |||||
Thailand1.0% |
|||||
Kasikornbank PCL |
492,100 | 1,281,660 | |||
PTT PCL |
47,000 | 346,791 | |||
1,628,451 | |||||
Turkey0.5% |
|||||
Anadolu Efes Biracilik ve Malt Sanayii AS |
68,447 | 765,646 | |||
The accompanying notes are an integral part of these financial statements.
F-71
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American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | ||||
COMMON STOCK (Continued) |
|||||
United Kingdom16.6% |
|||||
3i Group PLC |
36,000 | $ | 162,856 | ||
Anglo American PLC* |
23,660 | 1,024,706 | |||
Anglo American PLC (ADR)*(a) |
26,600 | 576,688 | |||
Antofagasta PLC |
17,700 | 280,850 | |||
AstraZeneca PLC (ADR)(a) |
10,100 | 474,094 | |||
Autonomy Corp. PLC* |
27,443 | 669,591 | |||
Babcock International Group PLC |
38,084 | 365,263 | |||
BAE Systems PLC |
64,110 | 369,718 | |||
Barclays PLC |
254,567 | 1,122,593 | |||
BP PLC |
125,348 | 1,213,126 | |||
BP PLC (ADR)(a) |
27,310 | 1,583,161 | |||
British American Tobacco PLC |
34,300 | 1,113,504 | |||
Carnival PLC* |
8,400 | 287,052 | |||
Cookson Group PLC* |
79,000 | 532,089 | |||
Diageo PLC |
108,100 | 1,886,537 | |||
GlaxoSmithKline PLC |
124,042 | 2,629,471 | |||
GlaxoSmithKline PLC (ADR)(a) |
15,000 | 633,750 | |||
HSBC Holdings PLC |
110,825 | 1,265,671 | |||
Kazakhmys PLC* |
17,490 | 366,206 | |||
Kingfisher PLC |
100,000 | 366,829 | |||
Marks & Spencer Group PLC |
45,000 | 292,138 | |||
National Grid PLC |
59,300 | 648,675 | |||
Pearson PLC |
46,218 | 664,886 | |||
Persimmon PLC* |
55,750 | 422,455 | |||
Reed Elsevier PLC |
120,880 | 993,344 | |||
Rio Tinto PLC |
15,334 | 827,035 | |||
Rio Tinto PLC (ADR)(a) |
3,100 | 667,709 | |||
SABMiller PLC |
21,056 | 617,896 | |||
Scottish & Southern Energy PLC |
40,660 | 760,365 | |||
Standard Chartered PLC |
19,320 | 484,167 | |||
Unilever PLC |
27,200 | 871,269 | |||
Vedanta Resources PLC |
12,900 | 533,548 | |||
Vodafone Group PLC (ADR)(a) |
50,880 | 1,174,819 | |||
WM Morrison Supermarkets PLC |
138,228 | 616,697 | |||
WPP PLC |
101,290 | 989,787 | |||
27,488,545 | |||||
The accompanying notes are an integral part of these financial statements.
F-72
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American Bar Association Members/State Street Collective Trust
International All Cap Equity Fund
Schedule of Investments
December 31, 2009
Shares | Value | |||||
COMMON STOCK (Continued) |
||||||
United States0.9% |
||||||
Philip Morris International, Inc.(a) |
19,130 | $ | 921,875 | |||
Schlumberger Ltd.(a) |
8,424 | 548,318 | ||||
1,470,193 | ||||||
TOTAL COMMON STOCK (cost $132,491,028) |
152,301,546 | |||||
PREFERRED STOCK0.7% |
||||||
Germany0.7% |
||||||
Henkel AG & Co. KgaA |
22,280 | 1,159,834 | ||||
TOTAL PREFERRED STOCK (cost $722,702) |
1,159,834 | |||||
INVESTMENT FUNDS2.8% |
||||||
Affiliated Fund2.2% |
||||||
SSgA Global Equity ex U.S. Index Non-Lending Series Fund Class A |
303,673 | 3,679,299 | ||||
Exchange-Traded Fund0.6% |
||||||
iShares MSCI Emerging Markets Index(a)(i) |
24,300 | 1,008,450 | ||||
TOTAL INVESTMENT FUNDS (cost $4,453,767) |
4,687,749 | |||||
Units | Value | |||||
SHORT-TERM INVESTMENTS14.4% |
||||||
Affiliated Funds14.4% |
||||||
State Street Bank and Trust Company Short Term Investment Fund(g) |
6,066,785 | 6,066,785 | ||||
State Street Quality D Short Term Investment Fund(g)(h) |
18,122,836 | 17,835,589 | ||||
TOTAL SHORT-TERM INVESTMENTS (cost $24,189,621) |
23,902,374 | |||||
TOTAL INVESTMENTS109.9% (cost $161,857,118) |
182,051,503 | |||||
Other assets less liabilities(9.9)% |
(16,523,566 | ) | ||||
NET ASSETS100.0% |
$ | 165,527,937 | ||||
* | Non-income producing security. |
(a) | All or a portion of security is on loan. |
(b) | Listed on the Hong Kong Exchanges and Clearing Ltd. |
(c) | Listed on the New York Stock Exchange. |
(d) | Listed on the London Stock Exchange. |
(e) | Listed on the Australian Securities Exchange. |
(f) | Listed on the NASDAQ Stock Market, Inc. |
(g) | Collective investment fund advised by State Street Global Advisors, a division of State Street Bank and Trust Company. |
(h) | Represents security purchased with cash collateral received for securities on loan. |
(i) | This fund is a regulated investment company (RIC). |
ADRAmerican Depositary Receipt
CVACertificaten Van Aandelen
MSCIMorgan Stanley Capital International
The accompanying notes are an integral part of these financial statements.
F-73
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Index Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investment in affiliated fund, at value: |
|||
SSgA U.S. Bond Index Non-Lending Series Fund Class A (cost $35,651,592 and units of 3,414,768) |
$ | 35,800,431 | |
Receivable for fund units sold |
263,265 | ||
Total assets |
36,063,696 | ||
Liabilities | |||
Payable for investments purchased |
259,336 | ||
Payable for fund units redeemed |
3,929 | ||
Investment advisory fee payable |
1,230 | ||
INGprogram fee payable |
14,902 | ||
Trustee, management and administration fees payable |
2,851 | ||
ABA Retirement Fundsprogram fee payable |
2,127 | ||
Payable for legal and audit services |
4,904 | ||
Payable for compliance consultant fees |
2,402 | ||
Other accruals |
2,894 | ||
Total liabilities |
294,575 | ||
Net Assets (equivalent to $11.65 per unit based on 3,069,305 units outstanding) |
$ | 35,769,121 | |
The accompanying notes are an integral part of these financial statements.
F-74
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Index Fund
Statement of Operations
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
85,069 | |||
State Street Bank and Trust Companyprogram fee |
4,991 | |||
Trustee, management and administration fees |
18,485 | |||
Investment advisory fee |
7,226 | |||
ABA Retirement Fundsprogram fee |
12,424 | |||
Legal and audit fees |
11,263 | |||
Compliance consultant fees |
6,520 | |||
Reports to unitholders |
5,183 | |||
Registration fees |
1,518 | |||
Other fees |
5,914 | |||
Total expenses |
158,593 | |||
Net investment income (loss) |
(158,593 | ) | ||
Net realized and unrealized gain (loss) on investment in affiliated fund |
||||
Net realized gain (loss) |
1,113,775 | |||
Change in net unrealized appreciation (depreciation) |
148,839 | |||
Net realized and unrealized gain (loss) |
1,262,614 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 1,104,021 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-75
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Index Fund
Statement of Changes in Net Assets
For the
period February 3, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (158,593 | ) | |
Net realized gain (loss) |
1,113,775 | |||
Change in net unrealized appreciation (depreciation) |
148,839 | |||
Net increase (decrease) in net assets resulting from operations |
1,104,021 | |||
From unitholder transactions |
||||
Proceeds from units issued |
41,068,048 | |||
Cost of units redeemed |
(6,402,948 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
34,665,100 | |||
Net increase (decrease) in net assets |
35,769,121 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 35,769,121 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
3,630,390 | |||
Redeemed |
(561,085 | ) | ||
Outstanding-end of period |
3,069,305 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-76
Table of Contents
American Bar Association Members/State Street Collective Trust
Bond Index Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(0.09 | ) | ||
Net investment income (loss) |
(0.09 | ) | ||
Net realized and unrealized gain (loss) |
0.74 | |||
Net increase (decrease) in unit value |
0.65 | |||
Net asset value at beginning of period |
11.00 | |||
Net asset value at end of period |
$ | 11.65 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.88 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.88 | )% | ||
Portfolio turnover** |
158 | % | ||
Total return** |
5.91 | % | ||
Net assets at end of period (in thousands) |
$ | 35,769 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in a collective investment fund, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
The accompanying notes are an integral part of these financial statements.
F-77
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Index Equity Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investment in affiliated fund, at value: |
|||
SSgA S&P 500® Index Non-Lending Series Fund Class A (cost $32,550,586 and units of 1,862,836) |
$ | 34,270,600 | |
Receivable for fund units sold |
234,008 | ||
Total assets |
34,504,608 | ||
Liabilities | |||
Payable for investments purchased |
229,690 | ||
Payable for fund units redeemed |
4,318 | ||
Investment advisory fee payable |
588 | ||
INGprogram fee payable |
13,994 | ||
Trustee, management and administration fees payable |
2,669 | ||
ABA Retirement Fundsprogram fee payable |
1,993 | ||
Payable for legal and audit services |
4,352 | ||
Payable for compliance consultant fees |
2,132 | ||
Other accruals |
2,568 | ||
Total liabilities |
262,304 | ||
Net Assets (equivalent to $15.68 per unit based on 2,184,145 units outstanding) |
$ | 34,242,304 | |
The accompanying notes are an integral part of these financial statements.
F-78
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Index Equity Fund
Statement of Operations
For the period February 9, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
67,994 | |||
State Street Bank and Trust Companyprogram fee |
1,950 | |||
Trustee, management and administration fees |
14,059 | |||
Investment advisory fee |
2,790 | |||
ABA Retirement Fundsprogram fee |
9,710 | |||
Legal and audit fees |
9,090 | |||
Compliance consultant fees |
5,245 | |||
Reports to unitholders |
3,803 | |||
Registration fees |
1,244 | |||
Other fees |
4,431 | |||
Total expenses |
120,316 | |||
Net investment income (loss) |
(120,316 | ) | ||
Net realized and unrealized gain (loss) on investment in affiliated fund |
||||
Net realized gain (loss) |
3,282,655 | |||
Change in net unrealized appreciation (depreciation) |
1,720,014 | |||
Net realized and unrealized gain (loss) |
5,002,669 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 4,882,353 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-79
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Index Equity Fund
Statement of Changes in Net Assets
For the period February 9, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (120,316 | ) | |
Net realized gain (loss) |
3,282,655 | |||
Change in net unrealized appreciation (depreciation) |
1,720,014 | |||
Net increase (decrease) in net assets resulting from operations |
4,882,353 | |||
From unitholder transactions |
||||
Proceeds from units issued |
34,331,680 | |||
Cost of units redeemed |
(4,971,729 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
29,359,951 | |||
Net increase (decrease) in net assets |
34,242,304 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 34,242,304 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
2,529,295 | |||
Redeemed |
(345,150 | ) | ||
Outstanding-end of period |
2,184,145 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-80
Table of Contents
American Bar Association Members/State Street Collective Trust
Large Cap Index Equity Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period February 9, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(0.11 | ) | ||
Net investment income (loss) |
(0.11 | ) | ||
Net realized and unrealized gain (loss) |
3.79 | |||
Net increase (decrease) in unit value |
3.68 | |||
Net asset value at beginning of period |
12.00 | |||
Net asset value at end of period |
$ | 15.68 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.87 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.87 | )% | ||
Portfolio turnover** |
159 | % | ||
Total return** |
30.67 | % | ||
Net assets at end of period (in thousands) |
$ | 34,242 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in a collective investment fund, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
The accompanying notes are an integral part of these financial statements.
F-81
Table of Contents
American Bar Association Members/State Street Collective Trust
All Cap Index Equity Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
SSgA Russell All Cap® Index Securities Lending Series Fund Class I (cost $162,340,743 and units of 9,694,348) |
$ | 172,006,814 | |
SSgA Russell All Cap Index Non-Lending Series Fund Class A (cost $89,904,862 and units of 6,765,677) |
94,726,249 | ||
Receivable for fund units sold |
495,209 | ||
Total assets |
267,228,272 | ||
Liabilities | |||
Payable for investments purchased |
340,503 | ||
Payable for fund units redeemed |
154,706 | ||
Investment advisory fee payable |
11,193 | ||
INGprogram fee payable |
112,960 | ||
Trustee, management and administration fees payable |
21,665 | ||
ABA Retirement Fundsprogram fee payable |
15,566 | ||
Payable for legal and audit services |
42,113 | ||
Payable for compliance consultant fees |
20,630 | ||
Other accruals |
24,846 | ||
Total liabilities |
744,182 | ||
Net Assets (equivalent to $30.60 per unit based on 8,708,063 units outstanding) |
$ | 266,484,090 | |
The accompanying notes are an integral part of these financial statements.
F-82
Table of Contents
American Bar Association Members/State Street Collective Trust
All Cap Index Equity Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
||||
Securities lending net income |
$ | 234,373 | ||
Total investment income |
234,373 | |||
Expenses |
||||
INGprogram fee |
848,470 | |||
State Street Bank and Trust Companyprogram fee |
255,894 | |||
Trustee, management and administration fees |
246,572 | |||
Investment advisory fee |
106,526 | |||
ABA Retirement Fundsprogram fee |
146,291 | |||
Legal and audit fees |
136,944 | |||
Compliance consultant fees |
87,495 | |||
Reports to unitholders |
87,460 | |||
Registration fees |
17,480 | |||
Other fees |
70,895 | |||
Total expenses |
2,004,027 | |||
Net investment income (loss) |
(1,769,654 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
18,144,096 | |||
Change in net unrealized appreciation (depreciation) |
43,496,689 | |||
Net realized and unrealized gain (loss) |
61,640,785 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 59,871,131 | ||
The accompanying notes are an integral part of these financial statements.
F-83
Table of Contents
American Bar Association Members/State Street Collective Trust
All Cap Index Equity Fund
Statement of Changes in Net Assets
For the years ended December 31, | ||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | (1,530,420 | ) | $ | (1,769,654 | ) | ||
Net realized gain (loss) |
6,822,684 | 18,144,096 | ||||||
Change in net unrealized appreciation (depreciation) |
(151,350,087 | ) | 43,496,689 | |||||
Net increase (decrease) in net assets resulting from operations |
(146,057,823 | ) | 59,871,131 | |||||
From unitholder transactions |
||||||||
Proceeds from units issued |
130,629,324 | 42,486,671 | ||||||
Cost of units redeemed |
(202,114,858 | ) | (57,133,520 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
(71,485,534 | ) | (14,646,849 | ) | ||||
Net increase (decrease) in net assets |
(217,543,357 | ) | 45,224,282 | |||||
Net Assets |
||||||||
Beginning of year |
438,803,165 | 221,259,808 | ||||||
End of year |
$ | 221,259,808 | $ | 266,484,090 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
11,413,546 | 9,275,049 | ||||||
Issued |
3,900,483 | 1,703,847 | ||||||
Redeemed |
(6,038,980 | ) | (2,270,833 | ) | ||||
Outstanding-end of year |
9,275,049 | 8,708,063 | ||||||
The accompanying notes are an integral part of these financial statements.
F-84
Table of Contents
American Bar Association Members/State Street Collective Trust
All Cap Index Equity Fund
Financial Highlights
(For a unit outstanding throughout the year)
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income(a) |
$ | 0.00 | $ | 0.00 | $ | 0.01 | $ | 0.03 | $ | 0.03 | ||||||||||
Expenses() |
(0.16 | ) | (0.19 | ) | (0.21 | ) | (0.18 | ) | (0.22 | ) | ||||||||||
Net investment income (loss) |
(0.16 | ) | (0.19 | ) | (0.20 | ) | (0.15 | ) | (0.19 | ) | ||||||||||
Net realized and unrealized gain (loss) |
1.87 | 5.00 | (b) | 1.93 | (14.44 | ) | 6.93 | |||||||||||||
Net increase (decrease) in unit value |
1.71 | 4.81 | 1.73 | (14.59 | ) | 6.74 | ||||||||||||||
Net asset value at beginning of year |
30.20 | 31.91 | 36.72 | 38.45 | 23.86 | |||||||||||||||
Net asset value at end of year |
$ | 31.91 | $ | 36.72 | $ | 38.45 | $ | 23.86 | $ | 30.60 | ||||||||||
Ratios/Supplemental Data: |
||||||||||||||||||||
Ratio of expenses to average net assets |
0.52 | % | 0.57 | % | 0.54 | % | 0.56 | % | 0.87 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
(0.51 | )% | (0.56 | )% | (0.52 | )% | (0.47 | )% | (0.76 | )% | ||||||||||
Portfolio turnover |
7 | % | 6 | % | 6 | % | 3 | % | 153 | % | ||||||||||
Total return |
5.66 | % | 15.07 | % | 4.71 | % | (37.95 | )% | 28.25 | % | ||||||||||
Net assets at end of year (in thousands) |
$ | 402,702 | $ | 437,011 | $ | 438,803 | $ | 221,260 | $ | 266,484 |
(a) | Amounts less than $0.005 per unit are rounded to zero. |
(b) | Net of payment made by the Programs record keeper, an affiliate, who reimbursed the Fund for trading losses attributable to processing errors. Impact of the increase is less than $0.005 per unit. |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-85
Table of Contents
American Bar Association Members/State Street Collective Trust
Mid Cap Index Equity Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investment in affiliated fund, at value: |
|||
SSgA S&P MidCap® Index Non-Lending Series Fund Class A (cost $24,070,803 and units of 949,116) |
$ | 25,331,899 | |
Receivable for fund units sold |
201,721 | ||
Total assets |
25,533,620 | ||
Liabilities | |||
Payable for investments purchased |
139,344 | ||
Payable for fund units redeemed |
62,377 | ||
Investment advisory fee payable |
993 | ||
INGprogram fee payable |
10,053 | ||
Trustee, management and administration fees payable |
1,912 | ||
ABA Retirement Fundsprogram fee payable |
1,430 | ||
Payable for legal and audit services |
3,046 | ||
Payable for compliance consultant fees |
1,492 | ||
Other accruals |
1,798 | ||
Total liabilities |
222,445 | ||
Net Assets (equivalent to $19.66 per unit based on 1,287,394 units outstanding) |
$ | 25,311,175 | |
The accompanying notes are an integral part of these financial statements.
F-86
Table of Contents
American Bar Association Members/State Street Collective Trust
Mid Cap Index Equity Fund
Statement of Operations
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
44,704 | |||
State Street Bank and Trust Companyprogram fee |
690 | |||
Trustee, management and administration fees |
9,021 | |||
Investment advisory fee |
4,447 | |||
ABA Retirement Fundsprogram fee |
6,348 | |||
Legal and audit fees |
6,075 | |||
Compliance consultant fees |
3,512 | |||
Reports to unitholders |
2,352 | |||
Registration fees |
841 | |||
Other fees |
2,835 | |||
Total expenses |
80,825 | |||
Net investment income (loss) |
(80,825 | ) | ||
Net realized and unrealized gain (loss) on investment in affiliated fund |
||||
Net realized gain (loss) |
2,284,833 | |||
Change in net unrealized appreciation (depreciation) |
1,261,096 | |||
Net realized and unrealized gain (loss) |
3,545,929 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 3,465,104 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-87
Table of Contents
American Bar Association Members/State Street Collective Trust
Mid Cap Index Equity Fund
Statement of Changes in Net Assets
For the period February 3, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (80,825 | ) | |
Net realized gain (loss) |
2,284,833 | |||
Change in net unrealized appreciation (depreciation) |
1,261,096 | |||
Net increase (decrease) in net assets resulting from operations |
3,465,104 | |||
From unitholder transactions |
||||
Proceeds from units issued |
26,022,276 | |||
Cost of units redeemed |
(4,176,205 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
21,846,071 | |||
Net increase (decrease) in net assets |
25,311,175 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 25,311,175 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
1,523,294 | |||
Redeemed |
(235,900 | ) | ||
Outstanding-end of period |
1,287,394 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-88
Table of Contents
American Bar Association Members/State Street Collective Trust
Mid Cap Index Equity Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(0.15 | ) | ||
Net investment income (loss) |
(0.15 | ) | ||
Net realized and unrealized gain (loss) |
6.81 | |||
Net increase (decrease) in unit value |
6.66 | |||
Net asset value at beginning of period |
13.00 | |||
Net asset value at end of period |
$ | 19.66 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.91 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.91 | )% | ||
Portfolio turnover** |
165 | % | ||
Total return** |
51.23 | % | ||
Net assets at end of period (in thousands) |
$ | 25,311 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in a collective investment fund, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
The accompanying notes are an integral part of these financial statements.
F-89
Table of Contents
American Bar Association Members/State Street Collective Trust
Small Cap Index Equity Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investment in affiliated fund, at value: |
|||
SSgA Russell Small Cap Index Non-Lending Series Fund Class A (cost $14,957,294 and units of 834,557) |
$ | 15,521,092 | |
Receivable for fund units sold |
117,203 | ||
Total assets |
15,638,295 | ||
Liabilities | |||
Payable for investments purchased |
115,303 | ||
Payable for fund units redeemed |
1,900 | ||
Investment advisory fee payable |
584 | ||
INGprogram fee payable |
6,242 | ||
Trustee, management and administration fees payable |
1,190 | ||
ABA Retirement Fundsprogram fee payable |
890 | ||
Payable for legal and audit services |
1,981 | ||
Payable for compliance consultant fees |
970 | ||
Other accruals |
1,169 | ||
Total liabilities |
130,229 | ||
Net Assets (equivalent to $20.67 per unit based on 750,212 units outstanding) |
$ | 15,508,066 | |
The accompanying notes are an integral part of these financial statements.
