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Table of Contents

As filed with the Securities and Exchange Commission on March 24, 2010

Registration No. 333-            

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

AMERICAN BAR ASSOCIATION MEMBERS/

STATE STREET COLLECTIVE TRUST

(Exact name of registrant as specified in its charter)

 

 

 

New Hampshire   6799   04-6691601

(State or other jurisdiction of

incorporation or organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification Number)

20 Trafalgar Square, Suite 449, Nashua, New Hampshire 03063

(603) 589-4097

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Nancy E. Grady

President

State Street Bank and Trust Company of New Hampshire

20 Trafalgar Square

Suite 449

Nashua, New Hampshire 03063

(603) 589-4097

(Name, address including zip code, and telephone number, including area code, of agent for service)

 

 

with copies to:

Dennis V. Osimitz

Andrew H. Shaw

Sidley Austin LLP

One South Dearborn Street

Chicago, IL 60603

(312) 853-7000

 

 

Approximate date of commencement of proposed sale to the public:

As soon as practicable after the effective date of this Registration Statement.

 

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  ¨            Accelerated filer  ¨            Non-accelerated filer  x            Smaller reporting company  ¨

                                         (Do not check if a smaller

                              reporting company)

Pursuant to Rule 429 under the Securities Act, the prospectus contained in this Registration Statement also relates to Registration Statement Nos. 333-155737, 333-158263 and 333-159466.

CALCULATION OF REGISTRATION FEE

 

 

Title of each class of

securities to be registered

  Proposed
maximum
aggregate
offering price
  Amount of
registration fee

Units representing beneficial interests in Stable Asset Return Fund

  100,000,000   $7,130

Units representing beneficial interests in Bond Index Fund

    10,000,000      $713

Units representing beneficial interests in Large Cap Index Equity Fund

    10,000,000      $713

Units representing beneficial interests in 2020 Retirement Date Fund

    10,000,000      $713

Units representing beneficial interests in 2030 Retirement Date Fund

    10,000,000      $713

Total Units of beneficial interest

              140,000,000(1)(2)     $9,982
 
 
(1) The Collective Trust may offer and sell an unlimited number of units representing interests in separate funds and portfolios of the Collective Trust, each unit to be offered and sold at the per unit net asset value of the corresponding fund or portfolio.
(2) Does not include units previously registered and remaining unsold as of the date hereof. The registered but unsold units are being carried forward pursuant to Rule 429 under the Securities Act.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information contained in this prospectus is not complete and may be changed. The Collective Trust may not sell these securities until the registration statement relating to this offering and filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

Subject to completion. Dated March 24, 2010

ABA RETIREMENT FUNDS PROGRAM

UNITS OF BENEFICIAL INTEREST

AMERICAN BAR ASSOCIATION MEMBERS/ STATE STREET COLLECTIVE TRUST

The American Bar Association Members/State Street Collective Trust (“we” or the “Collective Trust”) is offering Units representing pro rata beneficial interests in a total of 20 collective investment funds established under the Collective Trust. We refer to each of these collective investment funds individually as a Fund and together as the Funds. We group the Funds into five categories, as follows:

 

   

we offer five predominantly actively managed Funds as listed on the following page, which we refer to as the Managed Funds,

 

   

we offer six Funds, each of which is designed to replicate a specific securities index, as listed on the following page, which we refer to as the Index Funds,

 

   

we offer the Real Asset Return Fund, which seeks to provide investors with investment returns in excess of inflation as measured by the Core Consumer Price Index (which excludes food and energy),

 

   

we offer 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

 

   

we offer three Target Risk Funds, each of which is designed to represent risk and reward characteristics that reflect a certain level of investment risk.

In addition, assets contributed under the Program may be invested in any publicly traded debt and equity securities and shares of numerous mutual funds through Self-Managed Brokerage Accounts. The Self-Managed Brokerage Accounts are not registered under the Securities Act of 1933 and these Self-Managed Brokerage Accounts, together with the Balanced Fund, Units of which ceased to be offered as of July 2, 2009, are described in this prospectus for information purposes only.

Each of the Funds is an investment option under the ABA Retirement Funds program, which we refer to as the Program. The Program is a comprehensive retirement program sponsored by ABA Retirement Funds in which lawyers and law firms who are members or associates of the American Bar Association, most state and local bar associations and their employees and employees of certain organizations related to the practice of law are eligible to participate. There are no stated minimum initial or subsequent investment requirements to participate in the Program. The Units do not trade on any national exchange. Rather, Units may be purchased through the trustee of the Collective Trust, which is State Street Bank and Trust Company of New Hampshire, which we refer to as the Trustee or State Street. Transfers and withdrawals with respect to the Units may be made as described herein.

State Street is a subsidiary of State Street Bank and Trust Company, which we refer to as State Street Bank. State Street operates the Funds. ING Life Insurance and Annuity Company, which we refer to as ING Life, acting through its affiliates, including ING Institutional Plan Services, LLC, which we refer to as ING Services, provides recordkeeping, communication, marketing and administration services to the Program. The Northern Trust Company, which we refer to as Northern Trust, as investment fiduciary, makes recommendations to State Street on behalf of ABA Retirement Funds regarding certain Funds and the engagement and termination of Investment Advisors with respect to those Funds. Northern Trust is a wholly-owned subsidiary of Northern Trust Corporation, a publicly-traded bank holding company.

For a discussion of the risk factors relating generally to the Program, please refer to page 33. For a discussion of the risk factors applicable to investment in the Units of the respective Funds, please refer to page 43 (Stable Asset Return Fund), page 48 (Bond Core Plus Fund), page 52 (Large Cap Equity Fund), page 55 (Small-Mid Cap Equity Fund), page 59 (International All Cap Equity Fund), page 63 (Bond Index Fund), page 65 (Large Cap Index Equity Fund), page 67 (All Cap Index Equity Fund), page 69 (Mid Cap Index Equity Fund), page 71 (Small Cap Index Equity Fund), page 73 (International Index Equity Fund), page 78 (Real Asset Return Fund), page 86 (Retirement Date Funds) and page 92 (Target Risk Funds).

The offering of Units with a proposed offering price of approximately $1.65 billion under the Registration Statements to which this prospectus relates represents 48% of the total value of Units outstanding as of December 31, 2009. The Units will be offered based on the respective net asset values of the Funds as determined from time to time. Such net asset values are calculated as of the close of the regular trading session of the New York Stock Exchange on each Business Day.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

None of the Funds is registered as an investment company under the Investment Company Act of 1940, and, therefore, none of the Funds is subject to compliance with the requirements of this Act. Units are not “redeemable securities” within the meaning of the Investment Company Act of 1940. See “Regulation of Collective Trust.”

The date of this prospectus is April     , 2010.


Table of Contents

MANAGED FUNDS

STABLE ASSET RETURN FUNDSM invests primarily in high quality fixed-income instruments and investment contracts issued by insurance companies, banks or other financial institutions with the objective of providing current income consistent with preserving principal and maintaining liquidity.

BOND CORE PLUS FUND invests in debt securities of varying maturities with the objective of achieving a competitive total return from current income and capital appreciation.

LARGE CAP EQUITY FUND invests primarily in equity securities of large capitalization companies with the objective of achieving long-term growth of capital. Any income received is incidental to this objective. Large capitalization companies are considered those with a market capitalization of greater than $1 billion.

SMALL-MID CAP EQUITY FUND invests primarily in equity securities of small and medium capitalization companies with the objective of achieving long-term growth of capital. Any income received is incidental to this objective. Small and mid capitalization companies are considered those with a market capitalization between $100 million and $20 billion.

INTERNATIONAL ALL CAP EQUITY FUND invests primarily in equity securities of issuers domiciled outside of the U.S. The Fund may invest in companies of any size located in a number of countries throughout the world.

INDEX FUNDS

BOND INDEX 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 with the objective of replicating the total rate of return of the Barclays Capital U.S. Aggregate Bond Index.

LARGE CAP INDEX EQUITY FUND invests in securities of U.S. companies included in the S&P 500® with the objective of replicating the total rate of return of the S&P 500.

ALL CAP INDEX EQUITY FUND invests in common stocks included in the Russell 3000® Index with the objective of replicating the total rate of return of the Russell 3000 Index.

MID CAP INDEX EQUITY FUND invests in securities of U.S. companies included in the S&P MidCap 400® with the objective of replicating the total rate of return of the S&P MidCap 400.

SMALL CAP INDEX EQUITY FUND invests in securities of U.S. companies included in the Russell 2000® Index with the objective of replicating the total rate of return of the Russell 2000 Index.

INTERNATIONAL INDEX EQUITY FUND invests in securities of non-U.S. companies included in the Morgan Stanley Capital International All-Country World Ex-U.S. Index, which we refer to as the MSCI ACWI ex-US Index, with the objective of replicating the total rate of return of the MSCI ACWI ex-US Index.

REAL ASSET RETURN FUND

REAL ASSET RETURN FUND invests in a diversified portfolio of primarily Treasury Inflation Protected Securities, or so-called TIPS, commodity futures and real estate investment trusts with the objective of achieving a total return in excess of inflation as measured by the Core Consumer Price Index (which excludes food and energy).


Table of Contents

RETIREMENT DATE FUNDS

Assets contributed under the Program may also be invested in the RETIREMENT DATE FUNDS, a group of five balanced investment funds each of which is designed to correspond to a particular time horizon to retirement.

TARGET RISK FUNDS

Assets contributed under the Program may also be invested in TARGET RISK FUNDS, each of which is designed to represent risk and reward characteristics that reflect varying levels of investment risk such as conservative, moderate or aggressive.

SPECIAL NOTE REGARDING RECENT AND EXPECTED CHANGES TO THE PROGRAM

Northern Trust has been appointed by ABA Retirement Funds to act as investment fiduciary with respect to certain aspects of the Program. As investment fiduciary, Northern Trust exercises the rights previously exercised 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 these options, consistent with an investment policy for the Program developed by Northern Trust and accepted by ABA Retirement Funds.

Northern Trust, acting through its wholly-owned subsidiary Northern Trust Investments, is expected to be substituted for State Street as trustee of the Collective Trust no later than September 30, 2011, although the substitution is currently expected to occur on or about July 1, 2010. From and after the date of the substitution, Northern Trust Investments, as trustee of the Collective Trust, will have exclusive discretion and control over the assets of the Collective Trust, and Northern Trust no longer will act as investment fiduciary.

Upon the substitution of Northern Trust Investments for State Street as the trustee of the Collective Trust, State Street will no longer serve as trustee of the Collective Trust and the Declaration of Trust of the Collective Trust is expected to be amended and restated as the American Bar Association Members/Northern Trust Collective Trust.

For a description of upcoming expected changes relating to the Program, see “Recent and Expected Changes to the Program; Role of Northern Trust.”


Table of Contents

TABLE OF CONTENTS

 

     Page

Prospectus Summary

   1

Risk Factors Relating Generally to the Program

   33

The Program

   38

Description of Investment Options

   38

Managed Funds

   40

Stable Asset Return Fund

   40

Risk Factors

   43

Bond Core Plus Fund

   47

Risk Factors

   48

Large Cap Equity Fund

   51

Risk Factors

   52

Small-Mid Cap Equity Fund

   54

Risk Factors

   55

International All Cap Equity Fund

   58

Risk Factors

   59

Index Funds

   62

Bond Index Fund

   62

Risk Factors

   63

Large Cap Index Equity Fund

   65

Risk Factors

   65

All Cap Index Equity Fund

   66

Risk Factors

   67

Mid Cap Index Equity Fund

   69

Risk Factors

   69

Small Cap Index Equity Fund

   71

Risk Factors

   71

International Index Equity Fund

   73

Risk Factors

   73

Real Asset Return Fund

   76

Risk Factors

   78

Retirement Date Funds

   80

Risk Factors

   86

Target Risk Funds

   90

Risk Factors

   92

Balanced Fund

   94

Risk Factors

   96

Information with Respect to the Funds

   99

Valuation of Units

   101

Derivative Instruments

   103

Investment Advisors

   105

Self-Managed Brokerage Accounts

   106

Adoption of Program

   107

State Street and State Street Bank

   108

ING Life and ING Services

   112

Recent and Expected Changes to the Program; Role of Northern Trust

   112

ABA Retirement Funds

   114

Contributions and Investment Selection

   115

Transfers Among Investment Options and Withdrawals

   119

Deductions and Fees

   120

 

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Table of Contents
     Page

ERISA and Fiduciary Obligations

   127

Regulation of Collective Trust

   130

Federal Income Tax Considerations

   132

Taxation of Collective Trust

   135

Legal Matters

   135

Experts

   136

Where You Can Find More Information

   136

Special Note Regarding Forward-Looking Statements

   137

References in this prospectus to “Business Day” mean any day that the New York Stock Exchange is open for trading.

For additional information regarding all aspects of the Program and its investment options, contact State Street Bank and Trust Company by phone at (800) 826-8901 or by writing to ABA Retirement Funds Program, P.O. Box 5142, Boston, Massachusetts 02206-5142.

The Collective Trust has not authorized any person to give any information or to make any representations in connection with this offering other than those in this prospectus.