F-90
Table of Contents
American Bar Association Members/State Street Collective Trust
Small Cap Index Equity Fund
Statement of Operations
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
31,548 | |||
State Street Bank and Trust Companyprogram fee |
668 | |||
Trustee, management and administration fees |
6,445 | |||
Investment advisory fee |
3,128 | |||
ABA Retirement Fundsprogram fee |
4,478 | |||
Legal and audit fees |
4,199 | |||
Compliance consultant fees |
2,420 | |||
Reports to unitholders |
1,716 | |||
Registration fees |
577 | |||
Other fees |
2,093 | |||
Total expenses |
57,272 | |||
Net investment income (loss) |
(57,272 | ) | ||
Net realized and unrealized gain (loss) on investment in affiliated fund |
||||
Net realized gain (loss) |
1,791,939 | |||
Change in net unrealized appreciation (depreciation) |
563,798 | |||
Net realized and unrealized gain (loss) |
2,355,737 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 2,298,465 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-91
Table of Contents
American Bar Association Members/State Street Collective Trust
Small Cap Index Equity Fund
Statement of Changes in Net Assets
For the period February 3, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (57,272 | ) | |
Net realized gain (loss) |
1,791,939 | |||
Change in net unrealized appreciation (depreciation) |
563,798 | |||
Net increase (decrease) in net assets resulting from operations |
2,298,465 | |||
From unitholder transactions |
||||
Proceeds from units issued |
17,978,513 | |||
Cost of units redeemed |
(4,768,912 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
13,209,601 | |||
Net increase (decrease) in net assets |
15,508,066 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 15,508,066 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
1,020,803 | |||
Redeemed |
(270,591 | ) | ||
Outstanding-end of period |
750,212 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-92
Table of Contents
American Bar Association Members/State Street Collective Trust
Small Cap Index Equity Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period February 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(0.16 | ) | ||
Net investment income (loss) |
(0.16 | ) | ||
Net realized and unrealized gain (loss) |
6.83 | |||
Net increase (decrease) in unit value |
6.67 | |||
Net asset value at beginning of period |
14.00 | |||
Net asset value at end of period |
$ | 20.67 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.90 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.90 | )% | ||
Portfolio turnover** |
192 | % | ||
Total return** |
47.64 | % | ||
Net assets at end of period (in thousands) |
$ | 15,508 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in a collective investment fund, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
The accompanying notes are an integral part of these financial statements.
F-93
Table of Contents
American Bar Association Members/State Street Collective Trust
International Index Equity Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investment in affiliated fund, at value: |
|||
SSgA Global Equity ex U.S. Index Non-Lending Series Fund Class A (cost $23,540,980 and units of 2,011,204) |
$ | 24,367,752 | |
Receivable for fund units sold |
178,421 | ||
Total assets |
24,546,173 | ||
Liabilities | |||
Payable for investments purchased |
103,107 | ||
Payable for fund units redeemed |
75,314 | ||
Investment advisory fee payable |
1,891 | ||
INGprogram fee payable |
9,797 | ||
Trustee, management and administration fees payable |
1,869 | ||
ABA Retirement Fundsprogram fee payable |
1,397 | ||
Payable for legal and audit services |
3,040 | ||
Payable for compliance consultant fees |
1,489 | ||
Other accruals |
1,794 | ||
Total liabilities |
199,698 | ||
Net Assets (equivalent to $26.28 per unit based on 926,417 units outstanding) |
$ | 24,346,475 | |
The accompanying notes are an integral part of these financial statements.
F-94
Table of Contents
American Bar Association Members/State Street Collective Trust
International Index Equity Fund
Statement of Operations
For the period from March 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
46,652 | |||
State Street Bank and Trust Companyprogram fee |
390 | |||
Trustee, management and administration fees |
9,330 | |||
Investment advisory fee |
9,138 | |||
ABA Retirement Fundsprogram fee |
6,570 | |||
Legal and audit fees |
6,219 | |||
Compliance consultant fees |
3,583 | |||
Reports to unitholders |
2,436 | |||
Registration fees |
859 | |||
Other fees |
3,021 | |||
Total expenses |
88,198 | |||
Net investment income (loss) |
(88,198 | ) | ||
Net realized and unrealized gain (loss) on investment in affiliated fund |
||||
Net realized gain (loss) |
2,482,853 | |||
Change in net unrealized appreciation (depreciation) |
826,772 | |||
Net realized and unrealized gain (loss) |
3,309,625 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 3,221,427 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-95
Table of Contents
American Bar Association Members/State Street Collective Trust
International Index Equity Fund
Statement of Changes in Net Assets
For the period March 3, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (88,198 | ) | |
Net realized gain (loss) |
2,482,853 | |||
Change in net unrealized appreciation (depreciation) |
826,772 | |||
Net increase (decrease) in net assets resulting from operations |
3,221,427 | |||
From unitholder transactions |
||||
Proceeds from units issued |
23,437,420 | |||
Cost of units redeemed |
(2,312,372 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
21,125,048 | |||
Net increase (decrease) in net assets |
24,346,475 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 24,346,475 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
1,022,072 | |||
Redeemed |
(95,655 | ) | ||
Outstanding-end of period |
926,417 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-96
Table of Contents
American Bar Association Members/State Street Collective Trust
International Index Equity Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period March 3, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(0.20 | ) | ||
Net investment income (loss) |
(0.20 | ) | ||
Net realized and unrealized gain (loss) |
11.48 | |||
Net increase (decrease) in unit value |
11.28 | |||
Net asset value at beginning of period |
15.00 | |||
Net asset value at end of period |
$ | 26.28 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.96 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.96 | )% | ||
Portfolio turnover** |
147 | % | ||
Total return** |
75.20 | % | ||
Net assets at end of period (in thousands) |
$ | 24,346 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment fund in which the Fund invests. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in a collective investment fund, rather than portfolio turnover of the underlying portfolio of such collective investment fund. |
The accompanying notes are an integral part of these financial statements.
F-97
Table of Contents
American Bar Association Members/State Street Collective Trust
Real Asset Return Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund Class A (cost $2,258,845 and units of 119,350) |
$ | 2,327,329 | |
SSgA/Tuckerman REIT Index Non-Lending Series Fund Class A (cost $1,450,567 and units of 84,890) |
1,785,570 | ||
SSgA Dow Jones UBS-Commodity IndexSM Non-Lending Series Fund Class A (cost $1,155,811 and units of 149,113) |
1,262,836 | ||
Receivable for fund units sold |
58,971 | ||
Total assets |
5,434,706 | ||
Liabilities | |||
Payable for investments purchased |
58,971 | ||
Investment advisory fee payable |
386 | ||
INGprogram fee payable |
2,167 | ||
Trustee, management and administration fees payable |
414 | ||
ABA Retirement Fundsprogram fee payable |
308 | ||
Other accruals |
1,334 | ||
Total liabilities |
63,580 | ||
Net Assets (equivalent to $14.51 per unit based on 370,249 units outstanding) |
$ | 5,371,126 | |
The accompanying notes are an integral part of these financial statements.
F-98
Table of Contents
American Bar Association Members/State Street Collective Trust
Real Asset Return Fund
Statement of Operations
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
8,479 | |||
Trustee, management and administration fees |
1,660 | |||
Investment advisory fee |
1,485 | |||
ABA Retirement Fundsprogram fee |
1,202 | |||
Legal and audit fees |
1,187 | |||
Compliance consultant fees |
689 | |||
Reports to unitholders |
400 | |||
Registration fees |
168 | |||
Other fees |
499 | |||
Total expenses |
15,769 | |||
Net investment income (loss) on investments in affiliated funds |
(15,769 | ) | ||
Net realized and unrealized gain (loss) |
||||
Net realized gain (loss) |
34,750 | |||
Change in net unrealized appreciation (depreciation) |
510,512 | |||
Net realized and unrealized gain (loss) |
545,262 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 529,493 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-99
Table of Contents
American Bar Association Members/State Street Collective Trust
Real Asset Return Fund
Statement of Changes in Net Assets
For the period July 7, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (15,769 | ) | |
Net realized gain (loss) |
34,750 | |||
Change in net unrealized appreciation (depreciation) |
510,512 | |||
Net increase (decrease) in net assets resulting from operations |
529,493 | |||
From unitholder transactions |
||||
Proceeds from units issued |
5,465,488 | |||
Cost of units redeemed |
(623,855 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
4,841,633 | |||
Net increase (decrease) in net assets |
5,371,126 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 5,371,126 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
418,128 | |||
Redeemed |
(47,879 | ) | ||
Outstanding-end of period |
370,249 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-100
Table of Contents
American Bar Association Members/State Street Collective Trust
Real Asset Return Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(0.06 | ) | ||
Net investment income (loss) |
(0.06 | ) | ||
Net realized and unrealized gain (loss) |
2.57 | |||
Net increase (decrease) in unit value |
2.51 | |||
Net asset value at beginning of period |
12.00 | |||
Net asset value at end of period |
$ | 14.51 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.95 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.95 | )% | ||
Portfolio turnover** |
14 | % | ||
Total return** |
20.92 | % | ||
Net assets at end of period (in thousands) |
$ | 5,371 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-101
Table of Contents
American Bar Association Members/State Street Collective Trust
Lifetime Income Retirement Date Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
SSgA Target Retirement Income Securities Lending Series Fund Class I (cost $18,361,497 and units of 1,604,231) |
$ | 19,140,084 | |
SSgA Target Retirement Income Non-Lending Series Fund Class A (cost $9,202,591 and units of 885,586) |
9,822,032 | ||
Receivable for fund units sold |
200,281 | ||
Total assets |
29,162,397 | ||
Liabilities | |||
Payable for investments purchased |
181,343 | ||
Payable for fund units redeemed |
18,938 | ||
Retirement Date Fund management fee payable |
2,400 | ||
INGprogram fee payable |
12,111 | ||
Trustee, management and administration fees payable |
2,319 | ||
ABA Retirement Fundsprogram fee payable |
1,725 | ||
Other accruals |
9,621 | ||
Total liabilities |
228,457 | ||
Net Assets (equivalent to $10.94 per unit based on 2,645,849 units outstanding) |
$ | 28,933,940 | |
The accompanying notes are an integral part of these financial statements.
F-102
Table of Contents
American Bar Association Members/State Street Collective Trust
Lifetime Income Retirement Date Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
94,026 | |||
State Street Bank and Trust Companyprogram fee |
32,902 | |||
Trustee, management and administration fees |
28,691 | |||
Retirement Date Fund management fee |
26,802 | |||
ABA Retirement Fundsprogram fee |
16,777 | |||
Legal and audit fees |
15,835 | |||
Compliance consultant fees |
10,262 | |||
Reports to unitholders |
10,358 | |||
Registration fees |
2,012 | |||
Other fees |
8,108 | |||
Total expenses |
245,773 | |||
Net investment income (loss) |
(245,773 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
(1,046,468 | ) | ||
Change in net unrealized appreciation (depreciation) |
4,924,630 | |||
Net realized and unrealized gain (loss) |
3,878,162 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 3,632,389 | ||
The accompanying notes are an integral part of these financial statements.
F-103
Table of Contents
American Bar Association Members/State Street Collective Trust
Lifetime Income Retirement Date Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | (198,030 | ) | $ | (245,773 | ) | ||
Net realized gain (loss) |
182,122 | (1,046,468 | ) | |||||
Change in net unrealized appreciation (depreciation) |
(4,550,034 | ) | 4,924,630 | |||||
Net increase (decrease) in net assets resulting from operations |
(4,565,942 | ) | 3,632,389 | |||||
From unitholder transactions |
||||||||
Proceeds from units issued |
22,979,591 | 6,978,347 | ||||||
Cost of units redeemed |
(9,557,225 | ) | (9,138,858 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
13,422,366 | (2,160,511 | ) | |||||
Net increase (decrease) in net assets |
8,856,424 | 1,471,878 | ||||||
Net Assets |
||||||||
Beginning of year |
18,605,638 | 27,462,062 | ||||||
End of year |
$ | 27,462,062 | $ | 28,933,940 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
1,676,159 | 2,883,860 | ||||||
Issued |
2,131,117 | 692,688 | ||||||
Redeemed |
(923,416 | ) | (930,699 | ) | ||||
Outstanding-end of year |
2,883,860 | 2,645,849 | ||||||
The accompanying notes are an integral part of these financial statements.
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American Bar Association Members/State Street Collective Trust
Lifetime Income Retirement Date Fund
Financial Highlights
(For a unit outstanding throughout the year)
For the period August 9, 2006(a) to December 31, 2006 |
2007 | 2008 | 2009 | |||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(0.03 | ) | (0.07 | ) | (0.07 | ) | (0.09 | ) | ||||||||
Net investment income (loss) |
(0.03 | ) | (0.07 | ) | (0.07 | ) | (0.09 | ) | ||||||||
Net realized and unrealized gain (loss) |
0.53 | 0.67 | (1.51 | ) | 1.51 | |||||||||||
Net increase (decrease) in unit value |
0.50 | 0.60 | (1.58 | ) | 1.42 | |||||||||||
Net asset value at beginning of year |
10.00 | 10.50 | 11.10 | 9.52 | ||||||||||||
Net asset value at end of year |
$ | 10.50 | $ | 11.10 | $ | 9.52 | $ | 10.94 | ||||||||
Ratios/Supplemental Data: |
||||||||||||||||
Ratio of expenses to average net assets |
0.69 | %* | 0.64 | % | 0.67 | % | 0.92 | % | ||||||||
Ratio of net investment income (loss) to average net assets |
(0.69 | )%* | (0.64 | )% | (0.67 | )% | (0.92 | )% | ||||||||
Portfolio turnover |
72 | %** | 21 | % | 33 | % | 54 | % | ||||||||
Total return |
5.00 | %** | 5.71 | % | (14.23 | )% | 14.92 | % | ||||||||
Net assets at end of year (in thousands) |
$ | 11,432 | $ | 18,606 | $ | 27,462 | $ | 28,934 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-105
Table of Contents
American Bar Association Members/State Street Collective Trust
2010 Retirement Date Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
SSgA Target Retirement 2010 Securities Lending Series Fund Class I (cost $40,364,833 and units of 3,571,764) |
$ | 42,053,949 | |
SSgA Target Retirement 2010 Non-Lending Series Fund Class A (cost $18,513,806 and units of 1,755,367) |
19,977,832 | ||
Receivable for fund units sold |
89,899 | ||
Total assets |
62,121,680 | ||
Liabilities | |||
Payable for investments purchased |
88,037 | ||
Payable for fund units redeemed |
1,862 | ||
Retirement Date Fund management fee payable |
5,256 | ||
INGprogram fee payable |
26,575 | ||
Trustee, management and administration fees payable |
5,080 | ||
ABA Retirement Fundsprogram fee payable |
3,785 | ||
Payable for legal and audit services |
9,717 | ||
Other accruals |
10,493 | ||
Total liabilities |
150,805 | ||
Net Assets (equivalent to $12.75 per unit based on 4,859,187 units outstanding) |
$ | 61,970,875 | |
The accompanying notes are an integral part of these financial statements.
F-106
Table of Contents
American Bar Association Members/State Street Collective Trust
2010 Retirement Date Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
189,857 | |||
State Street Bank and Trust Companyprogram fee |
57,705 | |||
Trustee, management and administration fees |
55,292 | |||
Retirement Date Fund management fee |
51,889 | |||
ABA Retirement Fundsprogram fee |
32,821 | |||
Legal and audit fees |
30,922 | |||
Compliance consultant fees |
19,755 | |||
Reports to unitholders |
19,618 | |||
Registration fees |
3,954 | |||
Other fees |
15,686 | |||
Total expenses |
477,499 | |||
Net investment income (loss) |
(477,499 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
(3,508,460 | ) | ||
Change in net unrealized appreciation (depreciation) |
11,783,475 | |||
Net realized and unrealized gain (loss) |
8,275,015 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 7,797,516 | ||
The accompanying notes are an integral part of these financial statements.
F-107
Table of Contents
American Bar Association Members/State Street Collective Trust
2010 Retirement Date Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | (351,640 | ) | $ | (477,499 | ) | ||
Net realized gain (loss) |
(126,974 | ) | (3,508,460 | ) | ||||
Change in net unrealized appreciation (depreciation) |
(10,265,467 | ) | 11,783,475 | |||||
Net increase (decrease) in net assets resulting from operations |
(10,744,081 | ) | 7,797,516 | |||||
From unitholder transactions |
||||||||
Proceeds from units issued |
42,530,838 | 20,938,733 | ||||||
Cost of units redeemed |
(20,700,116 | ) | (15,951,278 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
21,830,722 | 4,987,455 | ||||||
Net increase (decrease) in net assets |
11,086,641 | 12,784,971 | ||||||
Net Assets |
||||||||
Beginning of year |
38,099,263 | 49,185,904 | ||||||
End of year |
$ | 49,185,904 | $ | 61,970,875 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
2,807,869 | 4,478,584 | ||||||
Issued |
3,342,882 | 1,791,685 | ||||||
Redeemed |
(1,672,167 | ) | (1,411,082 | ) | ||||
Outstanding-end of year |
4,478,584 | 4,859,187 | ||||||
The accompanying notes are an integral part of these financial statements.
F-108
Table of Contents
American Bar Association Members/State Street Collective Trust
2010 Retirement Date Fund
Financial Highlights
(For a unit outstanding throughout the year)
For the period August 8, 2006(a) to December 31, 2006 |
2007 | 2008 | 2009 | |||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(0.03 | ) | (0.08 | ) | (0.08 | ) | (0.11 | ) | ||||||||
Net investment income (loss) |
(0.03 | ) | (0.08 | ) | (0.08 | ) | (0.11 | ) | ||||||||
Net realized and unrealized gain (loss) |
0.80 | 0.88 | (2.51 | ) | 1.88 | |||||||||||
Net increase (decrease) in unit value |
0.77 | 0.80 | (2.59 | ) | 1.77 | |||||||||||
Net asset value at beginning of year |
12.00 | 12.77 | 13.57 | 10.98 | ||||||||||||
Net asset value at end of year |
$ | 12.77 | $ | 13.57 | $ | 10.98 | $ | 12.75 | ||||||||
Ratios/Supplemental Data: |
||||||||||||||||
Ratio of expenses to average net assets |
0.69 | %* | 0.63 | % | 0.67 | % | 0.92 | % | ||||||||
Ratio of net investment income (loss) to average net assets |
(0.69 | )%* | (0.63 | )% | (0.67 | )% | (0.92 | )% | ||||||||
Portfolio turnover |
21 | %** | 18 | % | 27 | % | 56 | % | ||||||||
Total return |
6.42 | %** | 6.26 | % | (19.09 | )% | 16.12 | % | ||||||||
Net assets at end of year (in thousands) |
$ | 15,765 | $ | 38,099 | $ | 49,186 | $ | 61,971 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolio of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-109
Table of Contents
American Bar Association Members/State Street Collective Trust
2020 Retirement Date Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
SSgA Target Retirement 2020 Securities Lending Series Fund Class I (cost $70,568,711 and units of 6,265,442) |
$ | 72,898,412 | |
SSgA Target Retirement 2020 Non-Lending Series Fund Class A (cost $30,659,606 and units of 2,864,045) |
33,772,813 | ||
Receivable for fund units sold |
299,844 | ||
Total assets |
106,971,069 | ||
Liabilities | |||
Payable for investments purchased |
267,837 | ||
Payable for fund units redeemed |
32,007 | ||
Retirement Date Fund management fee payable |
8,922 | ||
INGprogram fee payable |
45,003 | ||
Trustee, management and administration fees payable |
8,613 | ||
ABA Retirement Fundsprogram fee payable |
6,423 | ||
Other accruals |
34,032 | ||
Total liabilities |
402,837 | ||
Net Assets (equivalent to $14.45 per unit based on 7,372,493 units outstanding) |
$ | 106,568,232 | |
The accompanying notes are an integral part of these financial statements.
F-110
Table of Contents
American Bar Association Members/State Street Collective Trust
2020 Retirement Date Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
317,068 | |||
State Street Bank and Trust Companyprogram fee |
90,050 | |||
Trustee, management and administration fees |
90,356 | |||
Retirement Date Fund management fee |
85,000 | |||
ABA Retirement Fundsprogram fee |
54,184 | |||
Legal and audit fees |
50,973 | |||
Compliance consultant fees |
32,416 | |||
Reports to unitholders |
31,503 | |||
Registration fees |
6,554 | |||
Other fees |
26,076 | |||
Total expenses |
784,180 | |||
Net investment income (loss) |
(784,180 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
(9,481,156 | ) | ||
Change in net unrealized appreciation (depreciation) |
27,100,587 | |||
Net realized and unrealized gain (loss) |
17,619,431 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 16,835,251 | ||
The accompanying notes are an integral part of these financial statements.
F-111
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American Bar Association Members/State Street Collective Trust
2020 Retirement Date Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | (550,456 | ) | $ | (784,180 | ) | ||
Net realized gain (loss) |
(1,007,714 | ) | (9,481,156 | ) | ||||
Change in net unrealized appreciation (depreciation) |
(23,937,922 | ) | 27,100,587 | |||||
Net increase (decrease) in net assets resulting from operations |
(25,496,092 | ) | 16,835,251 | |||||
From unitholder transactions |
||||||||
Proceeds from units issued |
75,915,473 | 38,106,822 | ||||||
Cost of units redeemed |
(24,641,125 | ) | (23,229,302 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
51,274,348 | 14,877,520 | ||||||
Net increase (decrease) in net assets |
25,778,256 | 31,712,771 | ||||||
Net Assets |
||||||||
Beginning of year |
49,077,205 | 74,855,461 | ||||||
End of year |
$ | 74,855,461 | $ | 106,568,232 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
2,995,453 | 6,284,404 | ||||||
Issued |
5,055,777 | 2,970,277 | ||||||
Redeemed |
(1,766,826 | ) | (1,882,188 | ) | ||||
Outstanding-end of year |
6,284,404 | 7,372,493 | ||||||
The accompanying notes are an integral part of these financial statements.