The investment options described below are not deposits or obligations of, or guaranteed or endorsed by, State Street or State Street Bank, and Units of beneficial interest are not insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other governmental agency, are not deposits of State Street, State Street Bank or any other bank and involve risks, including the possible loss of principal.

 

ii


Table of Contents

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. Because it is a summary, it does not contain all of the information that you should consider before investing. You should read the entire prospectus carefully, including the “Risk Factors” information included in the description of each of the Funds and elsewhere in this prospectus.

The Program

The ABA Retirement Funds program, which we refer to as the Program, is a comprehensive retirement program that provides eligible employers that adopt the Program with tax-qualified employee retirement plans, a variety of investment options and related recordkeeping and administrative services. The Program is sponsored by ABA Retirement Funds, an Illinois not-for-profit corporation, which was organized by the American Bar Association to encourage lawyers to provide retirement benefits for themselves and their employees by sponsoring retirement programs.

The Collective Trust itself has no employees. State Street Bank and Trust Company of New Hampshire, a New Hampshire chartered non-depository trust company, which we refer to as State Street or the Trustee, in its role as trustee of the Collective Trust, offers the investment options available under the Program’s Collective Trust. State Street is a wholly-owned subsidiary of State Street Bank and Trust Company, which we refer to as State Street Bank. The board of directors of State Street is responsible for management of State Street’s business and affairs, including its service as trustee of the Collective Trust. State Street Bank maintains the Self-Managed Brokerage Accounts. For a more complete description of the relationship between State Street and State Street Bank, see “State Street and State Street Bank.” For a description of certain expected changes to the above-described arrangements with State Street and State Street Bank, see “Recent and Expected Changes to the Program; Role of Northern Trust.”

ING Life Insurance and Annuity Company, a Connecticut corporation, which we refer to as ING Life, acting through its affiliates, including ING Institutional Plan Services, LLC, a Delaware limited liability company, which we refer to as ING Services, provides recordkeeping, communication, marketing and administration services to the Program, including maintenance of individual account records or accrued benefit information for Participants whose Employers choose to have the Program’s administrator maintain those account records. ING Services also provides certain account and 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.

The Northern Trust Company, which we refer to as Northern Trust, as investment fiduciary appointed by ABA Retirement Funds, makes recommendations to State Street regarding certain Funds and the engagement and termination of Investment Advisors with respect to those Funds. Northern Trust Investments, N.A., which we refer to as Northern Trust Investments, is a national banking association and a wholly-owned subsidiary of Northern Trust, which in turn 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.

Investment Options

Assets contributed or held under the Program may be invested in any of the following Funds or a Self-Managed Brokerage Account.

 

 

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Table of Contents

Managed Funds

The Collective Trust offers five Managed Funds that are predominantly actively managed. The Stable Asset Return Fund invests primarily in high quality fixed-income instruments and investment contracts. The Bond Core Plus Fund invests primarily in debt securities of varying maturities. The Large Cap Equity Fund, the Small-Mid Cap Equity Fund and the International All Cap Equity Fund are multi-manager Funds and invest primarily in various types of equity securities.

Index Funds

The Collective Trust offers the following six Index Funds, each of which is designed to replicate a specific securities index: the Bond Index Fund, the Large Cap Index Equity Fund, the All Cap Index Equity Fund, the Mid Cap Index Equity Fund, the Small Cap Index Equity Fund and the International Index Equity Fund.

Real Asset Return Fund

The Collective Trust offers the Real Asset Return Fund, a diversified portfolio which is designed to provide investors with a return in excess of inflation as measured by the Core Consumer Price Index (which excludes food and energy).

Retirement Date Funds

The Collective Trust offers five Retirement Date Funds, a group of balanced investment funds, each of which is designed to correspond to a particular time horizon to retirement.

Target Risk Funds

The Collective Trust offers three Target Risk Funds, each of which is designed to represent risk and reward characteristics that reflect a certain level of investment risk such as conservative, moderate or aggressive.

Self-Managed Brokerage Account

Assets contributed or held under the Program can also be invested in a wide variety of publicly traded debt and equity securities and shares of numerous mutual funds through a self-managed brokerage account, which we refer to as a Self-Managed Brokerage Account. Self-Managed Brokerage Accounts are not registered under the Securities Act of 1933 and are described in this prospectus for informational purposes only. See “Self-Managed Brokerage Accounts.”

Investment Options

In this prospectus, we refer to the Funds and the Self-Managed Brokerage Account as “investment options.” As of July 2, 2009, the Balanced Fund ceased to be offered and thus the Balanced Fund is no longer an investment option, although certain assets held under the Program continue to be invested in this fund. See “Balanced Fund.

State Street may make additional investment options available from time to time, subject to consultation with Northern Trust as investment fiduciary appointed by ABA Retirement Funds. State Street may also terminate or amend the terms of certain investment options from time to time upon notice to, and in consultation with, Northern Trust as investment fiduciary. For a description of certain expected changes to the above-described arrangements, see “Recent and Expected Changes to the Program; Role of Northern Trust.”

 

 

2


Table of Contents

The following charts provide a summary of the features of the Funds that are available under the Program.

SUMMARY OF FUNDS*

 

    

Managed Funds

   

Stable
Asset
Return
Fund(1)

 

Bond Core
Plus Fund

 

Large Cap
Equity Fund(2)

 

Small-Mid Cap
Equity Fund(3)

 

International
All Cap Equity Fund(4)

Investment Objective:

  Current income consistent with preserving principal and maintaining liquidity  

Total return

from capital

appreciation

and current income

  Long-term growth of capital   Long-term growth of capital   Long-term growth of capital

Invests Primarily In:

  High quality short-term instruments and investment contracts of insurance companies, banks and financial institutions  

Debt securities of

various maturities

 

U.S. equities with

capitalization

in excess of $1 billion

 

U.S. equities with

capitalization

between $100 million and $20 billion.

  Common stocks and other equity securities of established non- U.S. companies

Risk to Principal:

  Low risk to principal   Average credit risk for a debt-oriented intermediate bond fund; also risk of loss related to movements in interest rates   Average risk to principal for a large cap U.S. equity fund   Above average risk to principal for a U.S. equity fund but average risk for a small-mid cap U.S. equity fund   Above average risk to principal for a U.S. equity fund but average risk to principal for an international equity fund, including risks due to currency fluctuations

Primary Source of Potential Return:

  Interest income   Interest income and capital appreciation   Capital appreciation   Capital appreciation   Capital appreciation

Estimated Maturity or Duration:

  1.88 years(5)   Generally 3 to 6 years duration   N/A   N/A   N/A

Volatility of Return:

  Subject to interest rate fluctuation   Below average volatility for a fund investing in debt securities; volatility subject to fluctuations in interest rates   Comparable to the Russell 1000® Index   Comparable to the Russell 2500™ Index   Above average for an equity fund

Transfer Permitted:(6)

  Daily   Daily   Daily   Daily   Daily

 

 * In addition, certain plans permit the establishment of a self-managed brokerage account. See “Self-Managed Brokerage Accounts.” Certain plans also continue to be invested in the Balanced Fund, which invests in both debt and equity securities through the Bond Core Plus Fund and the Large Cap Equity Fund. The Balanced Fund ceased to be offered as an investment option as of July 2, 2009. See “Balanced Fund.”
(1) Invests through the State Street Global Advisors, the investment management division of State Street Bank which we refer to as SSgA, Stable Asset Fund Trust, a collective investment fund maintained by State Street Bank, which in turn invests a portion of its assets in the State Street Bank and Trust Company Short Term Investment Fund, a collective investment fund maintained by State Street Bank.
(2)

Invests a portion of its assets through 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 the Russell Large Cap® Index Securities Lending Series Fund is being transitioned to the SSgA Russell Large Cap® Index Non-Lending Series Fund.

(3)

Invests a portion of its assets through 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.

(4) Invests a portion of the cash reserve of the Fund in one or more collective investment funds maintained by State Street Bank.
(5) Average weighted maturity as of December 31, 2009.
(6) For information regarding special restrictions on transfers involving the Funds and, in particular, the International All Cap Equity Fund and the International Index Equity Fund, see “Transfers Among Investment Options and Withdrawals—Frequent Trading; Restrictions on Transfers.”

 

 

3


Table of Contents

SUMMARY OF FUNDS

 

    

Index Funds(1)

    

Bond
Index
Fund(2)

  

Large Cap
Index
Equity
Fund(3)

  

All Cap
Index
Equity
Fund(4)

  

Mid Cap
Index
Equity
Fund(5)

  

Small Cap
Index
Equity
Fund(6)

  

International
Index
Equity
Fund(7)

Investment Objective:

   Replication of the total return of the Barclays Capital U.S. Aggregate Bond Index    Replication of the total return of the S&P 500    Replication of the total return of the Russell 3000 Index    Replication of the total return of the S&P MidCap 400    Replication of the total return of the Russell 2000® Index    Replication of the total return of the MSCI ACWI ex-US Index

Invests Primarily In:

   Debt securities included in the Barclays Capital U.S. Aggregate Bond Index    The common stocks included in the S&P 500    The common stocks included in the Russell 3000 Index    The common stocks included in the S&P MidCap 400    The common stocks included in the Russell 2000 Index    The common stocks included in the MSCI ACWI ex-US Index

Risk to Principal:

   Average credit risk for a debt-oriented bond index fund; also risk of loss related to movements in interest rates    Average for a U.S. equity fund    Average for a diversified U.S. equity fund    Above average for a U.S. equity fund    Above average for a U.S. equity fund    Above average for a U.S. equity fund but average for an international index equity fund, including risks due to currency fluctuations

Primary Source of Potential Return:

   Interest income and capital appreciation    Capital appreciation and dividend income    Capital appreciation and dividend income    Capital appreciation    Capital appreciation    Capital appreciation

Estimated Maturity or Duration:

   4.57 years(8)    N/A    N/A    N/A    N/A    N/A

Volatility of Return:

   Comparable to the Barclays Capital U.S. Aggregate Bond Index    Comparable to the S&P 500    Comparable to the Russell 3000 Index    Comparable to the S&P MidCap 400    Comparable to the Russell 2000 Index    Comparable to the MSCI ACWI ex-US Index

Transfer Permitted:(9)

   Daily    Daily    Daily    Daily    Daily    Daily

 

(1) The Index Funds obtain exposure to various equity, fixed-income and cash asset classes by investment in respective collective investment funds maintained by State Street Bank.
(2) Invests through the SSgA U.S. Bond Index Non-Lending Series Fund, a collective investment fund maintained by State Street Bank.
(3)

Invests through the SSgA S&P 500® Index Non-Lending Series Fund, a collective investment fund maintained by State Street Bank.

(4)

Invests through the SSgA Russell All Cap® Index Securities Lending Series Fund (which engages in securities lending), and the SSgA Russell All Cap Index Non-Lending Series Fund (which does not engage in securities lending), each a collective investment fund and having the same investment objective. Over time, the portion of the All Cap Index Equity Fund invested in the SSgA Russell All Cap® Index Securities Lending Series Fund is being transitioned to the SSgA Russell All Cap Index Non-Lending Series Fund.

(5)

Invests through the SSgA S&P MidCap® Index Non-Lending Series Fund, a collective investment fund maintained by State Street Bank.

(6) Invests through the SSgA Russell Small Cap Index Non-Lending Series Fund, a collective investment fund maintained by State Street Bank.
(7) Invests through the SSgA Global Equity ex U.S. Index Non-Lending Series Fund, a collective investment fund maintained by State Street Bank.
(8) Effective duration of the underlying index as of December 31, 2009.
(9) For information regarding special restrictions on transfers involving the Funds and, in particular, the International All Cap Equity Fund and the International Index Equity Fund, see “Transfers Among Investment Options and Withdrawals—Frequent Trading; Restrictions on Transfers.”

 

 

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Table of Contents

SUMMARY OF FUNDS

 

   

Real Asset Return Fund(1)

Investment Objective:

  Growth of capital in excess of inflation as measured by the Core Consumer Price Index (which excludes food and energy)

Invests Primarily In:

  U.S. real estate investment trusts, commodity futures and treasury inflation-protected securities

Allocates Assets

  REIT Index Fund    10% to 40%

As of the Date Hereof To:

  TIPS NL Fund    20% to 60%
  Commodity Index NL Fund    10% to 40%
  Cash    0% to 20%

Risk to Principal:

  Below average risk to principal   

Primary Source of Potential Return:

  Capital appreciation and income   

Estimated Maturity or Duration:

  N/A   

Volatility of Return:

  Less than the S&P 500   

Transfer Permitted:(2)

  Daily   

 

(1) The Real Asset Return Fund obtains exposure to various asset classes by investment in collective investment funds maintained by State Street Bank. For definitions of the terms used in the chart, see Real Asset Return Fund—Strategy.
(2) For information regarding special restrictions on transfers involving the Funds and, in particular, the International All Cap Equity Fund and the International Index Equity Fund, see “Transfers Among Investment Options and Withdrawals—Frequent Trading; Restrictions on Transfers.”