F-112
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American Bar Association Members/State Street Collective Trust
2020 Retirement Date Fund
Financial Highlights
(For a unit outstanding throughout the year)
For the period August 2, 2006(a) to December 31, 2006 |
2007 | 2008 | 2009 | |||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(0.04 | ) | (0.10 | ) | (0.10 | ) | (0.12 | ) | ||||||||
Net investment income (loss) |
(0.04 | ) | (0.10 | ) | (0.10 | ) | (0.12 | ) | ||||||||
Net realized and unrealized gain (loss) |
1.36 | 1.16 | (4.37 | ) | 2.66 | |||||||||||
Net increase (decrease) in unit value |
1.32 | 1.06 | (4.47 | ) | 2.54 | |||||||||||
Net asset value at beginning of year |
14.00 | 15.32 | 16.38 | 11.91 | ||||||||||||
Net asset value at end of year |
$ | 15.32 | $ | 16.38 | $ | 11.91 | $ | 14.45 | ||||||||
Ratios/Supplemental Data: |
||||||||||||||||
Ratio of expenses to average net assets |
0.69 | %* | 0.63 | % | 0.67 | % | 0.92 | % | ||||||||
Ratio of net investment income (loss) to average net assets |
(0.69 | )%* | (0.63 | )% | (0.67 | )% | (0.92 | )% | ||||||||
Portfolio turnover |
16 | %** | 20 | % | 17 | % | 51 | % | ||||||||
Total return |
9.43 | %** | 6.92 | % | (27.29 | )% | 21.33 | % | ||||||||
Net assets at end of year (in thousands) |
$ | 21,315 | $ | 49,077 | $ | 74,855 | $ | 106,568 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-113
Table of Contents
American Bar Association Members/State Street Collective Trust
2030 Retirement Date Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
SSgA Target Retirement 2030 Securities Lending Series Fund Class I (cost $51,752,852 and units of 4,600,846) |
$ | 52,757,899 | |
SSgA Target Retirement 2030 Non-Lending Series Fund Class A (cost $21,750,970 and units of 2,016,817) |
24,340,964 | ||
Receivable for fund units sold |
373,665 | ||
Total assets |
77,472,528 | ||
Liabilities | |||
Payable for investments purchased |
224,238 | ||
Payable for fund units redeemed |
149,427 | ||
Retirement Date Fund management fee payable |
6,420 | ||
INGprogram fee payable |
32,407 | ||
Trustee, management and administration fees payable |
6,198 | ||
ABA Retirement Fundsprogram fee payable |
4,622 | ||
Other accruals |
24,201 | ||
Total liabilities |
447,513 | ||
Net Assets (equivalent to $16.03 per unit based on 4,804,674 units outstanding) |
$ | 77,025,015 | |
The accompanying notes are an integral part of these financial statements.
F-114
Table of Contents
American Bar Association Members/State Street Collective Trust
2030 Retirement Date Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
224,339 | |||
State Street Bank and Trust Companyprogram fee |
61,701 | |||
Trustee, management and administration fees |
63,342 | |||
Retirement Date Fund management fee |
59,638 | |||
ABA Retirement Fundsprogram fee |
38,065 | |||
Legal and audit fees |
35,746 | |||
Compliance consultant fees |
22,641 | |||
Reports to unitholders |
22,073 | |||
Registration fees |
4,595 | |||
Other fees |
18,288 | |||
Total expenses |
550,428 | |||
Net investment income (loss) |
(550,428 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
(8,496,277 | ) | ||
Change in net unrealized appreciation (depreciation) |
23,189,920 | |||
Net realized and unrealized gain (loss) |
14,693,643 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 14,143,215 | ||
The accompanying notes are an integral part of these financial statements.
F-115
Table of Contents
American Bar Association Members/State Street Collective Trust
2030 Retirement Date Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | (397,436 | ) | $ | (550,428 | ) | ||
Net realized gain (loss) |
(353,221 | ) | (8,496,277 | ) | ||||
Change in net unrealized appreciation (depreciation) |
(21,728,360 | ) | 23,189,920 | |||||
Net increase (decrease) in net assets resulting from operations |
(22,479,017 | ) | 14,143,215 | |||||
From unitholder transactions |
||||||||
Proceeds from units issued |
48,033,691 | 27,908,180 | ||||||
Cost of units redeemed |
(18,719,510 | ) | (16,268,736 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
29,314,181 | 11,639,444 | ||||||
Net increase (decrease) in net assets |
6,835,164 | 25,782,659 | ||||||
Net Assets |
||||||||
Beginning of year |
44,407,192 | 51,242,356 | ||||||
End of year |
$ | 51,242,356 | $ | 77,025,015 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
2,334,893 | 4,006,357 | ||||||
Issued |
2,832,112 | 2,010,319 | ||||||
Redeemed |
(1,160,648 | ) | (1,212,002 | ) | ||||
Outstanding-end of year |
4,006,357 | 4,804,674 | ||||||
The accompanying notes are an integral part of these financial statements.
F-116
Table of Contents
American Bar Association Members/State Street Collective Trust
2030 Retirement Date Fund
Financial Highlights
(For a unit outstanding throughout the year)
For the period August 2, 2006(a) to December 31, 2006 |
2007 | 2008 | 2009 | |||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(0.05 | ) | (0.12 | ) | (0.11 | ) | (0.13 | ) | ||||||||
Net investment income (loss) |
(0.05 | ) | (0.12 | ) | (0.11 | ) | (0.13 | ) | ||||||||
Net realized and unrealized gain (loss) |
1.81 | 1.38 | (6.12 | ) | 3.37 | |||||||||||
Net increase (decrease) in unit value |
1.76 | 1.26 | (6.23 | ) | 3.24 | |||||||||||
Net asset value at beginning of year |
16.00 | 17.76 | 19.02 | 12.79 | ||||||||||||
Net asset value at end of year |
$ | 17.76 | $ | 19.02 | $ | 12.79 | $ | 16.03 | ||||||||
Ratios/Supplemental Data: |
||||||||||||||||
Ratio of expenses to average net assets |
0.69 | %* | 0.63 | % | 0.67 | % | 0.92 | % | ||||||||
Ratio of net investment income (loss) to average net assets |
(0.69 | )%* | (0.63 | )% | (0.67 | )% | (0.92 | )% | ||||||||
Portfolio turnover |
6 | %** | 7 | % | 15 | % | 48 | % | ||||||||
Total return |
11.00 | %** | 7.09 | % | (32.75 | )% | 25.33 | % | ||||||||
Net assets at end of year (in thousands) |
$ | 15,260 | $ | 44,407 | $ | 51,242 | $ | 77,025 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-117
Table of Contents
American Bar Association Members/State Street Collective Trust
2040 Retirement Date Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
SSgA Target Retirement 2040 Securities Lending Series Fund Class I (cost $31,735,746 and units of 2,903,818) |
$ | 33,605,889 | |
SSgA Target Retirement 2040 Non-Lending Series Fund Class A (cost $14,209,070 and units of 1,313,834) |
16,055,054 | ||
Receivable for fund units sold |
336,249 | ||
Total assets |
49,997,192 | ||
Liabilities | |||
Payable for investments purchased |
334,639 | ||
Payable for fund units redeemed |
1,610 | ||
Retirement Date Fund management fee payable |
4,114 | ||
INGprogram fee payable |
20,767 | ||
Trustee, management and administration fees payable |
3,971 | ||
ABA Retirement Fundsprogram fee payable |
2,960 | ||
Other accruals |
15,635 | ||
Total liabilities |
383,696 | ||
Net Assets (equivalent to $17.83 per unit based on 2,782,633 units outstanding) |
$ | 49,613,496 | |
The accompanying notes are an integral part of these financial statements.
F-118
Table of Contents
American Bar Association Members/State Street Collective Trust
2040 Retirement Date Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
147,055 | |||
State Street Bank and Trust Companyprogram fee |
37,789 | |||
Trustee, management and administration fees |
40,740 | |||
Retirement Date Fund management fee |
38,411 | |||
ABA Retirement Fundsprogram fee |
24,600 | |||
Legal and audit fees |
22,962 | |||
Compliance consultant fees |
14,446 | |||
Reports to unitholders |
14,099 | |||
Registration fees |
2,954 | |||
Other fees |
11,860 | |||
Total expenses |
354,916 | |||
Net investment income (loss) |
(354,916 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
(5,806,246 | ) | ||
Change in net unrealized appreciation (depreciation) |
16,565,546 | |||
Net realized and unrealized gain (loss) |
10,759,300 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 10,404,384 | ||
The accompanying notes are an integral part of these financial statements.
F-119
Table of Contents
American Bar Association Members/State Street Collective Trust
2040 Retirement Date Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | (242,627 | ) | $ | (354,916 | ) | ||
Net realized gain (loss) |
(385,452 | ) | (5,806,246 | ) | ||||
Change in net unrealized appreciation (depreciation) |
(14,478,560 | ) | 16,565,546 | |||||
Net increase (decrease) in net assets resulting from operations |
(15,106,639 | ) | 10,404,384 | |||||
From unitholder transactions |
||||||||
Proceeds from units issued |
29,884,952 | 18,944,387 | ||||||
Cost of units redeemed |
(12,335,820 | ) | (11,048,976 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
17,549,132 | 7,895,411 | ||||||
Net increase (decrease) in net assets |
2,442,493 | 18,299,795 | ||||||
Net Assets |
||||||||
Beginning of year |
28,871,208 | 31,313,701 | ||||||
End of year |
$ | 31,313,701 | $ | 49,613,496 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
1,344,258 | 2,251,543 | ||||||
Issued |
1,599,261 | 1,268,741 | ||||||
Redeemed |
(691,976 | ) | (737,651 | ) | ||||
Outstanding-end of year |
2,251,543 | 2,782,633 | ||||||
The accompanying notes are an integral part of these financial statements.
F-120
Table of Contents
American Bar Association Members/State Street Collective Trust
2040 Retirement Date Fund
Financial Highlights
(For a unit outstanding throughout the year)
For the period August 3, 2006(a) to December 31, 2006 |
2007 | 2008 | 2009 | |||||||||||||
Investment income |
$ | | $ | | $ | | $ | | ||||||||
Expenses() |
(0.06 | ) | (0.13 | ) | (0.12 | ) | (0.14 | ) | ||||||||
Net investment income (loss) |
(0.06 | ) | (0.13 | ) | (0.12 | ) | (0.14 | ) | ||||||||
Net realized and unrealized gain (loss) |
2.05 | 1.62 | (7.45 | ) | 4.06 | |||||||||||
Net increase (decrease) in unit value |
1.99 | 1.49 | (7.57 | ) | 3.92 | |||||||||||
Net asset value at beginning of year |
18.00 | 19.99 | 21.48 | 13.91 | ||||||||||||
Net asset value at end of year |
$ | 19.99 | $ | 21.48 | $ | 13.91 | $ | 17.83 | ||||||||
Ratios/Supplemental Data: |
||||||||||||||||
Ratio of expenses to average net assets |
0.69 | %* | 0.63 | % | 0.67 | % | 0.92 | % | ||||||||
Ratio of net investment income (loss) to average net assets |
(0.69 | )%* | (0.63 | )% | (0.67 | )% | (0.92 | )% | ||||||||
Portfolio turnover |
8 | %** | 14 | % | 14 | % | 50 | % | ||||||||
Total return |
11.06 | %** | 7.45 | % | (35.24 | )% | 28.18 | % | ||||||||
Net assets at end of year (in thousands) |
$ | 11,894 | $ | 28,871 | $ | 31,314 | $ | 49,613 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-121
Table of Contents
American Bar Association Members/State Street Collective Trust
Conservative Risk Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
State Street Bank and Trust Company Short Term Investment Fund (cost $325,615 and units of 325,615) |
$ | 325,615 | |
SSgA U.S. Bond Index Non-Lending Series Fund Class A (cost $3,065,157 and units of 296,295) |
3,106,356 | ||
SSgA Russell All Cap Index Non-Lending Series Fund Class A (cost $889,822 and units of 70,594) |
988,386 | ||
SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund Class A (cost $548,745 and units of 28,964) |
564,792 | ||
SSgA/Tuckerman REIT Index Non-Lending Series Fund Class A (cost $281,083 and units of 16,111) |
338,875 | ||
SSgA International Index Non-Lending Series Fund Class A (cost $286,314 and units of 24,523) |
310,636 | ||
Receivable for investments sold |
16,484 | ||
Receivable for fund units sold |
230,659 | ||
Interest receivable |
79 | ||
Total assets |
5,881,882 | ||
Liabilities | |||
Payable for investments purchased |
163,532 | ||
Payable for fund units redeemed |
70,352 | ||
Investment advisory fee payable |
267 | ||
INGprogram fee payable |
2,245 | ||
Trustee, management and administration fees payable |
429 | ||
ABA Retirement Fundsprogram fee payable |
319 | ||
Other accruals |
1,364 | ||
Total liabilities |
238,508 | ||
Net Assets (equivalent to $14.39 per unit based on 392,122 units outstanding) |
$ | 5,643,374 | |
The accompanying notes are an integral part of these financial statements.
F-122
Table of Contents
American Bar Association Members/State Street Collective Trust
Conservative Risk Fund
Statement of Operations
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | 392 | ||
Expenses |
||||
INGprogram fee |
8,613 | |||
Trustee, management and administration fees |
1,686 | |||
Investment advisory fee |
1,007 | |||
ABA Retirement Fundsprogram fee |
1,220 | |||
Legal and audit fees |
1,209 | |||
Compliance consultant fees |
702 | |||
Reports to unitholders |
407 | |||
Registration fees |
171 | |||
Other fees |
508 | |||
Total expenses |
15,523 | |||
Net investment income (loss) |
(15,131 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
27,642 | |||
Change in net unrealized appreciation (depreciation) |
237,924 | |||
Net realized and unrealized gain (loss) |
265,566 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 250,435 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-123
Table of Contents
American Bar Association Members/State Street Collective Trust
Conservative Risk Fund
Statement of Changes in Net Assets
For the period July 7, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (15,131 | ) | |
Net realized gain (loss) |
27,642 | |||
Change in net unrealized appreciation (depreciation) |
237,924 | |||
Net increase (decrease) in net assets resulting from operations |
250,435 | |||
From unitholder transactions |
||||
Proceeds from units issued |
5,837,562 | |||
Cost of units redeemed |
(444,623 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
5,392,939 | |||
Net increase (decrease) in net assets |
5,643,374 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 5,643,374 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
423,304 | |||
Redeemed |
(31,182 | ) | ||
Outstanding-end of period |
392,122 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-124
Table of Contents
American Bar Association Members/State Street Collective Trust
Conservative Risk Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income(b) |
$ | 0.00 | ||
Expenses() |
(0.06 | ) | ||
Net investment income (loss) |
(0.06 | ) | ||
Net realized and unrealized gain (loss) |
1.45 | |||
Net increase (decrease) in unit value |
1.39 | |||
Net asset value at beginning of period |
13.00 | |||
Net asset value at end of period |
$ | 14.39 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.92 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.90 | )% | ||
Portfolio turnover** |
5 | % | ||
Total return** |
10.69 | % | ||
Net assets at end of period (in thousands) |
$ | 5,643 |
(a) | Commencement of operations. |
(b) | Amounts less than $0.005 per unit are rounded to zero. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-125
Table of Contents
American Bar Association Members/State Street Collective Trust
Moderate Risk Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
State Street Bank and Trust Company Short Term Investment Fund (cost $308,661 and units of 308,661) |
$ | 308,661 | |
SSgA Russell All Cap Index Non-Lending Series Fund Class A (cost $4,536,127 and units of 359,196) |
5,029,103 | ||
SSgA U.S. Bond Index Non-Lending Series Fund Class A (cost $4,555,406 and units of 440,807) |
4,621,416 | ||
SSgA Global Equity ex U.S. Index Non-Lending Series Fund Class A (cost $1,721,342 and units of 157,061) |
1,902,956 | ||
SSgA/Tuckerman REIT Index Non-Lending Series Fund Class A (cost $669,758 and units of 38,773) |
815,556 | ||
SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund Class A (cost $659,484 and units of 34,847) |
679,525 | ||
SSgA Dow Jones UBS-Commodity IndexSM Non-Lending Series Fund Class A (cost $248,940 and units of 32,059) |
271,506 | ||
Receivable for investments sold |
92,748 | ||
Receivable for fund units sold |
98,086 | ||
Interest receivable |
73 | ||
Total assets |
13,819,630 | ||
Liabilities | |||
Payable for investments purchased |
204,076 | ||
Payable for fund units redeemed |
22,874 | ||
Investment advisory fee payable |
643 | ||
INGprogram fee payable |
5,413 | ||
Trustee, management and administration fees payable |
1,032 | ||
ABA Retirement Fundsprogram fee payable |
773 | ||
Other accruals |
3,327 | ||
Total liabilities |
238,138 | ||
Net Assets (equivalent to $16.43 per unit based on 826,808 units outstanding) |
$ | 13,581,492 | |
The accompanying notes are an integral part of these financial statements.
F-126
Table of Contents
American Bar Association Members/State Street Collective Trust
Moderate Risk Fund
Statement of Operations
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | 403 | ||
Expenses |
||||
INGprogram fee |
21,194 | |||
Trustee, management and administration fees |
4,151 | |||
Investment advisory fee |
2,479 | |||
ABA Retirement Fundsprogram fee |
3,007 | |||
Legal and audit fees |
2,967 | |||
Compliance consultant fees |
1,724 | |||
Reports to unitholders |
998 | |||
Registration fees |
418 | |||
Other fees |
1,248 | |||
Total expenses |
38,186 | |||
Net investment income (loss) |
(37,783 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
74,380 | |||
Change in net unrealized appreciation (depreciation) |
929,005 | |||
Net realized and unrealized gain (loss) |
1,003,385 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 965,602 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-127
Table of Contents
American Bar Association Members/State Street Collective Trust
Moderate Risk Fund
Statement of Changes in Net Assets
For the period July 7, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (37,783 | ) | |
Net realized gain (loss) |
74,380 | |||
Change in net unrealized appreciation (depreciation) |
929,005 | |||
Net increase (decrease) in net assets resulting from operations |
965,602 | |||
From unitholder transactions |
||||
Proceeds from units issued |
13,805,774 | |||
Cost of units redeemed |
(1,189,884 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
12,615,890 | |||
Net increase (decrease) in net assets |
13,581,492 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 13,581,492 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
903,096 | |||
Redeemed |
(76,288 | ) | ||
Outstanding-end of period |
826,808 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-128
Table of Contents
American Bar Association Members/State Street Collective Trust
Moderate Risk Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income(b) |
$ | 0.00 | ||
Expenses() |
(0.07 | ) | ||
Net investment income (loss) |
(0.07 | ) | ||
Net realized and unrealized gain (loss) |
2.50 | |||
Net increase (decrease) in unit value |
2.43 | |||
Net asset value at beginning of period |
14.00 | |||
Net asset value at end of period |
$ | 16.43 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.92 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.91 | )% | ||
Portfolio turnover** |
7 | % | ||
Total return** |
17.36 | % | ||
Net assets at end of period (in thousands) |
$ | 13,581 |
(a) | Commencement of operations. |
(b) | Amounts less than $0.005 per unit are rounded to zero. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-129
Table of Contents
American Bar Association Members/State Street Collective Trust
Aggressive Risk Fund
Statement of Assets and Liabilities
December 31, 2009 | |||
Assets | |||
Investments in affiliated funds, at value: |
|||
SSgA Russell All Cap Index Non-Lending Series Fund Class A (cost $2,131,667 and units of 165,573) |
$ | 2,318,191 | |
SSgA Global Equity ex U.S. Index Non-Lending Series Fund Class A (cost $860,429 and units of 76,533) |
927,276 | ||
SSgA U.S. Bond Index Non-Lending Series Fund Class A (cost $584,171 and units of 56,284) |
590,085 | ||
SSgA/Tuckerman REIT Index Non-Lending Series Fund Class A (cost $216,113 and units of 12,023) |
252,894 | ||
SSgA Dow Jones UBS-Commodity IndexSM Non-Lending Series Fund Class A (cost $117,317 and units of 14,931) |
126,447 | ||
Cash |
1 | ||
Receivable for investments sold |
9,646 | ||
Receivable for fund units sold |
47,730 | ||
Total assets |
4,272,270 | ||
Liabilities | |||
Payable for investments purchased |
50,407 | ||
Payable for fund units redeemed |
6,969 | ||
Investment advisory fee payable |
186 | ||
INGprogram fee payable |
1,564 | ||
Trustee, management and administration fees payable |
298 | ||
ABA Retirement Fundsprogram fee payable |
223 | ||
Other accruals |
940 | ||
Total liabilities |
60,587 | ||
Net Assets (equivalent to $18.62 per unit based on 226,145 units outstanding) |
$ | 4,211,683 | |
The accompanying notes are an integral part of these financial statements.
F-130
Table of Contents
American Bar Association Members/State Street Collective Trust
Aggressive Risk Fund
Statement of Operations
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses |
||||
INGprogram fee |
5,791 | |||
Trustee, management and administration fees |
1,132 | |||
Investment advisory fee |
677 | |||
ABA Retirement Fundsprogram fee |
821 | |||
Legal and audit fees |
819 | |||
Compliance consultant fees |
476 | |||
Reports to unitholders |
275 | |||
Registration fees |
115 | |||
Other fees |
336 | |||
Total expenses |
10,442 | |||
Net investment income (loss) |
(10,442 | ) | ||
Net realized and unrealized gain (loss) on investments in affiliated funds |
||||
Net realized gain (loss) |
37,834 | |||
Change in net unrealized appreciation (depreciation) |
305,196 | |||
Net realized and unrealized gain (loss) |
343,030 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 332,588 | ||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-131
Table of Contents
American Bar Association Members/State Street Collective Trust
Aggressive Risk Fund
Statement of Changes in Net Assets
For the period July 7, 2009(a) to December 31, 2009 |
||||
From operations |
||||
Net investment income (loss) |
$ | (10,442 | ) | |
Net realized gain (loss) |
37,834 | |||
Change in net unrealized appreciation (depreciation) |
305,196 | |||
Net increase (decrease) in net assets resulting from operations |
332,588 | |||
From unitholder transactions |
||||
Proceeds from units issued |
4,405,545 | |||
Cost of units redeemed |
(526,450 | ) | ||
Net increase (decrease) in net assets from unitholder transactions |
3,879,095 | |||
Net increase (decrease) in net assets |
4,211,683 | |||
Net Assets |
||||
Beginning of period |
| |||
End of period |
$ | 4,211,683 | ||
Number of units |
||||
Outstanding-beginning of period |
| |||
Issued |
256,270 | |||
Redeemed |
(30,125 | ) | ||
Outstanding-end of period |
226,145 | |||
(a) | Commencement of operations. |
The accompanying notes are an integral part of these financial statements.
F-132
Table of Contents
American Bar Association Members/State Street Collective Trust
Aggressive Risk Fund
Financial Highlights
(For a unit outstanding throughout the period)
For the period July 7, 2009(a) to December 31, 2009 |
||||
Investment income |
$ | | ||
Expenses() |
(0.08 | ) | ||
Net investment income (loss) |
(0.08 | ) | ||
Net realized and unrealized gain (loss) |
3.70 | |||
Net increase (decrease) in unit value |
3.62 | |||
Net asset value at beginning of period |
15.00 | |||
Net asset value at end of period |
$ | 18.62 | ||
Ratios/Supplemental Data: |
||||
Ratio of expenses to average net assets* |
0.92 | % | ||
Ratio of net investment income (loss) to average net assets* |
(0.92 | )% | ||
Portfolio turnover** |
9 | % | ||
Total return** |
24.13 | % | ||
Net assets at end of period (in thousands) |
$ | 4,212 |
(a) | Commencement of operations. |
* | Annualized. |
** | Not annualized. |
| Calculations prepared using the daily average number of units outstanding during the period. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to the collective investment funds in which the Fund invests a portion of its assets. |
| Portfolio turnover reflects purchases and sales of the Funds assets invested in collective investment funds, rather than portfolio turnover of the underlying portfolios of such collective investment funds. |
The accompanying notes are an integral part of these financial statements.
F-133
Table of Contents
American Bar Association Members/State Street Collective Trust
Balanced Fund
Statement of Assets and Liabilities
December 31, 2009 |
||||
Assets | ||||
American Bar Association Members/State Street Collective Trust investment funds, at value: |
||||
Bond Core Plus Fund (cost $91,011,911 and units of 4,732,937) |
$ | 114,022,873 | (a) | |
Large Cap Equity Fund (cost $140,605,097 and units of 14,060,231) |
170,780,000 | (a) | ||
Receivable for investments sold |
62,599 | |||
Total assets |
284,865,472 | |||
Liabilities | ||||
Payable for fund units redeemed |
62,599 | |||
Total liabilities |
62,599 | |||
Net Assets (equivalent to $82.71 per unit based on 3,443,359 units outstanding) |
$ | 284,802,873 | ||
(a) | Indicates an affiliated issuer. |
The accompanying notes are an integral part of these financial statements.
F-134
Table of Contents
American Bar Association Members/State Street Collective Trust
Balanced Fund
Statement of Operations
For the year ended December 31, 2009 |
||||
Investment income |
||||
Dividends (net of foreign tax expense of $1,173) |
$ | 1,993,271 | ||
Dividendsaffiliated issuers |
29,604 | |||
Securities lending net income |
62,738 | |||
Total investment income |
2,085,613 | |||
Expenses |
||||
INGprogram fee |
141,069 | |||
State Street Bank and Trust Companyprogram fee |
175,291 | |||
Trustee, management and administration fees |
81,835 | |||
Investment advisory fee |
189,258 | |||
ABA Retirement Fundsprogram fee |
37,608 | |||
Legal and audit fees |
34,647 | |||
Compliance consultant fees |
25,454 | |||
Reports to unitholders |
40,482 | |||
Registration fees |
3,610 | |||
Other fees |
13,529 | |||
Total expenses |
742,783 | |||
Net investment income (loss) |
1,342,830 | |||
Net realized and unrealized gain (loss) |
||||
Net realized gain (loss) on: |
||||
Investments |
(32,434,682 | ) | ||
Bond Core Plus Fund |
7,938,724 | |||
Large-Cap Equity Fund |
3,487,026 | |||
Net realized gain (loss) |
(21,008,932 | ) | ||
Change in net unrealized appreciation (depreciation) |
73,878,584 | |||
Net realized and unrealized gain (loss) |
52,869,652 | |||
Net increase (decrease) in net assets resulting from operations |
$ | 54,212,482 | ||
The accompanying notes are an integral part of these financial statements.
F-135
Table of Contents
American Bar Association Members/State Street Collective Trust
Balanced Fund
Statement of Changes in Net Assets
For the years ended December 31, |
||||||||
2008 | 2009 | |||||||
From operations |
||||||||
Net investment income (loss) |
$ | 2,542,208 | $ | 1,342,830 | ||||
Net realized gain (loss) |
(33,628,084 | ) | (21,008,932 | ) | ||||
Change in net unrealized appreciation (depreciation) |
(62,899,351 | ) | 73,878,584 | |||||
Net increase (decrease) in net assets resulting from operations |
(93,985,227 | ) | 54,212,482 | |||||
From unitholder transactions |
||||||||
Proceeds from units issued |
60,200,751 | 21,363,715 | ||||||
Cost of units redeemed |
(101,594,335 | ) | (68,726,234 | ) | ||||
Net increase (decrease) in net assets from unitholder transactions |
(41,393,584 | ) | (47,362,519 | ) | ||||
Net increase (decrease) in net assets |
(135,378,811 | ) | 6,849,963 | |||||
Net Assets |
||||||||
Beginning of year |
413,331,721 | 277,952,910 | ||||||
End of year |
$ | 277,952,910 | $ | 284,802,873 | ||||
Number of units |
||||||||
Outstanding-beginning of year |
4,610,378 | 4,081,965 | ||||||
Issued |
737,815 | 317,735 | ||||||
Redeemed |
(1,266,228 | ) | (956,341 | ) | ||||
Outstanding-end of year |
4,081,965 | 3,443,359 | ||||||
The accompanying notes are an integral part of these financial statements.
F-136
Table of Contents
American Bar Association Members/State Street Collective Trust
Balanced Fund
Financial Highlights
(For a unit outstanding throughout the year)
2005 | 2006 | 2007 | 2008 | 2009 | ||||||||||||||||
Investment income |
$ | 0.71 | $ | 0.84 | $ | 0.96 | $ | 0.95 | $ | 0.55 | ||||||||||
Expenses() |
(0.36 | ) | (0.43 | ) | (0.45 | ) | (0.37 | ) | (0.19 | ) | ||||||||||
Net investment income (loss) |
0.35 | 0.41 | 0.51 | 0.58 | 0.36 | |||||||||||||||
Net realized and unrealized gain (loss) |
3.50 | 5.82 | 1.89 | (22.14 | ) | 14.26 | ||||||||||||||
Net increase (decrease) in unit value |
3.85 | 6.23 | 2.40 | (21.56 | ) | 14.62 | ||||||||||||||
Net asset value at beginning of year |
77.17 | 81.02 | 87.25 | 89.65 | 68.09 | |||||||||||||||
Net asset value at end of year |
$ | 81.02 | $ | 87.25 | $ | 89.65 | $ | 68.09 | $ | 82.71 | ||||||||||
Ratios/Supplemental Data: |
||||||||||||||||||||
Ratio of expenses to average net assets |
0.46 | % | 0.51 | % | 0.50 | % | 0.46 | % | 0.27 | % | ||||||||||
Ratio of net investment income (loss) to average net assets |
0.46 | %(a) | 0.49 | %(a) | 0.57 | %(a) | 0.71 | %(a) | 0.48 | %(b) | ||||||||||
Portfolio turnover |
22 | %(c) | 18 | %(c) | 24 | %(c) | 32 | %(c) | 38 | %(d) | ||||||||||
Total return |
4.99 | % | 7.69 | % | 2.75 | % | (24.05 | )% | 21.47 | % | ||||||||||
Net assets at end of year (in thousands) |
$ | 468,940 | $ | 447,405 | $ | 413,332 | $ | 277,953 | $ | 284,803 |
| Calculations prepared using the daily average number of units outstanding during the year. |
| Expenses includes only those expenses charged directly to the Fund and does not include expenses charged to either the collective investment funds in which the Fund invests a portion of its assets and, with respect to periods commencing on July 1, 2004, does not include expenses charged to the Bond Core Plus Fund (formerly Intermediate Bond Fund) or with respect to the period commencing on July 7, 2009, does not include expenses charged to the Large Cap Equity Fund in which the Fund invests a portion of its assets. |
(a) | Does not reflect net investment income from the portion of the Fund invested in the Bond Core Plus Fund which retains all net investment income and makes no distributions. |
(b) | Does not reflect net investment income from the portions of the Fund invested in the Bond Core Plus Fund or Large Cap Equity Fund which retain all net investment income and make no distributions. |
(c) | With respect to the portion of the Funds assets invested in the Bond Core Plus Fund commencing July 1, 2004, portfolio turnover reflects purchases and sales of the Bond Core Plus Fund in which the Fund invests a portion of its assets, rather than turnover of the underlying portfolio of the Bond Core Plus Fund. |
(d) | With respect to the portions of the Funds assets invested in the Bond Core Plus Fund and Large Cap Equity Fund, commencing July 1, 2004 and July 7, 2009, respectively, portfolio turnover reflects purchases and sales of the Bond Core Plus Fund and Large Cap Equity Fund, rather than portfolio turnover of the underlying portfolios of the Bond Core Plus Fund and Large Cap Equity Fund. |
The accompanying notes are an integral part of these financial statements.
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1. Description of the Trust
American Bar Association Members/State Street Collective Trust (the Trust or the Collective Trust) was organized on August 8, 1991 under the American Bar Association Members/State Street Collective Trust Declaration of Trust, as amended and restated on December 5, 1991 and as amended thereafter. Since December 1, 2004, State Street Bank and Trust Company of New Hampshire (State Street or the Trustee) acts as trustee of the Collective Trust. The Trust is maintained exclusively for the collective investment of monies administered on behalf of participants in the ABA Retirement Funds Program (the Program). The Trust offers twenty separate collective investment funds, including five Managed Funds, the Real Asset Return Fund, three Target Risk Funds, six Index Funds, and five Retirement Date Funds (collectively, the Funds). The Retirement Date Funds are a group of five balanced investment funds each of which invests in one or more separate series of State Street Global Advisors (SSgA) funds, which is designed to correspond to a particular time horizon to retirement. The Funds are investment options under the Program, which is sponsored by ABA Retirement Funds. Effective July 2, 2009, units of the Balanced Fund ceased to be offered and thus the Balanced Fund is no longer an investment option under the Program, although certain assets held under the Program continue to be invested in the Balanced Fund. In addition, effective on or about July 2, 2009, the previously offered Large-Cap Value Equity Fund, Large-Cap Growth Equity Fund, Mid-Cap Value Equity Fund, Mid-Cap Growth Equity Fund and Small-Cap Equity Fund were eliminated. See Note 8, Changes to the Program for more information. The objectives and principal strategies of the Funds and the Balanced Fund are as follows:
Managed Funds
Stable Asset Return Fund (SARF)current income consistent with preserving principal and maintaining liquidity. As of December 31, 2009, SARF invested all of its assets in the SSgA Stable Asset Fund Trust (SAFT), a separate State Street Bank and Trust Company (State Street Bank) collective investment fund which invests in investment contracts (Traditional Investment Contracts), Synthetic GICs, which represent individual high quality fixed income and asset-backed securities subject to benefit responsive wrap contracts issued by financial institutions, and collective investment funds maintained by State Street Bank that invest in high quality fixed income and asset backed securities. SAFT also invests a portion of its assets in the State Street Bank Short Term Investment Fund (STIF), a short-term income collective investment fund maintained by State Street Bank in order to maintain liquidity for SAFT (a so-called cash buffer, the Cash Buffer). The Stable Asset Return Fund is the only investor in SAFT, while retirement plans other than those adopted under the Program also invest in STIF. The annual financial statements of STIF and SAFT are available from State Street Bank upon request.
Bond Core Plus Fund (formerly Intermediate Bond Fund)invests primarily in debt securities of varying maturities, with an average portfolio duration of three to six years, with the objective of achieving a total return from current income and capital appreciation.
Large Cap Equity Fundlong term growth of capital and some dividend income through investment in common stocks and equity-type securities of large-capitalization U.S. companies with market capitalizations, at the time of purchase, of greater than $1 billion. Invests in common stocks and the SSgA Russell 1000® Index Non-Lending Fund, the SSgA Russell Large Cap® Index Non-Lending Series Fund Class A and the SSgA Russell Large-Cap® Index Securities Lending Series Fund Class I, each of which is a separate collective investment fund maintained by State Street Bank that invests in securities contained in the Russell 1000® Index. As of December 31, 2009, 11.3% of the Funds net assets were invested in the SSgA Russell 1000® Index Non-Lending Fund, 2.4% of the
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Funds net assets were invested in the SSgA Russell Large-Cap® Index Securities Lending Series Fund Class I and 0.8% of the Funds net assets were invested in the SSgA Russell Large Cap® Index Non-Lending Series Fund Class A. These underlying funds annual financial statements are available from State Street Bank upon request.
Small-Mid Cap Equity Fundlong term growth of capital through investment in common stocks and equity-type securities of U.S. companies with market capitalizations, at the time of purchase, of between $100 million and $20 billion. Invests in common stocks and the SSgA Russell Small Cap® Index Securities Lending Series Fund Class I and the SSgA S&P MidCap® Index Non-Lending Series Fund Class A, each of which is a separate collective investment fund maintained by State Street Bank that invests in securities contained in the Russell 2000® Index. As of December 31, 2009, less than 0.1% of the Funds net assets were invested in the SSgA Russell Small Cap® Index Securities Lending Series Fund Class I and 1.7% of the Funds net assets were invested in the SSgA S&P MidCap® Index Non-Lending Series Fund Class A. These underlying funds annual financial statements are available from State Street Bank upon request.
International All Cap Equity Fund (formerly International Equity Fund)long term growth of capital primarily through investment in common stocks and other equity securities of non-U.S. domiciled companies.
Index Funds
Bond Index Fundreplication of the total return, after taking into account Fund expenses, of the U.S. investment-grade bond market represented by the Barclays Capital U.S. Aggregate Bond Index. As of December 31, 2009, 100% of the Funds net assets were invested indirectly through the SSgA U.S. Bond Index Non-Lending Series Fund Class A, which is a collective investment fund maintained by State Street Bank that invests in securities in the Barclays Capital U.S. Aggregate Bond Index. This underlying funds annual financial statements are available from State Street Bank upon request.
Large Cap Index Equity Fundreplication of the total return, after taking into account Fund expenses, of the S&P 500® Index. As of December 31, 2009, 100% of the Funds assets were invested indirectly through the SSgA S&P 500® Index Non-Lending Series Fund Class A, which is a collective investment fund maintained by State Street Bank that invests in securities in the S&P 500® Index. This underlying funds annual financial statements are available from State Street Bank upon request.
All Cap Index Equity Fund (formerly Index Equity Fund)replication of the total return, after taking into account Fund expenses, of the Russell 3000® Index. As of December 31, 2009, 64.5% of the Funds net assets in aggregate were invested in the SSgA Russell All Cap® Index Securities Lending Series Fund Class I and 35.5% of the Funds net assets in aggregate were invested in the SSgA Russell All Cap Index Non-Lending Series Fund Class A, each of which is a separate collective investment fund maintained by State Street Bank that invests in securities contained in the Russell 3000® Index. These underlying funds annual financial statements are available from State Street Bank upon request.
Mid Cap Index Equity Fundreplication of the total return, after taking into account Fund expenses of the S&P MidCap 400® Index. As of December 31, 2009, 100% of the Funds net assets were invested indirectly through the SSgA S&P MidCap® Index Non-Lending Series Fund Class A, which is a collective investment fund maintained by State Street Bank that invests in securities contained in the S&P MidCap 400® Index. This underlying funds annual financial statements are available from State Street Bank upon request.
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Small Cap Index Equity Fundreplication of the total return, after taking into account Fund expenses of the Russell 2000® Index. As of December 31, 2009, 100% of the Funds net assets were invested indirectly through the SSgA Russell Small Cap® Index Non-Lending Series Fund Class A, which is a collective investment fund maintained by State Street Bank that invests in securities in the Russell 2000® Index. This underlying funds annual financial statements are available from State Street Bank upon request.
International Index Equity Fundreplication of the total return, after taking into account Fund expenses of the Morgan Stanley Capital International All-Country World Ex-U.S. (MSCI ACWI ex-US) Index. As of December 31, 2009, 100% of the Funds net assets were invested indirectly through the SSgA Global Equity ex U.S. Index Non-Lending Series Fund Class A, which is a collective investment fund maintained by State Street Bank that invests in securities in the MSCI ACWI ex-US Index. This underlying funds annual financial statements are available from State Street Bank upon request.
Real Asset Return Fund
Real Asset Return Fundcapital appreciation in excess of inflation as measured by the All Items Less Food and Energy Consumer Price Index for All Urban Consumers for the U.S. City Average, 1982-84 = 100, which we refer to as the Core Consumer Price Index or Core CPI (which excludes food and energy). The Fund invests in the SSgA Dow Jones UBS-Commodity IndexSM Non-Lending Series Fund Class A, SSgA/Tuckerman REIT Index Non-Lending Series Fund Class A and SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund Class A, which comprise a diversified portfolio of primarily Treasury Inflation Protected Securities, which we refer to as U.S. TIPS, commodity futures and real estate investment trusts, which we refer to as REITs.
Retirement Date Funds
Retirement Date Fundsa series of balanced investment funds each of which is designed to correspond to a particular time horizon to retirement. The five Retirement Date Funds, designated as the Lifetime Income Retirement Date Fund, 2010 Retirement Date Fund, 2020 Retirement Date Fund, 2030 Retirement Date Fund and 2040 Retirement Date Fund, respectively, offer five separate target retirement date strategies. With the exception of the Lifetime Income Retirement Date Fund, which is designed for those currently beyond their retirement date, each Retirement Date Funds asset mix will, over time, become progressively more conservative as the specified date to most conservative asset mix draws nearer.
The Retirement Date Funds utilize a broad range of asset classes and an annual rebalancing process to provide diversification of returns and risks consistent with the stated time horizon to most conservative asset mix. Investment in each such asset class is obtained by investing in index strategies or other pooled strategies designed for low tracking error. Each of the Funds currently invests 100% of its assets in separate State Street Bank collective investment funds listed below.
Lifetime Income Retirement Date Fundinvests in the SSgA Target Retirement Income Securities Lending Series Fund Class I and the SSgA Target Retirement Income Non-Lending Series Fund Class A. As of December 31, 2009, 66.1% of the Funds net assets were invested in the Lending Series Fund and 33.9% were invested in the Non-Lending Series Fund.
2010 Retirement Date Fundinvests in the SSgA Target Retirement 2010 Securities Lending Series Fund Class I and the SSgA Target Retirement 2010 Non-Lending Series Fund Class A. As of December 31, 2009, 67.9% of the Funds net assets were invested in the Lending Series Fund and 32.1% were invested in the Non-Lending Series Fund.
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2020 Retirement Date Fundinvests in the SSgA Target Retirement 2020 Securities Lending Series Fund Class I and the SSgA Target Retirement 2020 Non-Lending Series Fund Class A. As of December 31, 2009, 68.4% of the Funds net assets were invested in the Lending Series Fund and 31.6% were invested in the Non-Lending Series Fund.
2030 Retirement Date Fundinvests in the SSgA Target Retirement 2030 Securities Lending Series Fund Class I and the SSgA Target Retirement 2030 Non-Lending Series Fund Class A. As of December 31, 2009, 68.5% of the Funds net assets were invested in the Lending Series Fund and 31.5% were invested in the Non-Lending Series Fund.
2040 Retirement Date Fundinvests in the SSgA Target Retirement 2040 Securities Lending Series Fund Class I and the SSgA Target Retirement 2040 Non-Lending Series Fund Class A. As of December 31, 2009, 67.7% of the Funds net assets were invested in the Lending Series Fund and 32.3% were invested in the Non-Lending Series Fund.
Each of these underlying funds annual financial statements is available from State Street Bank upon request.
Target Risk Funds
Target Risk Fundsa series of balanced investment funds each of which is designed to correspond to a particular investment risk level. The three Target Risk Funds, designated as the Conservative Risk Fund, the Moderate Risk Fund and the Aggressive Risk Fund, offer three separate strategies, each with a distinct asset mix.
The Conservative Risk Fund invests in a combination of U.S. stocks, non-U.S. stocks, bonds and cash-equivalent investments, and allocates its assets among these investments according to a fixed strategic asset allocation strategy. The Fund invests in SSgA International Index Non-Lending Series Fund Class A, SSgA U.S. Bond Index Non-Lending Series Fund Class A, SSgA/Tuckerman REIT Index Non-Lending Series Fund Class A, SSgA Russell All Cap Index Non-Lending Series Fund Class A, and SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund Class A. The Conservative Risk Fund is the most conservative strategy among the Target Risk Funds. The Conservative Risk Fund is designed for investors who prefer lower volatility of returns and higher expected income.
The Moderate Risk Fund invests in a combination of U.S. stocks, non-U.S. stocks, bonds and cash-equivalent investments, and allocates its assets among these investments according to a fixed strategic asset allocation strategy. The Fund invests in SSgA Global Equity ex U.S. Index Non-Lending Series Fund Class A, SSgA Dow Jones UBS-Commodity IndexSM Non-Lending Series Fund Class A, SSgA U.S. Bond Index Non-Lending Series Fund Class A, SSgA/Tuckerman REIT Index Non-Lending Series Fund Class A, SSgA Russell All Cap Index Non-Lending Series Fund Class A, and SSgA U.S. Inflation Protected Bond Index Non-Lending Series Fund Class A. The Moderate Risk Fund is designed for investors who seek a combination of capital appreciation and income. This Fund is expected to have higher volatility of returns than the Conservative Risk Fund but lower volatility than the Aggressive Risk Fund.