 

 

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SUMMARY OF FUNDS

 

   

Retirement Date Funds(1)

 
   

Lifetime Income
Retirement Date Fund

   

2010 Retirement Date Fund

   

2020 Retirement Date Fund

 

Investment Objectives:

  Avoidance of significant loss of principal for those who have reached or are beyond their retirement date         A blend of capital appreciation and stability of principal for those planning to retire in or around 2010        Long-term capital appreciation and more limited stability of principal for those planning to retire in or around 2020      

Allocates Assets in 2010 To:(2)

 

Fixed-Income:

    65.0  

Fixed-Income:

    52.5  

Fixed-Income:

    30.5
 

Long Government Bond Fund

  0.0    

Long Government Bond Fund

  15.0    

Long Government Bond Fund

  20.0  
 

Bond Market Index Fund

  20.0       

Bond Market Index Fund

  17.5       

Bond Market Index Fund

  3.5     
 

High Yield Bond Fund

  5.0       

High Yield Bond Fund

  5.0       

High Yield Bond Fund

  3.5     
 

Intermediate Bond Fund

  20.0       

Intermediate Bond Fund

  2.5       

Intermediate Bond Fund

  0.0     
 

TIPS Fund

  20.0       

TIPS Fund

  12.5       

TIPS Fund

  3.5     
 

Equity:

    30.0  

Equity:

    42.5  

Equity:

    69.5
 

S&P 500 Index Fund

  22.0    

S&P 500 Index Fund

  29.0    

S&P 500 Index Fund

  41.5  
 

MSCI ACWI ex-US Index Fund

  4.0       

MSCI ACWI ex-US Index Fund

  8.0       

MSCI ACWI ex-US Index Fund

  16.5     
 

S&P MidCap Index Fund

  2.5       

S&P MidCap Index Fund

  3.5       

S&P MidCap Index Fund

  6.5     
 

Russell 2000 Index Fund

  1.5       

Russell 2000 Index Fund

  2.5       

Russell 2000 Index Fund

  5.0     
 

Other:

    5.0  

Other:

    5.0  

Other:

    0.0
 

Real Estate Fund

  5.0    

Real Estate Fund

  5.0    

Real Estate Fund

  0.0  

Transfer Permitted:(3)

 

Daily

     

Daily

     

Daily

   

 

   

2030 Retirement Date Fund

   

2040 Retirement Date Fund

 

Investment Objectives:

  Long-term capital appreciation for those planning to retire in or around 2030       Long-term capital appreciation for those planning to retire in or around 2040    

Allocates Assets in 2010 To:(2)

 

Fixed-Income:

    17.0  

Fixed-Income:

    10.0
 

Long Government Bond Fund

  17.0    

Long Government Bond Fund

  10.0  
 

Bond Market Index Fund

  0.0       

Bond Market Index Fund

  0.0     
 

TIPS Fund

  0.0       

TIPS Fund

  0.0     
 

Principal Accumulation Fund

  0.0       

Principal Accumulation Fund

  0.0     
 

Equity:

    83.0  

Equity:

    90.0
 

S&P 500 Index Fund

  45.0    

S&P 500 Index Fund

  45.0  
 

MSCI ACWI ex-US Index Fund

  21.5       

MSCI ACWI ex-US Index Fund

  25.0     
 

S&P MidCap Index Fund

  8.0       

S&P MidCap Index Fund

  10.0     
 

Russell 2000 Index Fund

  8.0       

Russell 2000 Index Fund

  10.0     
 

Other:

    0.0  

Other:

    0.0
 

Real Estate Fund

  0.0    

Real Estate Fund

  0.0  

Transfer Permitted:(3)

 

Daily

     

Daily

   

 

(1) The Retirement Date Funds obtain exposure to various equity, fixed-income and other asset classes by investment in collective investment funds maintained by State Street Bank under its Investment Funds for Tax Exempt Retirement Plans, which in turn invest in various index and other collective investment funds maintained by State Street Bank. For definitions of the terms used in the chart, see “Retirement Date Funds—Strategy.”
(2) Except for the Lifetime Income Retirement Date Fund, annual reallocations will result in asset allocations becoming progressively more conservative as the year in which the Retirement Date Fund will reach its most conservative investment mix draws nearer.
(3) For information regarding special restrictions on transfers involving the Funds and, in particular, the International All Cap Equity Fund and the International Index Equity Fund, see “Transfers Among Investment Options and Withdrawals—Frequent Trading; Restrictions on Transfers.” For information regarding certain restrictions on transfers involving the Retirement Date Funds, see “Information with Respect to the Funds—Investment Prohibitions” and “Retirement Date Funds—Risk Factors—Liquidity and Transfers.”

 

 

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SUMMARY OF FUNDS

 

   

Target Risk Funds(1)

 
    

Conservative Risk Fund

   

Moderate Risk Fund

   

Aggressive Risk Fund

 

Investment Objectives:

  Higher current investment income and some capital appreciation       High current investment income and greater capital appreciation       Long-term growth of capital and lower current investment income    

Allocates Assets To:

 

Equity

    29.0  

Equity

    57.0  

Equity

    83.0
 

Russell 3000 Index NL Fund

  17.5    

Russell 3000 Index NL Fund

  37.0    

Russell 3000 Index NL Fund

  55.0  
 

Daily EAFE NL Fund

  5.5       

MSCI ACWI ex-US Index

  14.0       

MSCI ACWI ex-US Index

  22.0     
 

REIT Index Fund

  6.0       

REIT Index Fund

  6.0       

REIT Index Fund

  6.0     
 

Fixed-Income

    71.0  

Fixed-Income

    41.0  

Fixed-Income

    14.0
 

Bond Market Index NL Fund

  55.0    

Bond Market Index NL Fund

  34.0    

Bond Market Index NL Fund

  14.0  
 

TIPS NL Fund

  10.0       

TIPS NL Fund

  5.0       

Other

    3.0
 

STIF

  6.0       

STIF

  2.0       

Commodity Index NL Fund

  3.0  
       

Other

    2.0      
       

Commodity Index NL Fund

  2.0        

Transfer Permitted:(2)

 

Daily

     

Daily

     

Daily

   

 

(1) The Target Risk Funds obtain exposure to various asset classes by investment in respective collective investment funds maintained by State Street Bank. For definitions of the terms used in the chart, see “Target Risk Funds—Strategy.”
(2) For information regarding special restrictions on transfers involving the Funds and, in particular, the International All Cap Equity Fund and the International Index Equity Fund, see “Transfers Among Investment Options and Withdrawals—Frequent Trading; Restrictions on Transfers.”