The Aggressive Risk Fund invests in a combination of U.S. stocks, non-U.S. stocks, bonds and cash-equivalent investments, and allocates its assets among these investments according to a fixed strategic asset allocation strategy. The Fund invests in SSgA Global Equity ex U.S. Index Non-Lending Series Fund Class A, SSgA Dow Jones UBS-Commodity IndexSM Non-Lending Series Fund Class A, SSgA U.S. Bond Index Non-Lending Series Fund Class A, SSgA/Tuckerman REIT Index Non-Lending Series Fund Class A, and SSgA Russell All Cap Index Non-Lending Series Fund
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Class A. The Aggressive Risk Fund is designed for investors who want to maximize growth and capital appreciation. This Fund is expected to have the highest volatility of returns among the Target Risk Funds.
Balanced Fund
Balanced Fundcurrent income and long-term capital appreciation through investment in common stocks, other equity-type securities and debt securities. As of December 31, 2009, 40.0% and 60.0% of the Funds net assets were invested in the Bond Core Plus Fund and Large Cap Equity Fund, respectively. The Fund ceased offering its units on July 2, 2009.
All the Funds and the Balanced Fund may invest in STIF. The annual financial statements of STIF are available from State Street Bank upon request.
Funds in the Trust that participate directly in securities lending and the Balanced Fund may have cash collateral invested in the State Street Quality D Short-Term Investment Fund (Quality D). State Street Bank serves as the trustee for Quality D. For purposes of daily admissions and redemptions, the short-term portfolio instruments in Quality D are currently valued on the basis of amortized cost, as provided for in the Declaration of Trust of Quality D. Participant units in Quality D are issued and redeemed on each business day (valuation date). Participant units in Quality D are currently purchased and redeemed at a constant net asset value of $1.00 per unit for normal course transactions, such as new loans and returns of borrowed securities and adjustments upon the mark to market of securities on loan. In the event that a significant disparity develops between the constant net asset value and the market-based net asset value of Quality D, the trustee of Quality D may in its discretion determine that special circumstances exist and continued redemption at a constant $1.00 net asset value would create inequitable results for the Quality D unitholders. In these circumstances, the trustee of Quality D, in its sole discretion and acting in a manner it deems appropriate and fair on behalf of all of the Quality D unitholders, may direct that units be redeemed for all transactions or certain transactions at the market-based net asset value, engage in in-kind redemptions, or take other action to avoid inequitable results to unitholders until such time as the disparity between the market-based and the constant net asset value per unit is deemed to be immaterial.
The trustee for Quality D has informed the Trust that a disparity between the constant or amortized cost net asset value and the net asset value based on fair market value has existed during the year ended December 31, 2009 and is primarily attributable to unrealized losses on longer duration instruments stemming from a lack of liquidity in the secondary market rather than from any impairment to the underlying assets. The trustee of Quality D continues to believe that these longer duration instruments will mature at par and that selling these assets in the short term would result in realized losses that would not be in the best interest of all unitholders of Quality D. Accordingly, the trustee for Quality D has applied withdrawal safeguards. In order to maintain long-term value for all unitholders in Quality D, any unitholder in Quality D, including the Funds and the Balanced Fund, that expressly or otherwise effectively terminates its participation in the securities lending program would, on redemption, receive an in-kind pro rata share of the securities held by Quality D. The trustee of Quality D continues, however, to transact normal daily activity, such as new loans, loan returns, plan participant-directed transactions and daily marks to market, at $1.00 per unit. The financial statements of Quality D are available from State Street Bank upon request.
State Street Bank collective investment funds in which the Funds and the Balanced Fund invest may participate in securities lending and may invest their cash collateral in Series Quality Trust for SSgA
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Funds Trust Fund (Quality Trust), a fund that operates in a manner similar to Quality D (collectively with Quality D, the Cash Collateral Funds). This fund also has experienced a discrepancy between constant asset values and net asset values based on fair market values of these securities for the same reasons as described above, and also has imposed withdrawal safeguards for participants terminating participation in the securities lending program, although the trustee of Quality Trust currently permits limited monthly withdrawals by investors in Quality Trust. The financial statements of Quality Trust are available from State Street Bank upon request.
Although the level of redemptions in connection with plan activity is being monitored by the Trustee, as to the Funds and the Balanced Fund, and State Street Bank, as to the Cash Collateral Funds, no plan withdrawal decisions initiated by a plan sponsor have been limited by the Funds or the Balanced Fund through December 31, 2009. If the level of redemption activity, either through participant activity or plan activity, were to materially increase in the future, the Trustee, as to the Funds and the Balanced Fund, and State Street Bank, as to the Cash Collateral Funds, retain the right to impose limitations on such activity.
The Cash Collateral Funds per unit net asset values, and the net asset value of the Funds and the Balanced Fund investing directly or indirectly in Cash Collateral Funds, reflected in their financial statements are based on United States generally accepted accounting principles (GAAP) and differ from the per unit net asset values calculated for purpose of transactions experienced by participants in their accounts. The difference is driven by the GAAP valuation of the Cash Collateral Funds (See Note 6). Such difference in valuation as of December 31, 2009 has narrowed from the difference in valuation as of December 31, 2008 and June 30, 2009, reflecting higher GAAP valuations of the Cash Collateral Funds on December 31, 2009.
The Trust may offer and sell an unlimited number of units representing interests in separate Funds of the Trust, each unit to be offered and sold at the per unit net asset value of the corresponding Fund.
State Street offers and administers the investment options for the Program available under the Collective Trust.
State Street is a non-depository trust company established under the laws of the State of New Hampshire and is a wholly-owned subsidiary of State Street Bank. State Street has assumed responsibility for administering the Collective Trust and providing investment options for the Program. State Street Bank is a trust company established under the laws of The Commonwealth of Massachusetts and is a wholly-owned subsidiary of State Street Corporation, a Massachusetts corporation and a holding company registered under the Federal Bank Holding Company Act of 1956, as amended.
State Street has delegated to State Street Bank the responsibility to provide certain services to the Collective Trust on behalf of State Street. In addition, State Street Bank is the primary custodian and, based on instructions from ING Institutional Plan Services, LLC, a Delaware limited liability company (ING Services), as discussed below, effects investment and transfer transactions and distributes all benefits provided by the plans to the participants or, in the case of some individually designed plans, to the respective trustees of such plans. State Street Bank was, through April 30, 2009, responsible for certain recordkeeping and administrative services required by the Program. Effective May 1, 2009, ING Services or an affiliate thereof provides recordkeeping, communication, marketing and administration services to the Program. ING Services is responsible for the maintenance of individual account records or accrued benefit information for participants whose employers choose to have the Programs administrator maintain those account records. ING Services also provides certain account and
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investment information to employers and participants, manages the receipt of all plan contributions, forwards investment and transaction instructions to the appropriate parties and forwards instructions relating to distribution of benefits provided by the plans.
2. Summary of Significant Accounting Policies
The accompanying statements of assets and liabilities and the related statements of operations and of changes in net assets and certain financial data have been prepared in conformity with GAAP.
A. Security Valuation
The Collective Trust follows authoritative accounting guidance that governs the application of GAAP that requires fair value measurements of the Funds and Balanced Funds assets and liabilities. Fair value is an estimate of the price a Fund would receive upon selling a security in a timely transaction to an independent buyer in the principal or most advantageous market for the security.
All Funds (Other than SARF) and the Balanced Fund: State Street has delegated to State Street Bank the responsibility to determine the value of each Fund and the Balanced Fund based on the market value of each Funds and the Balanced Funds portfolio of securities. State Street Bank generally values each Funds and the Balanced Funds portfolio of securities based on closing market prices or readily available market quotations. When closing market prices or market quotations are not readily available or are considered by State Street Bank to be unreliable, the fair value of the particular securities or assets is determined in good faith by State Street pursuant to procedures adopted by State Street. For market prices and quotations, as well as some fair value methods of pricing, State Street Bank and State Street may rely upon securities prices provided by pricing services, the persons or entities State Street has retained to assist it in the exercise of its investment responsibility with respect to the Funds and the Balanced Fund (the Investment Advisors) or independent dealers.
When State Street Bank determines that the closing market price on the primary exchange where the security is traded is not readily available or no longer accurately reflects the value of the security at the time of calculation of the Funds or Balanced Funds net asset value, State Street endeavors to value the security at the amount the owner might reasonably expect to receive upon the securitys current sale. In so doing, management considers all factors it deems appropriate, including, if relevant, external factors such as general market developments and news events.
With respect to non-U.S. securities, if a significant event has occurred between the closing of the foreign exchange or market on which such securities trade and the calculation of net asset value, a valuation adjustment may be appropriate. Specifically, under appropriate circumstances, State Street will utilize a fair value model for the International All Cap Equity Fund to make fair value adjustments to the prices of non-U.S. securities based on movements in the U.S. markets after the close of foreign markets. If a significant event occurs other than general movements in the U.S. markets, State Street Bank will determine whether that event might affect the value of the non-U.S. securities and whether, if so, the securities should be valued in accordance with State Streets fair value procedures.
Unless believed no longer to accurately reflect value or to be reliable, foreign securities not traded directly or in the form of American Depositary Receipts (ADRs) in the United States are valued in the local currency at the last sale price on the applicable exchange on which such securities trade and such values are converted into the U.S. dollar equivalent at current exchange rates.
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Other securities may be priced using a pricing matrix to determine the value of fixed income securities that do not trade daily. A pricing matrix is a means of valuing a debt security on the basis of current market prices for other debt securities and historical trading patterns in the market for fixed income securities. To the extent that a Fund or the Balanced Fund invests in the shares of bank collective trust funds or of other registered open-end investment companies that are not traded on an exchange (mutual funds), such shares are valued at their net asset values per share as reported by the funds. Exchange traded funds that were used during the realignment of the investment options under the Program on or about July 6, 2009 were priced based on readily available closing market prices. Each of these funds uses fair value pricing in determining their net asset values.
United States Treasury securities and other obligations issued or guaranteed by the United States Government, its agencies or instrumentalities are valued at representative quoted prices provided by a vendor.
Swaps are marked-to-market daily based upon quotations from brokers or market makers and the change in value, if any, is recorded as unrealized appreciation or depreciation.
Futures contracts are valued at the last settlement price at the end of each day on the board of trade or exchange upon which they are traded.
The short-term portfolio instrument of STIF is valued on the basis of amortized cost, which approximates fair value, unless otherwise determined by the trustee of such fund. Amortized cost involves valuing an instrument initially at its cost and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates or changes in the creditworthiness of the issuer of the instrument on the market value of the instrument.
The Funds and the Balanced Fund follow a three-tiered hierarchy based on the use of observable market data and unobservable inputs to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about uncertainty, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model, and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entitys own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Various inputs are used in determining the value of the Funds and Balanced Funds investments. These inputs are summarized in the three broad levels as follows:
· | Level 1quoted prices in active markets for identical securities. |
· | Level 2other significant observable inputs. Observable inputs are inputs that other market participants would use in valuing a portfolio instrument. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk and others in active markets and markets that are not active. |
· | Level 3significant unobservable inputs (including a Funds own assumptions in determining the fair value of investments). |
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A Fund or Balanced Fund may record changes to valuations based on the amount that might reasonably be expected to be received for a security upon its current sale consistent with the fair value measurement objective. Each determination is based on a consideration of all relevant factors, which are likely to vary from one pricing context to another. Examples of such factors may include, but are not limited to, the type of the security, the existence of any contractual restrictions on the securitys disposition, the price of comparable securities, quotations or evaluated prices from broker-dealers and/or pricing services, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the companys financial statements, an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold, and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination, and movement of the market in which the security is normally traded. Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value realized upon sale.
The following is a summary of the inputs used in valuing the Funds and the Balanced Funds assets and liabilities, as well as a reconciliation of Level 3 assets for which significant unobservable inputs were used in determining value:
Bond Core Plus Fund |
Level 1 | Level 2 | Level 3 | Total | |||||||||||
Assets |
|||||||||||||||
Fixed Income |
|||||||||||||||
U.S. Corporate Asset-Backed Securities |
$ | | $ | 4,866,916 | $ | | $ | 4,866,916 | |||||||
U.S. Government & Agency Obligations |
| 207,018,612 | | 207,018,612 | |||||||||||
Foreign Government Obligations |
| 6,344,650 | | 6,344,650 | |||||||||||
Municipals |
| 8,760,570 | | 8,760,570 | |||||||||||
Corporate Bonds |
| 59,555,265 | | 59,555,265 | |||||||||||
Bank Loans |
| 9,272,239 | | 9,272,239 | |||||||||||
Convertible Preferred Stock |
1,374,375 | | | 1,374,375 | |||||||||||
Short-Term Investments |
| 919,995 | | 919,995 | |||||||||||
Affiliated Funds |
| 23,610,139 | | 23,610,139 | |||||||||||
Derivatives* |
1,029,799 | 69,381 | | 1,099,180 | |||||||||||
Total |
$ | 2,404,174 | $ | 320,417,767 | $ | | $ | 322,821,941 | |||||||
Liabilities |
|||||||||||||||
Derivatives* |
$ | (520,500 | ) | $ | (136,705 | ) | | $ | (657,205 | ) | |||||
Total |
$ | (520,500 | ) | $ | (136,705 | ) | $ | | $ | (657,205 | ) |
* | Derivatives include unrealized appreciation/depreciation on open futures contracts, foreign forward currency contracts and interest rate swap contracts. |
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Bond Core Plus Fund Level 3 Roll Forward |
Net Unrealized Appreciation (Depreciation) on Other Financial Instruments* |
|||
Balance as of January 1, 2009 |
$ | (2,176,808 | ) | |
Accrued discounts/premiums |
| |||
Realized gain (loss) |
(1,732,751 | ) | ||
Change in unrealized appreciation (depreciation) |
2,176,808 | |||
Net purchases (sales) |
1,732,751 | |||
Net transfers in and/or out of Level 3 |
| |||
Balance as of December 31, 2009 |
$ | | ||
Net change in unrealized appreciation (depreciation) from investments still held at December 31, 2009 |
$ | |
* | Other financial instruments are derivative instruments including interest rate swap contracts, which are valued at the unrealized appreciation/depreciation on the instrument. |
Large Cap Equity Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Common Stock and/or Other Equity Investments |
||||||||||||
Basic Materials |
$ | 13,698,264 | $ | | $ | | $ | 13,698,264 | ||||
Communications |
72,552,220 | | | 72,552,220 | ||||||||
Consumer, Cyclical |
65,080,506 | | | 65,080,506 | ||||||||
Consumer, Non-Cyclical |
183,863,341 | | | 183,863,341 | ||||||||
Energy |
94,033,647 | | | 94,033,647 | ||||||||
Financial |
70,304,596 | | | 70,304,596 | ||||||||
Industrial |
72,897,479 | | | 72,897,479 | ||||||||
Technology |
96,252,936 | | | 96,252,936 | ||||||||
Utilities |
16,013,580 | | | 16,013,580 | ||||||||
Closed End Investment Company |
| 1,051,465 | | 1,051,465 | ||||||||
Collective Investment Funds |
| 117,809,191 | | 117,809,191 | ||||||||
Short-Term Investments |
| 122,472,564 | | 122,472,564 | ||||||||
Total |
$ | 684,696,569 | $ | 241,333,220 | $ | | $ | 926,029,789 |
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International All Cap Equity Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Common Stock and/or Other Equity Investments |
||||||||||||
Australia |
$ | | $ | 2,019,057 | $ | | $ | 2,019,057 | ||||
Austria |
| 1,213,110 | | 1,213,110 | ||||||||
Belgium |
| 1,148,133 | | 1,148,133 | ||||||||
Brazil |
| 2,666,598 | | 2,666,598 | ||||||||
Canada |
4,310,345 | | | 4,310,345 | ||||||||
China |
| 885,700 | | 885,700 | ||||||||
Czech Republic |
| 1,163,076 | | 1,163,076 | ||||||||
Denmark |
| 573,555 | | 573,555 | ||||||||
Finland |
| 1,051,052 | | 1,051,052 | ||||||||
France |
| 13,635,758 | | 13,635,758 | ||||||||
Germany |
| 11,226,840 | | 11,226,840 | ||||||||
Greece |
| 1,566,984 | | 1,566,984 | ||||||||
Hong Kong |
| 3,748,612 | | 3,748,612 | ||||||||
Hungary |
| 451,648 | | 451,648 | ||||||||
India |
993,409 | | | 993,409 | ||||||||
Ireland |
1,793,481 | 969,876 | | 2,763,357 | ||||||||
Israel |
1,121,428 | | | 1,121,428 | ||||||||
Italy |
| 3,230,355 | | 3,230,355 | ||||||||
Japan |
| 28,186,466 | | 28,186,466 | ||||||||
Korea, Republic of |
| 3,458,485 | | 3,458,485 | ||||||||
Luxembourg |
866,940 | 473,864 | | 1,340,804 | ||||||||
Malaysia |
| 709,733 | | 709,733 | ||||||||
Mexico |
1,815,399 | | | 1,815,399 | ||||||||
Netherlands |
| 4,355,225 | | 4,355,225 | ||||||||
New Zealand |
| 150,456 | | 150,456 | ||||||||
Norway |
| 1,757,576 | | 1,757,576 | ||||||||
Papua New Guinea |
| 88,662 | | 88,662 | ||||||||
Philippines |
283,350 | 499,429 | | 782,779 | ||||||||
Portugal |
| 1,781,850 | | 1,781,850 | ||||||||
Singapore |
| 2,829,767 | | 2,829,767 | ||||||||
South Africa |
| 2,659,342 | | 2,659,342 | ||||||||
Spain |
| 4,104,070 | | 4,104,070 | ||||||||
Sweden |
| 787,663 | | 787,663 | ||||||||
Switzerland |
990,640 | 8,696,008 | | 9,686,648 | ||||||||
Taiwan |
1,827,936 | 2,016,667 | | 3,844,603 | ||||||||
Thailand |
| 1,628,451 | | 1,628,451 | ||||||||
Turkey |
| 765,646 | | 765,646 | ||||||||
United Kingdom |
5,110,221 | 22,378,324 | | 27,488,545 | ||||||||
United States |
1,470,193 | | | 1,470,193 | ||||||||
Exchange Traded Fund |
1,008,450 | | | 1,008,450 | ||||||||
Collective Investment Funds |
| 3,679,299 | | 3,679,299 | ||||||||
Short-Term Investments |
| 23,902,374 | | 23,902,374 | ||||||||
Total |
$ | 21,591,792 | $ | 160,459,711 | $ | | $ | 182,051,503 |
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Small-Mid Cap Equity Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Common Stock and/or Other Equity Investments |
||||||||||||
Basic Materials |
$ | 12,366,048 | $ | | $ | | $ | 12,366,048 | ||||
Communications |
16,987,555 | | | 16,987,555 | ||||||||
Consumer, Cyclical |
35,874,115 | | | 35,874,115 | ||||||||
Consumer, Non-Cyclical |
58,066,956 | | | 58,066,956 | ||||||||
Energy |
17,322,654 | | | 17,322,654 | ||||||||
Financial |
52,418,038 | | 308,692 | 52,726,730 | ||||||||
Industrial |
42,258,816 | | | 42,258,816 | ||||||||
Technology |
29,958,503 | | | 29,958,503 | ||||||||
Utilities |
11,781,019 | | | 11,781,019 | ||||||||
Collective Investment Funds |
| 4,775,510 | | 4,775,510 | ||||||||
Short-Term Investments |
| 161,954,444 | | 161,954,444 | ||||||||
Total |
$ | 277,033,704 | $ | 166,729,954 | $ | 308,692 | $ | 444,072,350 |
Small-Mid Cap Equity Fund Level 3 Roll Forward |
Common Stock and/or Other Equity Investments | ||
Balance as of January 1, 2009 |
$ | | |
Accrued discounts/premiums |
| ||
Realized gain (loss) |
| ||
Change in unrealized appreciation (depreciation) |
9,436 | ||
Net purchases (sales) |
299,256 | ||
Net transfers in and/or out of Level 3 |
| ||
Balance as of December 31, 2009 |
$ | 308,692 |
Balanced Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 284,802,873 | $ | | $ | 284,802,873 | ||||
Total |
$ | | $ | 284,802,873 | $ | | $ | 284,802,873 | ||||
All Cap Index Equity Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 266,733,063 | $ | | $ | 266,733,063 | ||||
Total |
$ | | $ | 266,733,063 | $ | | $ | 266,733,063 | ||||
Stable Asset Return Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 1,015,748,076 | $ | | $ | 1,015,748,076 | ||||
Total |
$ | $1,015,748,076 | $ | $1,015,748,076 | ||||||||
Lifetime Income Retirement Date Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 28,962,116 | $ | | $ | 28,962,116 | ||||
Total |
$ | | $ | 28,962,116 | $ | | $ | 28,962,116 |
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2010 Retirement Date Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 62,031,781 | $ | | $ | 62,031,781 | ||||
Total |
$ | | $ | 62,031,781 | $ | | $ | 62,031,781 | ||||
2020 Retirement Date Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 106,671,225 | $ | | $ | 106,671,225 | ||||
Total |
$ | | $ | 106,671,225 | $ | | $ | 106,671,225 | ||||
2030 Retirement Date Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 77,098,863 | $ | | $ | 77,098,863 | ||||
Total |
$ | | $ | 77,098,863 | $ | | $ | 77,098,863 | ||||
2040 Retirement Date Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 49,660,943 | $ | | $ | 49,660,943 | ||||
Total |
$ | | $ | 49,660,943 | $ | | $ | 49,660,943 | ||||
International Index Equity Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 24,367,752 | $ | | $ | 24,367,752 | ||||
Total |
$ | | $ | 24,367,752 | $ | | $ | 24,367,752 | ||||
Small Cap Index Equity Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 15,521,092 | $ | | $ | 15,521,092 | ||||
Total |
$ | | $ | 15,521,092 | $ | | $ | 15,521,092 | ||||
Mid Cap Index Equity Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 25,331,899 | $ | | $ | 25,331,899 | ||||
Total |
$ | | $ | 25,331,899 | $ | | $ | 25,331,899 | ||||
Large Cap Index Equity Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 34,270,600 | $ | | $ | 34,270,600 | ||||
Total |
$ | | $ | 34,270,600 | $ | | $ | 34,270,600 | ||||
Bond Index Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 35,800,431 | $ | | $ | 35,800,431 | ||||
Total |
$ | | $ | 35,800,431 | $ | | $ | 35,800,431 |
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Notes to Financial Statements(Continued)
Conservative Risk Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 5,309,045 | $ | | $ | 5,309,045 | ||||
Short-Term Investments |
| 325,615 | | 325,615 | ||||||||
Total |
$ | | $ | 5,634,660 | $ | | $ | 5,634,660 | ||||
Moderate Risk Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 13,320,062 | $ | | $ | 13,320,062 | ||||
Short-Term Investments |
| 308,661 | | 308,661 | ||||||||
Total |
$ | | $ | 13,628,723 | $ | | $ | 13,628,723 | ||||
Aggressive Risk Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 4,214,893 | $ | | $ | 4,214,893 | ||||
Total |
$ | | $ | 4,214,893 | $ | | $ | 4,214,893 | ||||
Real Asset Return Fund |
Level 1 | Level 2 | Level 3 | Total | ||||||||
Assets |
||||||||||||
Collective Investment Funds |
$ | | $ | 5,375,735 | $ | | $ | 5,375,735 | ||||
Total |
$ | | $ | 5,375,735 | $ | | $ | 5,375,735 |
B. Stable Asset Return Fund
SARF invests in SAFT, whose investments include insurance company, bank and financial institution investment contracts, high quality short-term income securities and investments in STIF and the State Street Bank Mortgage Backed Securities Non-Lending Fund. SAFT, with the approval of SARF, liquidated its investment in the State Street Bank Mortgage-Backed Securities Lending Fund on October 30, 2009 and reinvested the proceeds in the State Street Bank Mortgage-Backed Securities Non-Lending Fund. SAFT has entered into a global fully benefit responsive investment contract with four different financial institutions which are so called synthetic investment contracts described below. On a daily basis, SARF accrues dividend income based on the income credited by SAFT. SARF does not distribute income and any increase to the net assets is reflected by an increase to the unit value. Each month the dividend income earned by SARF is reinvested into SAFT. As a result of its investment in SAFT, SARF is subject to the specialized accounting provisions described below. The Statement of Assets and Liabilities presents the fair value of the investment contracts held by SAFT with a separate adjustment to contract value. The Statements of Operations and Changes in Net Assets were prepared on a contract value basis. Because SARF invests only in SAFT, the Trust is providing the following accounting policies of SAFT:
i. Basis of Accounting
Investments held by an investment company are reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets of an investment company attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the underlying defined contribution plans. The Statement of Assets and Liabilities presents the fair value of the investment contracts as well as the adjustment of the fully benefit responsive investment contracts from fair value to contract value. The Statements of Operations and Changes in Net Assets were prepared on a contract value basis.