The Units

Interests in each Fund are represented by Units of beneficial interest. Each Unit represents an equal pro rata interest in the net assets of a Fund. 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 of 1940 and are not subject to compliance with the requirements of that Act. Units are not “redeemable securities” as defined in the Investment Company Act of 1940. See “Description of Investment Options” and “Regulation of Collective Trust.” Units representing interests in the Funds are held by State Street Bank, as trustee of the American Bar Association Members Retirement Trust, which we refer to as the Retirement Trust, and the American Bar Association Members Pooled Trust for Retirement Plans, which we refer to as the Pooled Trust. We refer to the Retirement Trust and the Pooled Trust together as the ABA Members Trusts. Neither the Units nor the assets of the Funds 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 Bank, State Street or any other bank. The activities of each of State Street and State Street Bank in connection with the operation and management of the Collective Trust and the ABA Members Trusts, respectively, are subject to the requirements of the Employee Retirement Income Security Act of 1974, which is known as ERISA, a federal statute specifically designed to regulate the activities of pension plan fiduciaries. See “Regulation of Collective Trust.”

The Collective Trust issues both Units that are registered under the Securities Act of 1933 and Units that are unregistered. Unregistered Units are offered and sold in reliance upon the exemption from registration under Section 3(a)(2) of the Securities Act of 1933 or, in the case of Units offered and sold to certain employee benefit plans covering self-employed individuals, commonly called “Keogh” or “H.R.10” plans, Rule 180 promulgated thereunder. See “Regulation of Collective Trust.

 

 

7


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Eligible Employers and Participants

Attorneys who are sole practitioners, partnerships (including limited liability companies) and professional corporations engaged in the practice of law may adopt the Program for their law practices if they or at least one of their partners or shareholders is a member or associate of the American Bar Association or of a state or local bar association that is represented in the American Bar Association’s House of Delegates. Such a state or local bar association or an organization closely associated with the legal profession which has, as an owner or member of its governing board, a member or associate of the American Bar Association may also be eligible to adopt the Program. We refer to law practices, bar associations and other organizations which are eligible to adopt the Program as Eligible Employers, and we refer to those that adopt the Program as Employers. We refer to self-employed individuals and employees (together with their beneficiaries where applicable) of Employers which have adopted the Program for their practices as Participants.

Plans Available Under the Program

Eligible Employers that 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. One of these Members Plans is the American Bar Association Members Retirement Plan, a defined contribution master plan, and the other is the American Bar Association Members Defined Benefit Plan, a defined benefit master plan. Eligible Employers that design and maintain their own individually designed plans may also participate in most aspects of the Program through those individually designed plans.

The ABA Members Trusts

Assets contributed under the Program are held by State Street Bank as trustee of the Retirement Trust in the case of assets contributed under master plans and of the Pooled Trust in the case of assets contributed under individually designed 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 allocation under the terms of the particular plan. For a description of the expected change of trustee of the ABA Members Trusts, see “Recent and Expected Changes to the Program; Role of Northern Trust.”

HISTORICAL RETURN INFORMATION

The bar charts below indicate the risk of investing in the Funds that were in operation for at least a full calendar year as of December 31, 2009 by showing changes in performance from year to year. Past performance of a Fund is not a guarantee of future results. Shorter term performance swings are shown by the highest and lowest quarter returns during the years depicted on the charts. Performance information for the Stable Asset Return Fund, the Bond Core Plus Fund, the International All Cap Equity Fund and the All Cap Index Equity Fund is included for ten years. Performance information for the Lifetime Income Retirement Date Fund, the 2010 Retirement Date Fund, the 2020 Retirement Date Fund, the 2030 Retirement Date Fund and the 2040 Retirement Date Fund is included for each full fiscal year in which such Fund has been in operation. State Street manages the various Funds with the advice of different Investment Advisor(s) that may change over time, and the Funds may have employed different investment strategies and guidelines during the various periods for which performance is shown.

 

 

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No performance information is included for the Funds the operations of which commenced since December 31, 2008.

LOGO

LOGO

 

 

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LOGO

LOGO

LOGO

 

 

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The following table shows, with respect to the Funds listed below, the total annual return, after expenses, over one-year, five-year and ten-year periods ended December 31, 2009, or since inception, if shorter. After-tax returns are not included inasmuch as the Program is open only to tax-qualified employee retirement plans which are not subject to federal income tax. The table also provides average annual returns for comparative market indices for each of these Funds. The market indices shown generally do not include an allowance for fees and expenses that an investor would pay to invest in the securities that comprise the index. State Street manages the various Funds with the advice of different Investment Advisor(s) that may change over time, and the Funds may have employed different investment strategies and guidelines during various periods for which performance is shown. Additionally, the Funds have had changes in fees and expenses applicable to them during and, in certain cases, 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). Finally, the performance of the Funds is reduced by the Program Expense Fees that pay for the administration of the plans maintained under the Program. The past performance of a Fund or an index shown is no guarantee of future performance.

 

     Periods Ended December 31, 2009  

Average Annual Total Returns(1)

   1 Year     5 Year     Shorter of 10 Years
or Since Inception(2)
    Inception
Date
 

Managed Funds

        

Stable Asset Return Fund

   1.97   3.57   3.99   09/05/95   

70% Ryan Labs Three Year GIC Index/

30% iMoneyNet MFR Prime Institutional Money Market Fund Average

   3.23   3.84   4.16  

70% Ryan Labs Three Year GIC Index/

30% iMoneyNet MFR Prime Institutional Money Market Fund Average

less 0.5% per year(3)

   2.73   3.34   3.66  

Bond Core Plus Fund

   9.59   5.12   6.54   09/05/95   

Barclays Capital U.S. Aggregate Bond Index

   5.93   4.97   6.33  

Large Cap Equity Fund

   —        —        21.75   07/02/09   

Russell 1000 Index

   —        —        22.53  

Small-Mid Cap Equity Fund

   —        —        22.22   07/02/09   

Russell 2500 Index

   —        —        24.52  

International All Cap Equity Fund(4)

   33.75   2.68   (1.24 )%    09/05/95   

MSCI EAFE Index

   31.78   3.54   1.17  

MSCI ACWI ex-US Index

   41.45   5.83   2.79  

Index Funds

        

Bond Index Fund(5)

   —        —        5.94   02/03/09   

Barclays Capital U.S. Aggregate Bond Index(6)

   —        —        6.87  

Large Cap Index Equity Fund(5)

   —        —        30.65   02/09/09   

S&P 500

   —        —        31.15  

All Cap Index Equity Fund

   27.42   0.30   (0.79 )%    09/05/95   

Russell 3000 Index

   28.34   0.76   (0.20 )%   

Mid Cap Index Equity Fund(5)