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ii. Value of Investments
SAFT may invest in guaranteed investment contracts (Traditional GIC or GICs), bank investment contracts and/or a wrapped portfolio of fixed income instruments (Synthetic Investment Contracts or Synthetic GICs). Collectively, these contracts are referred to as investment contracts.
Investments in bank, insurance company and other financial institution investment contracts (GICs) are stated at contract value. An investment contract is generally permitted to be valued at contract value, rather than fair value, to the extent it is fully benefit-responsive and held by a trust offered only to qualified employer-sponsored defined contribution plans. An investment contract is considered fully benefit-responsive if: 1) it is effected directly between SAFT and the issuer and may not be transferred without the consent of the issuer, 2) either the repayment of principal and interest is a financial obligation of the issuer (i.e., for traditional investment contracts) or the issuer of a wrap contract provides assurance that the contract crediting rate will not be adjusted to less than zero (i.e., for Synthetic GICs), 3) the contract requires all permitted participant-initiated transactions with the trust to occur at contract value without limitation, 4) it is improbable that an event will occur that would limit the ability of SAFT to transact at contract value with both the issuer and unitholders of SAFT, and 5) SAFT allows unitholders reasonable access to their funds. Investment contracts that do not meet the criteria for valuation at contract value will be valued at fair value as determined by the Trustee, and such value may be more or less than contract value.
The fair value of traditional GICs is determined using a discounted cash flow methodology where the individual contract cash flows are discounted at the prevailing interpolated swap rate as of period-end.
A traditional GIC is a group annuity contract that pays a specified rate of return for a specific period of time and guarantees a fixed return after any benefit responsive payments are made to participants. The issuer of a traditional GIC takes a deposit from SAFT and purchases investments that are held in the issuers general account. The traditional GIC issuer is contractually obligated to repay the principal and a specified interest rate that is guaranteed to SAFT.
Events disqualifying an underlying investment include but are not limited to bankruptcy of the security issuer or default or restricted liquidity of the security. The portfolio is owned by SAFT. SAFT purchases a wrap contract from an insurance company, bank or other financial services institution, if available. The portfolio, coupled with the wrap contract, attempts to replicate the characteristics of a traditional GIC. Synthetic investment contracts represent individual high quality fixed income and asset-backed securities subject to benefit responsive wrap contracts issued by financial institutions. Individual assets of the synthetic investment contract are generally valued at representative quoted market prices. Short-term securities, if any, are valued at amortized cost, which approximates market value. Debt securities are valued on the basis of valuations furnished by a pricing service approved by the Trustee of SAFT, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Investments in registered investment companies or collective investment funds are valued at the net asset value per share/unit on the valuation date. Securities for which market quotations are not readily available, or that have quotations which management believes are not appropriate, are valued at fair value as determined in good faith by the Trustee of SAFT or its agent. The fair value of the wrap contracts is determined using the market approach discounting methodology which incorporates the difference between current market level rates for contract level wrap fees and the wrap fee being charged. The difference is calculated as a dollar value and discounted by the prevailing interpolated swap rate as of period-end.
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A bank investment contract is an investment contract issued by a bank, with features (other than annuity provisions) comparable to a GIC.
Synthetic GICs generally require a Cash Buffer of a certain level to be maintained in order to provide liquidity for the stable value fund. The wrap contracts in place as of December 31, 2009 held by SAFT require a Cash Buffer of a minimum of 20% of the net asset value of SAFT. At December 31, 2009, the Cash Buffer was 28% of such net assets.
A synthetic GIC attempts to protect principal and accumulated interest and credits a stated interest rate for a specified period of time (e.g. monthly or quarterly). Under the terms of the wrap contracts, assets subject to synthetic GICs are credited at a rate (the Crediting Rate) agreed to with the issuer of the benefit-responsive contract (which rate is adjusted periodically, but not below zero, to reflect the performance of the underlying securities of the synthetic GIC) for purposes of permitting the contract to be benefit-responsive. Investment gains and losses are amortized over the expected duration through the calculation of the applicable Crediting Rate to SAFT on a prospective basis. The Crediting Rate is primarily based on the current yield-to-maturity of the covered investments, plus or minus amortization of the difference between the market value and contract value of the covered investments over the duration of the covered investments at the time of computation. The Crediting Rate is most impacted by the change in the annual effective yield to maturity of the underlying securities, but is also affected by the differential between the contract value and the market value of the covered investments. This difference is amortized over the duration of the covered investments. Depending on the change in duration from each reset period, the magnitude of the impact to the Crediting Rate of the contract to market difference is heightened or lessened. The Crediting Rate can be adjusted periodically and is usually adjusted either monthly or quarterly, but in no event is the Crediting Rate less than zero. The Crediting Rate may be impacted by, among other things, volatility and illiquidity in the fixed-income securities market. If the market value of the underlying investments held by SAFT as a whole is lower than their contract value, the Crediting Rate may be lower than the return on the underlying investments. Significant additional contributions from participants may in certain cases increase market value attributed to the underlying investments and increase the Crediting Rate and SAFTs return. Redemptions may have an opposite effect, where if SAFT experiences significant redemptions when the market value is below the contract value, SAFTs return and the Crediting Rate may be reduced to zero.
iii. Events Limiting Contract Value Treatment
Investment contracts are valued at contract value principally because participants are able to transact at contract value when initiating benefit-responsive withdrawals, taking loans or making investment option transfers permitted by the participating plan. A benefit-responsive withdrawal includes a payment to a participant arising from retirement, termination of employment, disability or death. In the normal course, participant events are predictive (for participants as a group) such that the economic integrity of investment contracts is largely unaffected by participant withdrawals.
Employer initiated events, if material, may affect the underlying economics of investment contracts. These events include plant closings, layoffs, plan termination, bankruptcy or reorganization, merger, early retirement incentive programs, tax disqualification of a trust or other events. The occurrence of one or more employer initiated events could limit SAFTs ability to transact at contract value with plan participants.
For example, retirement benefit payments that occur because an employer has offered a subsidized early retirement program will not transact at contract value unless the scope of the program is not
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material or the investment contract includes a contract value corridor. Whether an employer-initiated event is probable is foremost within the knowledge of the employer, but in the normal course may be communicated to the investment manager of SAFT. While the investment manager may take action to minimize or eliminate the impact of the employer initiated event, there is no assurance that the issuer will continue to transact at contract value once the corridor is used. In that case, SAFT would be unable to maintain the ability to transact at contract value. As of December 31, 2009, the occurrence of an event that would limit the ability of SAFT to transact at contract value with the participants is not probable.
iv. Termination Events by the Issuer
Investment contracts generally impose conditions on both SAFT and the issuer. Assuming conditions are met and neither SAFT nor the issuer is in default, SAFT can buy and sell covered investments and process withdrawals through the sale of covered investments in accordance with SAFTs liquidity hierarchy.
If an event of default, within the meaning of an investment contract, occurs and is not cured, the non-defaulting party may terminate the contract. The following (among other events) may cause SAFT to be in default: a breach of material obligation under the contract; a material misrepresentation; a material amendment to the trust agreement, in the administration of the trust or in the investment of fund assets without consent from the issuer; and an uncured violation of SAFTs Investment Guidelines.
The issuer may be in default if it breaches a material obligation under the investment contract; makes a material misrepresentation; has a decline in its long-term credit rating below a threshold set forth in the contract; or is acquired or reorganized and the successor issuer does not satisfy the investment or credit guidelines applicable to issuers. If, in the event of default of an issuer, SAFT were unable to obtain a replacement investment contract, withdrawing plans may experience losses if the value of SAFTs assets no longer covered by the contract is below contract value. SAFT may seek to add additional issuers over time to diversify SAFTs exposure to such risk, but there is no assurance that SAFT will be able to do so, especially in light of the recent withdrawal of several large issuers of wrap contracts from the synthetic GIC market and the dearth of new issuers of wrap contracts. The combination of the default of an issuer and an inability to obtain a replacement agreement could render SAFT unable to achieve its objective of maintaining a stable contract value.
The terms of an investment contract generally provide for settlement of payments only upon termination of the contract or total liquidation of the covered investments. Generally, payments under a global wrap contract will be made pro rata, based on the percentage of investments covered by each issuer. Contract termination occurs whenever the contract value or market value of the covered investments reaches zero or upon certain events of default. If the contract terminates due to issuer default (other than a default occurring because of a decline in its rating), the issuer will generally be required to pay to SAFT the excess, if any, of contract value over market value on the date of termination. If a synthetic GIC terminates due to a decline in the ratings of the issuer, the issuer may be required to pay to SAFT the cost of acquiring a replacement contract (i.e. replacement cost) within the meaning of the contract. If the contract terminates when the market value equals zero, the issuer must pay to SAFT the excess of contract value over market value to the extent necessary for SAFT to satisfy outstanding contract value withdrawal requests. Contract termination also may occur by either party upon election and notice.
At any time after the second anniversary of the contract, the issuer may elect to terminate the contract by giving notice to the trustee of SAFT. If, at any time prior to dates agreed to in each contract
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for the receipt of such notice, the trustee objects to such election, the trustee shall be deemed to have made an immunization election and the immunization provisions of the contract apply. The immunization provisions give the issuer the right to request that its wrapped portion of SAFT be managed according to more conservative immunization investment guidelines provided for in the contract.
Effective January 2009, Bank of America, N.A. (Bank of America) announced it will not be accepting any new participant cash flows into the wrap contracts, including its wrap contract with SAFT, unless otherwise determined by Bank of America, which SAFT believes it has not done as of this date. SAFTs other three wrap contract providers have taken the same action as Bank of America. In addition, UBS AG, Stamford Branch (UBS), one of the wrap providers, had previously agreed with State Street Bank that it would not terminate its wrap contract until on or after October 26, 2009. UBS has delayed issuing a notice of termination but is likely to issue such notice in the near future. At the discretion of State Street, net new participant cash flows will be invested in traditional GICs or in the Cash Buffer through portfolio cash vehicles going forward. Although the trustee continues to seek to identify additional or replacement wrap providers, no assurances can be given that one or more additional or replacement wrap providers can be identified.
v. Investment Transactions and Income
Investment transactions are accounted for on the trade date. Interest income is recorded on the accrual basis. Income from investment contracts is recorded at the contract rate, which in the case of synthetic investment contracts is referred to as the crediting rate. Crediting rates on synthetic contacts are net of fees to the issuer of the wrap contract (wrap fees) and custody fees on underlying assets. For fully benefit-responsive synthetic investment contracts, earnings on the underlying assets are factored into the next computation of the crediting rate re-set. Interest income is accrued and reinvested daily. Reinvested units are issued to unitholders on a pro-rata basis.
vi. Issuances and Redemptions of SAFT Units
Issuances and redemptions of participant units are made on each business day (valuation date). Participant units are typically purchased and redeemed at a constant net asset value of $1.00 per unit. In the event that a significant disparity develops between the constant net asset value and the market-based net asset value of units of SAFT, the trustee may determine that continued redemption at a constant $1.00 net asset value would create inequitable results for SAFTs unitholders. In these circumstances, the trustee, in its sole discretion and acting on behalf of SAFTs unitholders, may direct that units be redeemed at the market-based net asset value until such time as the disparity between the market-based and the constant net asset value per unit is deemed to be immaterial.
vii. Industry Concentration of Investments
SAFT maintains investment contracts issued by insurance companies, banks and other financial institutions as required by its Declaration of Trust. The issuing institutions ability to meet their contractual obligations under the respective contracts may be affected by future economic and regulatory developments in the insurance and banking industries, respectively.
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viii. Adjustments to Contract Value
At December 31, 2009, all investment contracts held by SAFT were deemed fully benefit-responsive. The change in the difference between the fair value and contract value of SAFTs fully benefit-responsive investment contracts during 2009 is reflected below:
December 31, 2009 | December 31, 2008 | Change | ||||||||||
Net assets at fair value |
$ | 1,015,748,390 | $ | 976,459,379 | $ | 39,289,011 | ||||||
Net assets (at contract value) |
1,007,415,006 | 969,171,710 | 38,243,296 | |||||||||
Adjustment to contract value |
(8,333,384 | ) | (7,287,669 | ) | (1,045,715 | ) |
Sensitivity Analysis
The following tables are intended to provide certain sensitivity analyses disclosures. These are estimates calculated based on the current Crediting Rate, are not intended to serve as a projection or guarantee of future rates of return to be earned by SAFT and make an assumption that there is no change in the duration of the underlying investment portfolio, which will likely not be the case if UBS terminates its wrap contract and a replacement wrap provider cannot be secured.
Hypothetical change in current yield and no participant transactions, base case1.
Weighted Average Credit Interest Rate |
50% Decrease |
25% Decrease |
25% Increase |
50% Increase |
|||||||||||
December 31, 2009 |
2.38 | % | |||||||||||||
March 31, 2010 |
2.37 | % | 2.44 | % | 2.56 | % | 2.61 | % | |||||||
June 30, 2010 |
2.19 | % | 2.33 | % | 2.57 | % | 2.68 | % | |||||||
September 30, 2010 |
2.04 | % | 2.23 | % | 2.57 | % | 2.74 | % | |||||||
December 31, 2010 |
1.91 | % | 2.14 | % | 2.58 | % | 2.79 | % |
Hypothetical change in current yield and 10% participant redemptions, base case2.
Weighted Average Credit Interest Rate |
50% Decrease |
25% Decrease |
25% Increase |
50% Increase |
|||||||||||
December 31, 2009 |
2.38 | % | |||||||||||||
March 31, 2010 |
2.54 | % | 2.55 | % | 2.55 | % | 2.54 | % | |||||||
June 30, 2010 |
2.34 | % | 2.42 | % | 2.56 | % | 2.62 | % | |||||||
September 30, 2010 |
2.16 | % | 2.31 | % | 2.57 | % | 2.69 | % | |||||||
December 31, 2010 |
2.02 | % | 2.21 | % | 2.57 | % | 2.75 | % |
1 | Assumes an immediate hypothetical change in market yield (relative to current contract value yield), with no change to the duration of the underlying investment portfolio and no contributions or withdrawals. |
2 | Assumes an immediate hypothetical change in market yield (relative to current contract value yield), combined with an immediate, one-time hypothetical 10% decrease in the net assets of the trust due to participant-initiated unitholder transfers, with no change to the duration of the underlying investment portfolio. |
Average yields |
|||
Based on actual income(1) |
1.61 | % | |
Based on interest rate credited to participants(2) |
2.32 | % |
(1) | Computed by dividing the annualized one-day actual earnings of the Fund on December 31, 2009 by the fair value of investments on December 31, 2009. |
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(2) | Computed by dividing the annualized one-day earnings credited to participants on December 31, 2009 by the fair value of investments on December 31, 2009. |
C. Security Transactions and Related Investment Income
Security transactions are accounted for on the trade date (the date on which the order to buy or sell is executed). Interest income is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Interest income is increased by accretion of discount and reduced by amortization of premium. Realized gains and losses are reported on the basis of the identified cost of securities delivered. Distributions received from collective investment funds, if any, retain the character as earned by the underlying funds.
A Funds portfolio of investments may include securities purchased on a when-issued basis, which may be settled in the month after the issue date. Interest income is not accrued until the settlement date.
Certain collective investment funds and registered investment companies in which certain of the Funds or the Balanced Fund invest may retain investment income and net realized gains. Accordingly, realized and unrealized gains and losses reported by a Fund or the Balanced Fund may include a component attributable to investment income of the underlying funds.
All securities lending income earned by the Funds or the Balanced Fund is credited on a cash basis generally in the month following the month in which it is earned due to the immateriality of the amounts. This method is applied to the income both from the Funds and the Balanced Fund lending securities directly and from collective investment funds in which certain Funds and the Balanced Fund are invested and which lend a portion of their securities.
D. Foreign Currency Transactions
The accounting records of the Funds and the Balanced Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange at period-end. Purchases and sales of securities, income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions.
Reported net realized gains and losses on foreign currency transactions represent net gains and losses from disposition of foreign currencies, currency gains and losses realized between the trade and settlement dates on securities transactions, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. The effects of changes in foreign currency exchange rates on investments in securities and derivatives (other than foreign currency contracts) are not segregated in the Statement of Operations from the effects of changes in market prices of those securities, but are included with the net realized and unrealized gain or loss on investments in securities.
Net unrealized foreign exchange gains and losses arising from changes in the value of other assets and liabilities as a result of changes in foreign exchange rates are included as increases or decreases in unrealized appreciation/depreciation on foreign currency related transactions.
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E. Income Taxes
The Trust has received a favorable determination letter dated March 9, 1992 from the Internal Revenue Service, which concluded that the Trust is a trust arrangement described in Rev. Rul. 81-100, 1981, C.B. 326 (subsequently modified by Rev. Rul. 2004-67, 2004-28 I.R.B. 28) and exempt from Federal income tax pursuant to Section 501(a) of the Internal Revenue Code. Accordingly, no provision for Federal income taxes is required.
Management is required to determine whether a tax position of the Collective Trust is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement which could result in the Collective Trust recording a tax liability that would reduce net assets. Management determined that no uncertainties would have a material impact on the Collective Trusts financial statements. Authoritative accounting guidance establishes financial accounting and disclosure requirements for recognition and measurement of tax positions taken or expected to be taken in any tax jurisdiction. However, managements conclusions regarding tax liabilities may be subject to review and adjustment at a later date based on factors including, but not limited to, further guidance and on-going analyses of tax laws, regulations and interpretations thereof.
F. Sales and Redemptions of Units of Participation and Distributions
The units offered represent interests in the Funds established under the Collective Trust. The Collective Trust may offer and sell an unlimited number of units. Each unit will be offered and sold daily at the offering Funds net asset value. The Collective Trust ceased offering units of the Balanced Fund on July 2, 2009 although assets held under the Program and invested therein through July 1, 2009 may continue to remain invested therein.
Pursuant to the Collective Trusts Declaration of Trust, the Funds and the Balanced Fund are not required to distribute their net investment income or gains from the sale of portfolio investments.
G. TBA Commitments and Roll Transactions
The Bond Core Plus Fund may enter into TBA (to be announced) commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price for a TBA has been established, the principal value has not been finalized. However, the amount of the TBA commitment will not fluctuate more than 1.0% from the principal amount. The Bond Core Plus Fund holds, and maintains until the settlement date, cash or liquid securities in an amount sufficient to meet the purchase price. TBA commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, and such risk is in addition to the risk of decline in the value of other assets of the Bond Core Plus Fund. These contracts also present a risk from the potential inability of counterparties to meet their contractual obligations. During the period prior to settlement, the Bond Core Plus Fund will not be entitled to accrue interest and/or receive principal payments on the securities to be purchased. Unsettled TBA commitments are valued at the current market value of the underlying securities, generally according to the procedures described under Security Valuation above. The Bond Core Plus Fund may dispose of a commitment prior to settlement if the Investment Advisor to the Bond Core Plus Fund deems it appropriate to do so. Upon settlement date, the Bond Core Plus Fund may take delivery of the securities or defer (roll) the delivery to the next month.
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H. Futures Contracts
The Bond Core Plus Fund uses, on a limited basis, futures contracts to manage exposure to the bond market, and as a substitute for acquiring market positions in securities comparable to those held by the Fund (with respect to the portion of its portfolio that is held in cash items). Buying futures tends to increase a funds exposure to the underlying instrument. Selling futures tends to decrease a funds exposure to the underlying instrument, or hedge other investments. Futures contracts involve, to varying degrees, credit and market risks.
The Fund enters into futures contracts only on exchanges or boards of trade where the exchange or board of trade acts as the counterparty to the transaction. Thus, credit risk on such transactions is limited to the failure of the exchange or board of trade. Losses in value may arise from changes in the value of the underlying instruments or from illiquidity in the secondary market for the contracts. In addition, there is the risk that there may not be an exact correlation between a futures contract and the underlying index.
Upon entering into a futures contract, the Fund is required to deposit either in cash or securities an amount (initial margin) equal to a certain percentage of the nominal value of the contract. Subsequent payments are made or received by the Fund periodically, depending on the daily fluctuation in the value of the underlying securities, and are recorded as unrealized gains or losses by the Fund. A gain or loss is realized when the contract is closed or expires.
At December 31, 2009, the Bond Core Plus Fund held the following futures contracts:
Futures Contracts |
Number of Contracts |
Notional Cost | Settlement Month | Unrealized Appreciation/ (Depreciation) |
|||||||
Long |
|||||||||||
90 Day Eurodollar Futures |
286 | $ | 70,347,938 | September 2010 | $ | 365,562 | |||||
90 Day Eurodollar Futures |
187 | 46,224,465 | March 2010 | 359,572 | |||||||
90 Day Eurodollar Futures |
92 | 22,678,000 | June 2010 | 165,600 | |||||||
10 Year U.S. Treasury Futures |
100 | 11,806,281 | March 2010 | (260,969 | ) | ||||||
2 Year U.S. Treasury Futures |
19 | 4,136,656 | March 2010 | (27,609 | ) | ||||||
90 Day Euribor Futures |
5 | 1,754,213 | September 2010 | 10,482 | |||||||
Germany Federal Republic Bonds |
39 | 6,866,659 | March 2010 | (91,824 | ) | ||||||
Germany Federal Republic Bonds |
98 | 16,363,009 | March 2010 | (115,879 | ) | ||||||
Sterling Futures |
7 | 1,383,407 | June 2010 | 16,756 | |||||||
U.K. Treasury Bonds |
5 | 948,312 | March 2010 | (23,356 | ) | ||||||
$ | 398,335 | ||||||||||
I. Forward Foreign Currency Contracts
The Bond Core Plus Fund and the International All Cap Equity Fund use forward foreign currency contracts to facilitate transactions in foreign securities or as a hedge against the foreign currency exposure of either specific transactions or portfolio positions. When entering into a forward foreign currency contract, the Fund agrees to receive or deliver a fixed quantity of foreign currency for an agreed-upon price on an agreed-upon future date. Such contracts are valued based upon the difference in the forward exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, and any resulting unrealized gains or losses are recorded in the Funds financial
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statements. The Fund records realized gains or losses at the time the forward contract is extinguished by entry into a closing transaction or by delivery of the currency. Risks in foreign currency contracts arise from the possible inability of counterparties to meet the contracts terms and from movements in currency values. As of December 31, 2009, the Bond Core Plus Fund held the following forward foreign currency contracts:
Type |
Currency | Principal Amount Covered by Contract |
US Dollar Cost |
Settlement Date |
Unrealized Appreciation/ (Depreciation) |
||||||||
Purchase |
Brazilian Real | 393,075 | $ | 225,000 | 02/02/10 | $ | (863 | ) | |||||
Purchase |
Mexican Peso | 1,924,572 | 144,228 | 04/22/10 | 1,312 | ||||||||
Sale |
Australian Dollar | 41,000 | 37,903 | 01/11/10 | 1,052 | ||||||||
Sale |
Euro | 2,737,000 | 3,930,299 | 01/26/10 | 3,484 | ||||||||
Sale |
Euro | 3,915,000 | 5,686,753 | 03/17/10 | 70,337 | ||||||||
Sale |
Pound Sterling | 87,000 | 176,126 | 01/13/10 | 35,642 | ||||||||
$ | 110,964 | ||||||||||||
J. Interest Rate Swap Contracts
The Bond Core Plus Fund invests in swap contracts. A swap is an agreement to exchange the return generated by one instrument for the return generated by another instrument. The Fund uses interest rate swap contracts to manage its exposure to interest rates. Interest rate swap contracts typically represent the exchange of commitments to make variable rate and fixed rate payments with respect to a notional amount of principal. Swap contracts typically have a term of one to ten years, but typically require periodic interim settlement in cash, at which time the specified variable interest rate is reset for the next settlement period. During the period that the swap contract is open, the contract is marked-to-market as the net amount due to or from the Fund in accordance with the terms of the contract based on the closing level of the interest accrual through valuation date. Changes in the value of swap contracts are recorded as unrealized gains or losses. Periodic cash settlements on interest rate swaps are recorded as adjustments to realized gains or losses. Up-front payments are recorded to realized gains or losses upon termination of the swap contract.
Entering into a swap contract involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. Notional principal amounts are used to express the extent of involvement in the transactions, but are not delivered under the contracts. Accordingly, credit risk is limited to any amounts receivable from the counterparty. To reduce credit risk from potential counterparty default, the Fund enters into swap contracts with counterparties whose creditworthiness has been approved by the Investment Advisor to the Fund. The Fund bears the market risk arising from any change in interest rates. Based on market fluctuation cash collateral may be exchanged between the parties to decrease the amount of counterparty default risk.
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At December 31, 2009, the Bond Core Plus Fund held the following interest rate swap contracts:
Rate Type |
|||||||||||||||||
Notional Amount |
Net Cost/ (Proceeds) |
Swap |
Termination Date |
Floating Rate |
Fixed Rate |
Unrealized Appreciation/ (Depreciation) |
|||||||||||
6,100,000 BRL |
$ | (61,765 | ) | Morgan Stanley(a) | 01/02/2012 | CDI-Brazil(b) | 10.115 | % | $ | (102,626 | ) | ||||||
4,000,000 BRL |
(35,463 | ) | UBS(a) | 01/02/2012 | CDI-Brazil(b) | 10.575 | % | (31,860 | ) | ||||||||
800,000 BRL |
| UBS(a) | 01/02/2012 | CDI-Brazil(b) | 11.020 | % | (2,219 | ) | |||||||||
3,400,000 GBP |
5,066 | Barclays(a) | 03/17/2012 | 6 Month GBP LIBOR | 3.000 | % | 69,381 | ||||||||||
$ | (92,162 | ) | $ | (67,324 | ) | ||||||||||||
(a) | Fund receives the fixed rate and pays the floating rate. |
(b) | CDIBrazil is the interbank lending rate of Brazil as published by the Central Bank of Brazil. |
K. Option and Swaption Contracts
The Bond Core Plus Fund purchases or writes option contracts to manage exposure to fluctuations in interest rates or hedge the fair value of other Fund investments. The premium paid by the Fund for the purchase of a call or put option is included in the Funds Statement of Assets and Liabilities as an investment and subsequently marked-to-market to reflect the current market value of the option purchased. If an option which the Fund has purchased expires on its stipulated expiration date, the Fund realizes a loss for the amount of the cost of the option. If the Fund enters into a closing transaction, it realizes a gain or loss, depending on whether the proceeds from the sale are greater or less than the cost of the option. If the Fund exercises a put option, it realizes a gain or loss from the sale of the underlying security and the proceeds from such sale will be decreased by the premium originally paid. If the Fund exercises a call option, the cost of the security which the Fund purchases upon exercise will be increased by the premium originally paid.
The premium received by the Fund for a written option is recorded as a liability. The liability is marked-to-market based on the options quoted daily settlement price. When an option expires or the Fund enters into a closing purchase transaction, the Fund realizes a gain (or loss if the cost of the closing purchase transaction exceeds the premium received when the option was sold) without regard to any unrealized gain or loss on the underlying security and the liability related to such option is eliminated. When a written call option is exercised, the Fund realizes a gain or loss from the sale of the underlying security and the proceeds from such sale are increased by the premium originally received. If a written put option is exercised, the amount of the premium originally received will reduce the cost of the security which the Fund is obligated to purchase.
The Bond Core Plus Fund may also purchase or write swaption contracts to manage exposure to fluctuations in interest rates or hedge the fair value of other Fund investments. Swaption contracts entered into by the Fund typically represent an option that gives the purchaser the right, but not the obligation, to enter into a swap contract on a future date. If a call swaption is exercised, the purchaser will enter into a swap to receive the fixed rate and pay a floating rate in exchange. Exercising a put would entitle the purchaser to pay a fixed rate and receive a floating rate.
Swaption contracts are marked-to-market at the net amount due to or from the Fund in accordance with the terms of the contract based on the closing level of the relevant market rate of interest. Changes in the value of the swaption are reported as unrealized gains or losses. Gain or loss is recognized when the swaption contract expires or is closed. When the Fund writes a swaption, the premium received is
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recorded as a liability and is subsequently adjusted to the current fair value of the swaption written. Premiums received from writing swaptions that expire unexercised are treated by the Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase, as a realized loss.
Entering into option and swaption contracts involves, to varying degrees, elements of credit, market and interest rate risk in excess of the amounts reported in the Statement of Assets and Liabilities. To reduce credit risk from potential counterparty default, the Fund enters into these contracts with counterparties whose creditworthiness has been approved by the advisor. The Fund bears the market risk arising from any change in index values or interest rates.
A summary of the written put options for the year ended December 31, 2009 is as follows:
Written Put Option Contracts |
Number of Contracts | Premium | |||||
Outstanding, beginning of year |
| $ | | ||||
Options written |
39 | 13,553 | |||||
Options exercised |
| | |||||
Options expired |
| | |||||
Options closed |
(39 | ) | (13,553 | ) | |||
Outstanding, end of year |
| $ | | ||||
For the year ended December 31, 2009, the Fund had not written any call options or entered into any swaption contracts.
L. Additional Derivative Disclosure
The Bond Core Plus Fund has entered into futures contracts to adjust interest rate exposures and to replicate bond positions. A futures contract frequently offers the opportunity to outperform securities due to cheapness of futures contracts and active management of the liquid, short duration securities backing the futures. The Bond Core Plus Fund uses futures contracts to manage its exposure to the securities markets or to movements in interest rates and currency values. The primary risks associated with the use of futures contracts are the imperfect correlation between the change in market value of the securities held by the Fund and the prices of futures contracts, the possibility of an illiquid market, and the inability of the counterparty to meet the terms of the contract. Futures contracts are valued based upon their quoted daily settlement prices. Upon entering into a futures contract, the Fund is required to deposit with its futures broker an amount of cash or U.S. Government and Agency Obligations in accordance with the initial margin requirements of the broker or exchange. Futures contracts are marked-to-market daily and an appropriate payable or receivable for the change in value (variation margin) is recorded by the Fund. Gains or losses are recognized but not considered realized until the contracts expire or are closed. Futures contracts involve, to varying degrees, risk of loss in excess of the variation margin disclosed on the Statements of Assets and Liabilities.
The Bond Core Plus Fund has entered into foreign currency contracts. The Fund may enter into these contracts in connection with settling planned purchases or sales of securities, to hedge the currency exposure associated with some or all of the Funds securities or as a part of an investment strategy. A foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a foreign currency contract fluctuates with changes in
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foreign currency exchange rates. Foreign currency contracts are markedto-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. Realized gains or losses equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed are recorded upon delivery or receipt of the currency. These contracts may involve market risk in excess of the unrealized gain or loss reflected on the Statement of Assets and Liabilities. In addition, the Fund could be exposed to risk if the counterparties are unable to meet the terms of the contracts or if the value of the currency changes unfavorably to the U.S. dollar. In connection with these contracts, securities may be identified as collateral in accordance with the terms of the respective contracts.
The Bond Core Plus Fund has entered into interest rate swap agreements. Interest rate swaps provide the Fund with an effective and usually less expensive means to adjust quickly portfolio duration, maturity mix and sector exposure. Interest rate swap agreements involve the exchange by the Fund with another party of their respective commitments to pay or receive interest with respect to the notional amount of principal. Swap agreements are privately negotiated agreements between the Fund and counterparty. Swaps are marked to market daily based upon values from third party vendors or quotations from market makers to the extent available and the change in value, if any, is recorded as an unrealized gain or loss on the Statement of Assets and Liabilities. In the event that market quotations are not readily available or deemed reliable, certain swap agreements may be valued pursuant to guidelines established by the Trustee. Payments received or made at the beginning of the measurement period are reflected as such on the Statement of Assets and Liabilities and represent payments made or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, currency exchange rates, interest rates, and other relevant factors). These upfront payments are recorded as realized gains or losses on the Statement of Operations upon termination or maturity of the swap. A liquidation payment received or made at the termination of the swap is recorded as realized gain or loss on the Statement of Operations. Net periodic payments received or paid by the Fund are included as part of realized gains or losses on the Statement of Operations. Entering into these agreements involves, to varying degrees, elements of credit, market and documentation risk in excess of the amounts recognized on the Statement of Assets and Liabilities. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of contractual terms in the agreements and that there may be unfavorable changes in interest rates.
Derivative Market and Credit Risk
In the normal course of business the Bond Core Plus Fund trades financial instruments and enters into financial transactions where risk of potential loss exists due to changes in the market (market risk) or failure of the other party to a transaction to perform (credit risk).
Similar to credit risk, the Bond Core Plus Fund may be exposed to counterparty risk, or the risk that an institution or other entity with which the Bond Core Plus Fund has unsettled or open transactions will default. The potential loss could exceed the value of the financial assets recorded in the financial statements. Financial assets, which potentially expose the Bond Core Plus Fund to credit risk, consist principally of cash due from counterparties and investments.
The Investment Advisor seeks to minimize credit risks to the Bond Core Plus Fund by performing extensive reviews of each counterparty and obtains approval from the Investment Advisors counterparty risk committee prior to entering into transactions with a third party. All transactions in listed securities are settled/paid for upon delivery using approved counterparties. The risk of default is considered
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minimal, as delivery of securities sold is only made once the Bond Core Plus Fund has received payment. Payment is made on a purchase once the securities have been delivered by the counterparty. The trade will fail if either party fails to meet its obligation.
The Bond Core Plus Fund restricts its exposure to credit losses by entering into master agreements with counterparties (approved brokers) with whom it undertakes a significant volume of transactions to include certain safeguards for derivatives and non-standard settlement trades. The credit risk associated with favorable contracts is reduced by master netting arrangements so that if an event of default occurs, all amounts with the counterparty are terminated and settled on a net basis. The Bond Core Plus Funds overall exposure to credit risk on derivative instruments subject to master netting arrangements can change substantially within a short period, as it is affected by each transaction subject to the arrangement.
The Bond Core Plus Fund is party to the International Swaps and Derivatives Association, Inc. Master Agreements (ISDA Master Agreements) with select counterparties that govern transactions, over- the-counter derivative and foreign exchange contracts, entered into by the Bond Core Plus Fund with those counterparties. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement. Any election to terminate early could be material to the financial statements.
The considerations and factors surrounding the settlement of certain purchases and sales made on a delayed-delivery basis are governed by Master Securities Forward Transaction Agreements (Master Forward Agreements) between the Bond Core Plus Fund and select counterparties. The Master Forward Agreements maintain provisions for, among other things, initiation and confirmation, payment and transfer, events of default, termination, and maintenance of collateral. Cash collateral provided, and received by, the Bond Core Plus Fund for each type of derivative contract at December 31, 2009 is presented as Deposit with broker or Due to broker, respectively, on the accompanying Statement of Assets and Liabilities.
At December 31, 2009, the Bond Core Plus Fund had the following derivatives (not designated as hedges) grouped into appropriate risk categories that illustrate how and why the Fund uses derivative instruments:
Asset Derivatives
Interest Rate Contracts | Foreign Exchange Contracts |
Credit Derivatives |
Equity Contracts |
Total | |||||||||||||
Bond Core Plus Fund |
|||||||||||||||||
Futures Contracts(a) | $ | 917,972 | $ | | $ | | $ | | $ | 917,972 | |||||||
Forward Contracts(b) | | 111,827 | | | 111,827 | ||||||||||||
Swap Contracts(c) | 74,447 | | | | 74,447 | ||||||||||||
Total Value | $ | 992,419 | $ | 111,827 | $ | | $ | | $ | 1,104,246 | |||||||
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Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts.
(a) | Net Assets Unrealized-Appreciation (Includes cumulative appreciation/depreciation of futures contracts as reported in Note H: Futures Contracts. Only current days variation margin is reported within the Statement of Assets and Liabilities) |
(b) | Gross unrealized appreciation of forward currency exchange contracts |
(c) | Swap contracts, at value |
Liability Derivatives
Interest Rate Contracts | Foreign Exchange Contracts |
Credit Derivatives |
Equity Contracts |
Total | |||||||||||||
Bond Core Plus Fund |
|||||||||||||||||
Futures Contracts(a) | $ | 519,637 | $ | | $ | | $ | | $ | 519,637 | |||||||
Forward Contracts(b) | | 863 | | | 863 | ||||||||||||
Swap Contracts(c) | 233,933 | | | | 233,933 | ||||||||||||
Total Value | $ | 753,570 | $ | 863 | $ | | $ | | $ | 754,433 | |||||||
Each of the above derivatives is located in the following Statement of Assets and Liabilities accounts.
(a) | Net Assets Unrealized-Depreciation (Includes cumulative appreciation/depreciation of futures contracts as reported in Note H: Futures Contracts. Only current days variation margin is reported within the Statement of Assets and Liabilities) |
(b) | Gross unrealized depreciation of forward currency exchange contracts |
(c) | Swap contracts, at value |
Interest Rate Contracts | Foreign Exchange Contracts |
Credit Derivatives |
Equity Contracts |
Total | ||||||||||||||||
Bond Core Plus Fund |
||||||||||||||||||||
Realized gain (loss) | ||||||||||||||||||||
Futures Contracts(a) | $ | 10,880,883 | $ | | $ | | $ | | $ | 10,880,883 | ||||||||||
Forward Contracts(b) | | (672,028 | ) | | | (672,028 | ) | |||||||||||||
Swap Contracts(c) | (8,429,358 | ) | | | | (8,429,358 | ) | |||||||||||||
Total Value | $ | 2,451,525 | $ | (672,028 | ) | $ | | $ | | $ | 1,779,497 | |||||||||
Each of the above derivatives is located in the following Statement of Operations accounts.
(a) | Net realized gain/(loss) futures contracts |
(b) | Net realized gain/(loss) foreign currency transactions (Statement of Operations includes both forwards and foreign currency transactions) |
(c) | Net realized gain/(loss) swap contracts |
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Interest Rate Contracts | Foreign Exchange Contracts |
Credit Derivatives |
Equity Contracts |
Total | |||||||||||||||
Bond Core Plus Fund |
Change in Unrealized Appreciation (Depreciation) | ||||||||||||||||||
Futures Contracts(a) | $ | (8,155,101 | ) | $ | | $ | | $ | | $ | (8,155,101 | ) | |||||||
Forward Contracts(b) | | 623,683 | | | 623,683 | ||||||||||||||
Swap Contracts(c) | 21,070,534 | | | | 21,070,534 | ||||||||||||||
Total Value | $ | 12,915,433 | $ | 623,683 | $ | | $ | | $ | 13,539,116 | |||||||||
Each of the above derivatives are located in the following Statement of Operations accounts.
(a) | Net unrealized appreciation/(depreciation) futures contracts |
(b) | Net unrealized appreciation/(depreciation) foreign currency transactions (Statement of Operations includes both forwards and foreign currency transactions) |
(c) | Net unrealized appreciation/(depreciation) swap contracts |
The volumes indicated in the associated futures, forward foreign currency and interest rate swap footnotes are indicative of the amounts throughout the period.
M. Use of Estimates
The preparation of financial statements in accordance with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
N. Indemnifications
In the normal course of business, the Collective Trust enters into contracts that contain a variety of representations and that may contain general indemnifications. The Collective Trusts maximum exposure under these provisions is unknown, as this would involve future claims that may be made against the Collective Trust. The Collective Trust expects the risk of loss to be remote.
3. Investment Advisory, Investment Management and Related Party Transactions
State Street has retained the services of the Investment Advisors listed below to advise it with respect to its investment responsibility and has allocated the assets of certain of the Funds among the Investment Advisors. Each Investment Advisor recommends to State Street investments and reinvestments of the assets allocated to it in accordance with the investment policies of the applicable Fund as described above. State Street exercises discretion with respect to the selection and retention of the Investment Advisors and may remove an Investment Advisor at any time, in certain cases upon consultation with Northern Trust as investment fiduciary, and otherwise subject to consultation with ABA Retirement Funds.
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A fee is paid to each Investment Advisor for certain of the Funds based on the value of the assets allocated to that Investment Advisor and the respective breakpoints agreed to in the Investment Advisors contract. These fees are accrued on a daily basis and paid monthly or quarterly from the allocated assets. Actual fees paid to each Investment Advisor during the year ended December 31, 2009 are listed below and the asset based fees range from the highest rate of .75% to the lowest rate of .18% among the various Investment Advisors.
Investment Advisor |
Fees for the Year Ended December 31, 2009 | ||
Altrinsic Global Advisors, LLC (International All Cap Equity Fund) |
$ | 138,932 | |
Capital Guardian Trust Company (Balanced Fund) terminated July 1, 2009 |
189,258 | ||
C.S. McKee, L.P. (Large Cap Equity Fund) |
467,496 | ||
Denver Investment Advisors LLC (Small-Mid Cap Equity Fund) |
114,514 | ||
Eagle Global Advisors LLC (International All Cap Equity Fund) |
65,235 | ||
First State Investments International Limited (International All Cap Equity Fund) |
84,935 | ||
Frontier Capital Management Co. LLC (Small-Mid Cap Equity Fund) |
59,865 | ||
Jennison Associates LLC (Large Cap Equity Fund) |
363,574 | ||
JP Morgan Asset Management (UK) Limited (International Equity Fund) terminated July 1, 2009 |
204,891 | ||
LSV Asset Management (Small-Mid Cap Equity Fund) |
85,136 | ||
Martin Currie Inc. (International All Cap Equity Fund) |
88,389 | ||
OFI Institutional Asset Management, Inc (Small-Mid Cap Equity Fund) |
98,327 | ||
Oppenheimer Capital LLC (Small-Mid Cap Equity Fund) |
66,010 | ||
Pacific Investment Management Company LLC (Bond Core Plus Fund) |
1,062,238 | ||
Philadelphia International Advisors, LP (International Equity Fund) terminated July 1, 2009 |
152,431 | ||
Riverbridge Partners (Small-Mid Cap Equity Fund) |
71,928 | ||
Systematic Financial Management, L.P. (Small-Mid Cap Equity Fund) |
117,135 | ||
TCW Investment Management Company (Small-Mid Cap Equity Fund) |
67,207 | ||
$ | 3,497,501 | ||
A separate program fee (Program fee) is paid to each of the Program recordkeeper and ABA Retirement Funds. These fees are allocated to each Fund and the Balanced Fund based on net asset value and are accrued daily and paid monthly from the assets of the Funds and the Balanced Fund. (During the period from January 1, 2009 to April 30, 2009 in which State Street Bank served as recordkeeper, State Street did not receive any fees or payments in respect of expenses from the Collective Trust. Rather, State Street was entitled to payment for services from State Street Bank.)