   —        —        51.24   02/03/09   

S&P MidCap 400

   —        —        47.65  

Small Cap Index Equity Fund(5)

   —        —        47.65   02/03/09   

Russell 2000 Index

   —        —        41.15  

International Index Equity Fund(5)(7)

   —        —        75.20   03/03/09   

MSCI ACWI ex-US Index

   —        —        80.28  

Real Asset Return Fund

        

Real Asset Return Fund

   —        —        20.89   07/07/09   

Composite Benchmark(8)

   —        —        20.55   (9

Retirement Date Funds(10)

        

Lifetime Income Retirement Date Fund

   13.99   —        2.70   08/09/06   

Composite Benchmark(11)

   14.96   —        3.45   (12

2010 Retirement Date Fund

   13.94   —        1.88   08/08/06   

Composite Benchmark(11)

   14.44   —        2.31   (12

2020 Retirement Date Fund

   19.07   —        1.00   08/02/06   

Composite Benchmark(11)

   19.61   —        1.19   (12

2030 Retirement Date Fund

   23.15   —        0.12   08/02/06   

Composite Benchmark(11)

   23.86   —        0.33   (12

2040 Retirement Date Fund

   26.27   —        (0.23 )%    08/03/06   

Composite Benchmark(11)

   27.05   —        0.26   (12

Target Risk Funds

        

Conservative Risk Fund

   —        —        10.71   07/07/09   

Composite Benchmark(13)

   —        —        11.00   (14

Moderate Risk Fund

   —        —        17.33   07/07/09   

Composite Benchmark(13)

   —        —        17.77   (14

Aggressive Risk Fund

   —        —        24.16   07/07/09   

Composite Benchmark(13)

   —        —        24.16   (14

 

(1)

The Managed Funds, the All Cap Index Equity Fund and the Retirement Date Funds participate to varying degrees in the State Street Bank securities lending program as described under “Information with Respect to the Funds—Loans of Portfolio Securities.” The cash collateral

 

 

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received by these Funds 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 these Funds were effected (and continue to be effected) at net asset values that do not reflect mark-to-market valuations. See “Risk Factors Relating Generally to the Program—Risks Related to Securities Lending.”

(2) Inception to date returns annualized where Fund has at least one year of performance. Where Fund has greater than 10 years of performance history, the 10 year annualized return is reported.
(3) This benchmark is shown to account for reductions since late 2008 in the Stable Asset Return Fund’s 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.
(4) On or about July 6, 2009, the International All Cap Equity Fund engaged a new line-up of Investment Advisors.
(5) The Index Funds introduced in February and March 2009 experienced tracking error for periods from inception through September 24, 2009 due to a difference in timing of investment of contributions by participants in the underlying funds in which the respective Funds invest and also a difference in timing of redemptions of investments of participants out of such underlying funds (in addition to the impact of Fund expenses). Since September 25, 2009, each of the Index Funds has been invested in an underlying fund that matches the timing of contributions and redemptions, which State Street believes should lower future tracking error after taking into account the impact of Fund expenses.
(6) Index since inception data reflects performance from February 2, 2009.
(7) As described in this prospectus, State Street may utilize fair value pricing adjustments for the Fund in certain circumstances that may at certain times result in a difference in the Fund’s net asset value in comparison to that which would have resulted based on the Fund’s more customary pricing methodology. The MSCI ACWI ex-US Index does not apply fair value pricing adjustments, and the reported Index returns would not be adjusted for any fair value pricing adjustments made by the Fund.
(8) The Composite Benchmark for the Real Asset Return Fund is the composite performance of the benchmarks for the three underlying asset classes to which the Real Asset Return Fund allocates assets. The benchmarks comprising the Composite Benchmark currently include the Dow Jones U.S. Select REIT Index, Dow Jones-UBS Commodity Index and the Barclays Capital U.S. Treasury Inflation Protected Securities Index and are weighted based on the Fund’s target allocations to the asset classes to which such benchmarks relate. See “Real Asset Return Fund.”
(9) Benchmark comparison begins July 1, 2009.
(10) 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 such 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. See “Retirement Date Funds.”
(11) Composite Benchmark since inception data reflects performance from August 1, 2006. The Composite Benchmark for each of the Retirement Date Funds is the composite performance of the respective benchmarks for the underlying asset classes to which the respective Retirement Date Funds allocate assets from time to time. From May 1, 2007 to December 30, 2009, the respective benchmarks comprising the Composite Benchmarks included some or all of the Ryan Labs Three Year GIC Index, the Barclays Capital U.S. Aggregate Bond Index, the Barclays Capital U.S. Long Government Bond Index, the Barclays Capital U.S. Treasury Inflation Protected Securities Index, the S&P 500, the S&P MidCap 400, the Russell 2000 Index and the Morgan Stanley Capital International All-Country World Ex-U.S. Index and are weighted based on each Fund’s respective current target allocations to the asset classes to which such benchmark relates.
(12) Benchmark comparison begins August 1, 2006.
(13) The Composite Benchmark for each of the Target Risk Funds is the composite performance of the respective benchmarks for the underlying asset classes to which the respective Target Risk Funds allocate assets. The respective benchmarks comprising the Composite Benchmarks currently include some or all of the Barclays Capital U.S. Aggregate Bond Index, the Barclays Capital U.S. Treasury Inflation Protected Securities Index, the Dow Jones U.S. Select REIT Index, the Dow Jones-UBS Commodity Index, the Russell 3000 Index, the Citigroup 3-Month T-Bill, the Morgan Stanley Capital International EAFE Index and the Morgan Stanley Capital International All-Country World Ex-U.S. Index and are weighted based on each Fund’s respective target allocations to the asset classes to which such benchmark relates. See “Target Risk Funds.”
(14) Benchmark comparison begins July 1, 2009.

Total returns reflected in the bar charts and table above have been determined by calculating the difference between the per Unit net asset value of a Fund at the end of the period and the per Unit net asset value of such Fund at the beginning of the period and then dividing the difference by the per Unit net asset value of that Fund at the beginning of the period. All such calculations have been determined to the sixth decimal place. Total returns in the financial statements included in the Collective Trust’s Annual Report on Form 10-K for the year ended December 31, 2009 and incorporated by reference into this prospectus have been determined in the same manner (except the total returns in the financial statements of the Funds specified in footnote (1) above value direct and indirect investments in the cash collateral funds at their market values, notwithstanding that transactions have been, and continue to be, effected as of this date on the basis of amortized cost values) but with calculations determined to the second decimal place.