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The ABA Retirement Funds Program fee is based on the value of Program assets and the following annual fee rates in effect at various times during the year ended December 31, 2009:
For the period January 1, 2009 through June 17, 2009:
Value of Program Assets |
Rate of ABA Retirement Funds Program Fee |
||
First $500 million |
.075 | % | |
Next $850 million |
.065 | % | |
Next $1.15 billion |
.035 | % | |
Next $1.5 billion |
.025 | % | |
Over $4 billion |
.015 | % |
For the period June 18, 2009 through December 31, 2009:
Value of Program Assets |
Rate of ABA Retirement Funds Program Fee |
||
First $3 billion |
.075 | % | |
Next $1 billion |
.065 | % | |
Next $1 billion |
.035 | % | |
Next $1 billion |
.025 | % | |
Over $6 billion |
.015 | % |
ABA Retirement Funds received Program fees of $1,950,929 for the year ended December 31, 2009. These fees are allocated to each Fund and the Balanced Fund based on net asset value.
Since May 1, 2009, the Collective Trust pays a Program fee to ING Services equal to (A) $135,250 for each of the first twelve calendar months after that date, (B) $177,850 for each of the next twelve calendar months, and (C) $152,850 for each of the remaining calendar months of the term of the Program Services Agreement between ABA Retirement Funds and ING Services; plus, for each calendar month of the term of the Program Services Agreement, a fee based on the aggregate assets of the Funds and the Balanced Fund at the following annual rate:
Value of Assets |
Rate of ING Services Program Expense Fee |
||
First $4 billion |
.470 | % | |
Next $1 billion |
.360 | % | |
Next $1 billion |
.215 | % | |
Over $6 billion |
.220 | % |
For the period from May 1, 2009 through December 31, 2009, the Program fee paid to ING Services was $11,156,188.
An additional one-time program expense fee of $125,000 was charged to the Program during the third quarter of 2009 relating to expenses incurred by ING Services in connection with the changes to the fund line-up that occurred in July 2009.
This Program fee is accrued daily and paid monthly based on the aggregate assets of the Funds as of the last Business Day of the preceding month. The Funds bear their respective portions of this Program fee pro rata based on their respective net asset values as of the time of calculation thereof. This Program fee attributable to the Balanced Fund is accrued and paid from the Bond Fund Core Plus Fund and the Large Cap Equity Fund in which the Balanced Fund invests. The Program Services Agreement contains
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certain service standards applicable to the performance of recordkeeping services by ING Services and imposes penalties that reduce the Program fee if these service standards are not met. No service penalties were imposed for this period.
Prior to May 1, 2009, the Collective Trust paid a Program fee to State Street Bank based on the aggregate assets of the Funds and the Balanced Fund at the following annual rate (excluding one-time project fees):
Value of Assets |
Rate of State Street Bank Program Expense Fee |
||
First $2 billion |
.40 | % | |
Next $1 billion |
.31 | % | |
Next $1 billion |
.21 | % | |
Over $4 billion |
.13 | % |
For the period from January 1, 2009 through April 30, 2009, the Program fee paid to State Street Bank was $3,588,754. The prior agreement between ABA Retirement Funds and State Street Bank for such services had service standards similar to those contained in the Program Services Agreement and imposed similar penalties for failure to meet these standards. A service penalty of $75,000 was imposed in September 2009.
A one-time additional program expense fee of $150,000 was charged to the Program on February 2, 2009 relating to expenses incurred by State Street in connection with the establishment of five new Index Funds in early 2009.
Benefit payments under the Program generally are made by check. Within two business days before the check becomes payable, funds for the payment of benefits are transferred to a non-interest bearing account with State Street Bank. No separate fee is charged for benefit payments; rather, State Street Bank retains any earnings attributable to outstanding benefit checks, and these earnings have been taken into account in setting State Street Banks fees under the Program.
A fee is paid to State Street Bank for its management, administration and custody of the assets in the investment options (other than Self-Managed Brokerage Accounts). This fee is accrued on a daily basis and paid monthly from the net assets of the Funds and the Balanced Fund at the following rates:
For the period January 1, 2009 through January 31, 2009:
Value of Assets in all Funds |
Rate | ||
First $1 billion |
.217 | % | |
Next $1.8 billion |
.067 | % | |
Over $2.8 billion |
.029 | % |
For the period February 1, 2009 through December 31, 2009:
Value of Assets in all Funds |
Rate | ||
First $1 billion |
.202 | % | |
Next $1.8 billion |
.067 | % | |
Over $2.8 billion |
.029 | % |
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For the year ended December 31, 2009, State Street Bank received trustee, management and administration fees of $3,311,857.
State Street Global Markets received $492,000 for the work on the Investment Advisor transition in connection with the Fund line-up changes in July 2009. This fee was allocated to the following Funds experiencing the Investment Advisor changes:
Large Cap Equity Fund |
$ | 318,563 | |
Small-Mid Cap Equity Fund |
$ | 111,334 | |
International All Cap Equity Fund |
$ | 62,103 |
From on or about July 1, 2009 until September 30, 2011, or if earlier, upon the effective date of a Succession Agreement dated as of July 1, 2009 among The Northern Trust Company (Northern Trust), Northern Trust Investments, N.A., State Street and State Street Bank, which effective date is expected to occur on or about July 1, 2010, although it may occur earlier or later, the Collective Trust pays Northern Trust an annual fee of $500,000 for its services as investment fiduciary. Northern Trusts annual fee accrues on a daily basis and will be paid monthly from the assets of the respective Funds, which will bear their respective portions of this fee based on their respective net asset values as of the time of calculation of the fee. In 2009, the Collective Trust paid Northern Trust a prorated annual fee of $250,000 for services provided on and after July 1, 2009 and a one-time fee of $250,000 for related services performed by Northern Trust prior to July 1, 2009. These fees are included in the Other fees column in the Statements of Operations.
Management FeesIndex Funds and Indexed Portions of Managed Funds
Since February 2, 2009 (or the inception date of the Fund, if later), fees have been paid to State Street Bank for the investment management services it performs relating to the assets in the Index Funds listed below and the indexed portions of the Large Cap Equity Fund, the Small-Mid Cap Equity Fund and the International All Cap Equity Fund. These fees are accrued on a daily basis and paid monthly from the relevant assets of the respective Funds and are based on respective net asset values as of the time of calculation. The fees for the indexed portions of the Managed Funds and the fees for the respective Index Funds are at the following annual rates:
Fund |
Rate | ||
Bond Index Fund |
.04 | % | |
Large Cap Index Equity Fund |
.02 | % | |
All Cap Index Equity Fund |
.05 | % | |
Mid Cap Index Equity Fund |
.05 | % | |
Small Cap Index Equity Fund |
.05 | % | |
International Index Equity Fund |
.10 | % | |
Large Cap Equity Fund |
.05 | % | |
Small-Mid Cap Equity Fund |
.05 | % | |
International All Cap Equity Fund |
.12 | % |
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State Street Bank received the following fees paid from the Funds listed below during the period from respective inception date through December 31, 2009:
Bond Index Fund (inception date February 3, 2009) |
$ | 7,226 | |
Large Cap Index Equity Fund (inception date February 9, 2009) |
2,790 | ||
All Cap Index Equity Fund (fee inception date February 1, 2009) |
106,526 | ||
Mid Cap Index Equity Fund (inception date February 3, 2009) |
4,447 | ||
Small Cap Index Equity Fund (inception date February 3, 2009) |
3,128 | ||
International Index Equity Fund (inception date March 3, 2009) |
9,138 | ||
Large Cap Equity Fund (inception date July 2, 2009) |
40,075 | ||
Small-Mid Cap Equity Fund (inception date July 2, 2009) |
1,784 | ||
International All Cap Equity Fund (fee inception date July 2, 2009) |
9,090 | ||
$ | 184,204 | ||
The Retirement Date Funds are subject to a management fee of .10% of the total annual assets invested in the Retirement Date Funds, payable to State Street Bank. The fee is accrued daily and paid monthly. For the year ended December 31, 2009, State Street Bank received Retirement Date Fund management fees of $261,740.
The Target Risk Funds are subject to a management fee of .06% of the total annual assets invested in the Target Risk Funds, payable to State Street Bank. The fee is accrued daily and paid monthly. For the period since inception on July 7, 2009 through December 31, 2009, State Street Bank received investment management fees of $4,163.
The Real Asset Return Fund is subject to a management fee of .09% of the total annual assets invested in the Real Asset Return Fund, payable to State Street Bank. The fee is accrued daily and paid monthly. For the period since inception on July 7, 2009 through December 31, 2009, State Street Bank received investment management fees of $1,485.
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4. Purchases and Sales of Securities
The aggregate cost of purchases and proceeds from sales of securities excluding U.S. Government securities and short-term investments were as follows:
For the Year Ended December 31, 2009 | ||||||
Purchases | Sales | |||||
Aggressive Risk Fund |
$ | 4,082,719 | $ | 210,856 | ||
All Cap Index Equity Fund |
352,965,187 | 370,325,570 | ||||
Balanced Fund |
223,766,538 | 104,895,292 | ||||
Bond Core Plus Fund |
45,782,803 | 102,917,379 | ||||
Bond Index Fund |
67,060,528 | 32,522,711 | ||||
Conservative Risk Fund |
5,191,533 | 148,054 | ||||
International All Cap Equity Fund |
222,812,876 | 238,791,542 | ||||
International Index Equity Fund |
38,710,304 | 17,652,177 | ||||
Large Cap Equity Fund |
1,163,262,424 | 527,782,085 | ||||
Large Cap Index Equity Fund |
54,976,876 | 25,708,945 | ||||
Mid Cap Index Equity Fund |
39,328,197 | 17,542,227 | ||||
Moderate Risk Fund |
12,914,288 | 597,611 | ||||
Real Asset Return Fund |
5,278,430 | 447,957 | ||||
Small Cap Index Equity Fund |
27,155,633 | 13,990,278 | ||||
Small-Mid Cap Equity Fund |
380,283,303 | 160,526,839 | ||||
Lifetime Income Retirement Date Fund |
14,384,726 | 16,784,582 | ||||
2010 Retirement Date Fund |
33,438,772 | 28,906,715 | ||||
2020 Retirement Date Fund |
57,669,683 | 43,532,341 | ||||
2030 Retirement Date Fund |
39,684,568 | 28,562,129 | ||||
2040 Retirement Date Fund |
26,927,542 | 19,363,951 |
The aggregate cost of purchases and proceeds from sales of U.S. Government securities were as follows:
For the Year Ended December 31, 2009 | ||||||
Purchases | Sales | |||||
Bond Core Plus Fund |
$ | 4,858,021,218 | $ | 4,787,739,572 |
5. Risks Associated with Investments of the Trust
The Funds and the Balanced Fund to the extent invested in the equity markets are subject to a variety of market and financial risks. Common stocks, the most familiar type of equity security, represent an equity (ownership) interest in a corporation. Although common stocks and other equity securities have a history of long-term growth in value, their prices may fluctuate dramatically in the short term in response to changes in market conditions, interest rates and other company, political and economic developments. In addition, investments in non-U.S. securities, including emerging markets equities, and in small capitalization and mid-capitalization equity securities, involve special risks. For instance, smaller companies may be impacted by economic conditions more severely. Foreign securities risks include less investor protections, government failure or nationalization of businesses, exchange rate risk and exchange restrictions, poorly developed financial reporting requirements, broker/dealer regulation, or foreign government taxation, financial markets or legal systems. Certain Funds and the Balanced Fund,
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in addition to the more general risks associated with equity investing, are subject to the more particular risks associated with investing in value stocks or growth stocks, as different types of stocks tend to shift into and out of favor depending on market and economic conditions. The value of the Funds and the Balanced Fund to the extent so invested in the equity markets will fluctuate, and the holders of units in the Funds and the Balanced Fund should be able to tolerate changes, sometimes sudden or substantial, in the value of their investment.
The Funds and the Balanced Fund, to the extent invested in fixed income securities, including all lending through collateral holdings, are subject to the risks associated with investing in such instruments. Fixed-income securities such as bonds are issued to evidence loans that investors make to corporations and governments, either foreign or domestic. If prevailing interest rates fall, the market value of fixed-income securities that trade on a yield basis tends to rise. On the other hand, if prevailing interest rates rise, the market value of fixed-income securities generally will fall. In general, the shorter the maturity, the lower the yield but the greater the price stability. These factors may have an effect on the value of the Funds and the Balanced Fund. A change in the level of interest rates will tend to cause the net asset value of the Funds or the Balanced Fund to change. If such interest rate changes are sustained over time, the yield of the Funds or the Balanced Fund will fluctuate accordingly.
Fixed-income securities, including corporate bonds, also are subject to credit risk. When a security is purchased, its anticipated yield depends on the timely payment by the borrower of each interest and principal installment. Credit analysis and bond ratings take into account the relative likelihood that such timely payment will result. Bonds with a lower credit rating tend to have higher yields than bonds of similar maturity with a better credit rating. However, to the extent the Funds or the Balanced Fund invest in securities with medium or lower credit qualities, they are subject to a higher level of credit risk than investments in investment-grade securities. The credit quality of non investment-grade securities is considered speculative by recognized ratings agencies with respect to the issuers continuing ability to pay interest and principal. Lower-grade securities may have less liquidity and a higher incidence of default than higher-grade securities. Furthermore, as economic, political and business developments unfold, lower-quality bonds, which possess lower levels of protection with respect to timely payment, usually exhibit more price fluctuation than do higher-quality bonds of like maturity and the value of the Funds and the Balanced Fund will reflect this volatility. Moreover, the Funds and the Balanced Fund rely to a significant extent on ratings issued by one or more nationally recognized credit rating agencies to assess the credit quality of securities in which they propose to invest. There may be limitations on the quality of such ratings. For instance, certain asset backed securities such as subprime collateralized mortgage obligations (CMOs) and securities backed by bond insurance that initially received relatively high ratings were, in connection with the credit markets turbulence, subsequently significantly downgraded. There is a risk of loss associated with securities even if initially highly rated, particularly in the case of collateralized debt obligations and other structured-finance investments that are often of relatively higher complexity.
Recent events in both the equity and fixed income markets and in particular the financial sector have resulted in an unusually high degree of volatility in the market, the Funds and the Balanced Fund. Certain sectors of the fixed income markets also experienced an unusually high degree of illiquidity during 2009 which adversely affected the Funds and the Balanced Fund to the extent invested in those sectors during 2009. The Collective Trusts investment in the financial sector has contributed to the volatility of the Funds and the Balanced Fund.
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6. Securities Lending Income
The Funds and the Balanced Fund are authorized to participate in the Securities Lending Program administered by State Street Bank, under which securities held by the Funds and the Balanced Fund are loaned by State Street Bank, as the Funds and the Balanced Funds lending agent, to certain brokers and other financial institutions (the Borrowers). The Borrowers provide cash, securities or letters of credit as collateral against loans in an amount at least equal to 100% of the fair value of the loaned securities. The Borrowers are required to maintain the collateral at not less than 100% of the fair value of the loaned securities. Cash collateral is invested in the State Street Quality D Short-Term Investment Fund.
The Funds and the Balanced Fund are subject to the risks associated with the lending of securities, including the risks associated with defaults by the Borrowers of such securities and the credit, liquidity and other risks arising out of the investment of cash collateral received from the Borrowers.
Certain Funds and the Balanced Fund also invest in collective investment funds which lend a portion of their securities to qualified Borrowers under identical collateral requirements described above.
A portion of the income generated upon investment of cash collateral is remitted to the Borrowers, and the remainder is allocated between the Fund or the Balanced Fund lending the securities and State Street Bank in its capacity as lending agent.
At December 31, 2009, the Funds fair value of securities on loan and collateral value received at amortized cost and fair value for securities loaned was as follows:
Collateral Received | |||||||||
Fund |
Fair Value of Loaned Securities |
Amortized Cost | Fair Value | ||||||
Bond Core Plus Fund |
$ | 21,352,312 | $ | 21,790,756 | $ | 21,445,373 | |||
International All Cap Equity Fund |
17,507,960 | 18,122,836 | 17,835,589 | ||||||
Large Cap Equity Fund |
111,134,684 | 113,688,207 | 111,886,249 | ||||||
Small-Mid Cap Equity Fund |
156,458,735 | 160,659,953 | 158,113,493 |
As discussed in Note 1, units of Quality D continue to be issued and redeemed at a constant $1.00 net asset value per unit; however, certain limitations on withdrawals would apply to redemptions in connection with discontinuing participation in the securities lending program. At December 31, 2009, the market value of the investments in Quality D, as reported by its trustee, was approximately 98.415% of amortized cost. Furthermore, as reported by the trustee as of December 31, 2009, all investments in Quality D were performing in accordance with their respective terms. The accompanying financial statements of the Funds and the Balanced Fund have valued their direct and indirect investments in the Cash Collateral Funds at their fair values, and have recognized unrealized losses. However, the Funds and the Balanced Fund have continued to value their investments in the Cash Collateral Funds for purposes of participant transactions at the amortized cost based values used by the Cash Collateral Funds for daily transactions.
7. Participant Ownership
As of December 31, 2009, the following Funds had participants owning greater than 5% of the outstanding units of a Fund. One participant owned 8.95% of the outstanding units of the Real Asset
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Return Fund. One participant owned 5.04% of the outstanding units of the Conservative Risk Fund. One participant owned 5.66% of the outstanding units of the Moderate Risk Fund. Two participants owned 7.21% and 6.07%, respectively, of the outstanding units of the Aggressive Risk Fund. In addition, one participant owned 5.61% of the outstanding units of the Lifetime Income Retirement Date Fund and one participant owned 5.65% of the outstanding units of the 2010 Retirement Date Fund.
8. Changes to the Program
The following is a summary of certain changes that were made to the Funds and the Balanced Fund. These changes took effect on or about July 6, 2009.
· | The Large-Cap Value Equity Fund and Large-Cap Growth Equity Fund were terminated and instead the Program offers a new Large Cap Equity Fund, a multi-manager fund with a new line-up of Investment Advisors; |
· | The Mid-Cap Value Equity Fund, Mid-Cap Growth Equity Fund and Small-Cap Equity Fund were terminated and instead the Program offers a new Small-Mid Cap Equity Fund, a multi-manager fund with a new line-up of Investment Advisors; |
· | The International Equity Fund changed its name to the International All Cap Equity Fund with a new line-up of Investment Advisors; |
· | The Balanced Fund ceased offering its units (although assets held under the Program and invested therein through July 1, 2009 continue to remain invested therein), and investment of the equity portion of the Balanced Fund has been changed to the Large Cap Equity Fund. Effective with the change to investing in the Large Cap Equity Fund, fees are no longer charged directly to the Balanced Fund as the fees are charged to the Large Cap Equity Fund and the Bond Core Plus Fund which the Balanced Fund invests; |
· | In lieu of offering the Balanced Fund, the Program offers a series of three new Target Risk Funds: the Conservative Risk Fund, the Moderate Risk Fund and the Aggressive Risk Fund, each of which reflects a specified level of investment risk; and |
· | The Program offers a new Real Asset Return Fund. |
Additionally, two Funds were renamed, as follows:
Previous Name |
New Name | |
Intermediate Bond Fund | Bond Core Plus Fund | |
Index Equity Fund | All Cap Index Equity Fund |
Participants invested in any of the funds being terminated were given at least 30 days advance written notice of the expected date of termination, and such participants were given an opportunity to direct the transfer of their assets so invested into other investment options available under the Program prior to such termination. Any assets not subject to a valid timely direction to be transferred to another investment option remained in the terminated funds until the effectuation of the changes in the Program and were then transferred, in the case of the Large-Cap Value Equity Fund and the Large-Cap Growth Equity Fund, to the Large Cap Equity Fund, and, in the case of the Mid-Cap Value Equity Fund, the Mid-Cap Growth Equity Fund and the Small-Cap Equity Fund, to the Small-Mid Cap Equity Fund.
9. Voluntary Payment
In November 2009, State Street made a voluntary payment of $72 to the Bond Core Plus Fund, $3,835 to the Small-Mid Cap Equity Fund, and $121,312 to the International All Cap Equity Fund
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associated with certain foreign exchange transactions that were effected with such Funds by affiliates of State Street at the erroneous direction of an Investment Advisor to each of the Funds.
10. Subsequent Events
Management has reviewed events and transactions through March 23, 2010, the date the financial statements were available to be issued for subsequent events requiring recognition and disclosure in these financial statements. Management has determined that no material events require recognition or disclosure in the Funds financial statements through this date other than the following:
Effective on January 19, 2010 the line-up of Investment Advisors to State Street with respect to the Large Cap Equity Fund was modified by the addition of two new Investment Advisors, Delaware Investment Advisers and Columbus Circle Investors. As of January 19, 2010, approximately 22%, 19%, 16%, 24% and 19% of the assets of the Large Cap Equity Fund were allocated to, respectively, Delaware Investment Advisers, Columbus Circle Investors, Jennison Associates LLC, C.S. McKee, L.P. and the indexed portion of the Fund.
Effective on January 19, 2010, the line-up of Investment Advisors to State Street with respect to the International All Cap Equity Fund was modified by the addition of a new Investment Advisor, LSV Asset Management. As of January 19, 2010, approximately 25%, 17%, 17%, 17% and 25% of the assets of the International All Cap Equity Fund were allocated to, respectively, Altrinsic Global Advisors, LLC, Eagle Global Advisors LLC, First State Investments International Limited, Martin Currie Inc. and LSV Asset Management.
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