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 each of the Funds. These estimated annual expenses are stated as a percentage of the

 

 

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assets of each Fund. The 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 such date, except as otherwise noted below, and Program Expense Fees and Other Fees are calculated based on estimates of expected expenses for 2010 (although this table does not give effect to the expected changes to the Program discussed in “Expected Changes to the Program”). For a discussion of the manner in which deductions and fees 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)
    Trustee,
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)

Managed Funds

           

Stable Asset Return Fund

  0.000   0.601   0.223   0.012   0.836   1,007

Bond Core Plus Fund

  0.275   0.601   0.223   0.001   1.100   381

Large Cap Equity Fund

  0.259 %(6)    0.601   0.223   0.005   1.088   819

Small-Mid Cap Equity Fund

  0.504   0.601   0.223   0.003   1.331   286

International All Cap Equity Fund

  0.482 %(6)    0.601   0.223   0.001   1.307   166

Index Funds

           

Bond Index Fund

  0.040   0.601   0.223   0.020   0.884   36

Large Cap Index Equity Fund

  0.020   0.601   0.223   0.010   0.854   34

All Cap Index Equity Fund

  0.050   0.601   0.223   0.020   0.894   267

Mid Cap Index Equity Fund

  0.050   0.601   0.223   0.020   0.894   25

Small Cap Index Equity Fund

  0.050   0.601   0.223   0.020   0.894   15

International Index Equity Fund

  0.100   0.601   0.223   0.050   0.974   24

Real Asset Return Fund

  0.090   0.601   0.223   0.025   0.939   5

Retirement Date Funds

           

Lifetime Income Retirement Date Fund

  0.100   0.601   0.223   0.030   0.954   29

2010 Retirement Date Fund

  0.100   0.601   0.223   0.023   0.947   62

2020 Retirement Date Fund

  0.100   0.601   0.223   0.022   0.946   107

2030 Retirement Date Fund

  0.100   0.601   0.223   0.026   0.950   77

2040 Retirement Date Fund

  0.100   0.601   0.223   0.028   0.952   49

Target Risk Funds

           

Conservative Risk Fund

  0.060   0.601   0.223   0.025   0.909   6

Moderate Risk Fund

  0.060   0.601   0.223   0.025   0.909   13

Aggressive Risk Fund

  0.060   0.601   0.223   0.025   0.909   4
            3,412

 

(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 reflected under the Bond Core Plus Fund and the Large Cap Equity Fund, respectively, 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 Bond Core Plus Fund and the Large Cap Equity Fund, respectively. This table is based on the approximate allocation of the Collective Trust’s assets among the investment options and the Balanced Fund as of December 31, 2009. This 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. The Stable Asset Return Fund pays no Investment Advisor fees independent of the Trust, Management and Administration Fee payable to State Street Bank, which is included under a separate heading.
(3) The Trust, Management and Administration Fee is 0.114% of the assets of each Fund.
(4) Includes the amortization of deductions and fees relating to recurring operational expenses, such as printing, legal, registration, consulting and auditing expenses, including investment fiduciary consulting fees payable to Northern Trust. The table does not include fees for the Self-Managed Brokerage Account or the Balanced Fund.
(5) Each 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 Funds indirectly bear expenses of those underlying collective investment funds, including audit, administration and legal fees.
(6) Investment Advisor fees for the Large Cap Equity Fund and the International All Cap Equity Fund are calculated utilizing fee rates and asset allocations among the respective Investment Advisors to such Funds as of January 19, 2010.

 

 

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The following table demonstrates how expense ratios may translate into dollar amounts and helps you to compare the cost of investing in the Funds with that of investing in other investment funds. Although your actual costs may be higher or lower, the table shows how much you would pay on an initial investment of $10,000 if operating expenses remain the same, you earn a 5% annual return on your investment in the Fund indicated, and you hold your investment in the Fund for the following periods.

 

     1 Year    3 Years    5 Years    10 years

Managed Funds

           

Stable Asset Return Fund

   $ 85    $ 267    $ 464    $ 1,032

Bond Core Plus Fund

   $ 112    $ 350    $ 606    $ 1,340

Large Cap Equity Fund

   $ 111    $ 346    $ 600    $ 1,326

Small-Mid Cap Equity Fund

   $ 136    $ 422    $ 729    $ 1,603

International All Cap Equity Fund

   $ 133    $ 414    $ 717    $ 1,576

Index Funds

           

Bond Index Fund

   $ 90    $ 282    $ 490    $ 1,089

Large Cap Index Equity Fund

   $ 87    $ 273    $ 474    $ 1,054

All Cap Index Equity Fund

   $ 91    $ 285    $ 495    $ 1,101

Mid Cap Index Equity Fund

   $ 91    $ 285    $ 495    $ 1,101

Small Cap Index Equity Fund

   $ 91    $ 285    $ 495    $ 1,101

International Index Equity Fund

   $ 99    $ 310    $ 538    $ 1,194

Real Asset Return Fund

   $ 96    $ 299    $ 520    $ 1,154

Retirement Date Funds

           

Lifetime Income Retirement Date Fund

   $ 97    $ 304    $ 528    $ 1,171

2010 Retirement Date Fund

   $ 97    $ 302    $ 524    $ 1,163

2020 Retirement Date Fund

   $ 97    $ 301    $ 523    $ 1,162

2030 Retirement Date Fund

   $ 97    $ 303    $ 525    $ 1,166

2040 Retirement Date Fund

   $ 97    $ 303    $ 527    $ 1,169

Target Risk Funds

           

Conservative Risk Fund

   $ 93    $ 290    $ 503    $ 1,118

Moderate Risk Fund

   $ 93    $ 290    $ 503    $ 1,118

Aggressive Risk Fund

   $ 93    $ 290    $ 503    $ 1,118

Transaction costs, such as brokerage fees, commissions and other expenses, attributable to a Participant’s or Employer’s Self-Managed Brokerage Account are charged in accordance with the schedule provided to the Participant and the Employer from time to time. See “Deductions and Fees.”

 

 

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SUMMARY 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 for each of the periods ended December 31 have been derived from financial statements audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm. The summary financial data should be read in conjunction with the financial statements of the Funds, including the related Notes thereto, included in the Collective Trust’s Annual Report on Form 10-K for the year ended December 31, 2009, which is incorporated by reference into this prospectus. See “Where You Can Find More 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 Fund’s 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 Fund’s 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 Program’s 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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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Allocation of Contributions to the Investment Options

Contributions under the Program generally can be allocated to the Funds on a daily basis and are credited on the day of receipt if accompanied or preceded by proper allocation instructions and received on a Business Day by 4:00 p.m. Eastern time (or, if earlier, the close of regular market trading). Contributions are used to purchase Units of the applicable Funds based on their per Unit net asset value. 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.

In accordance with accounting rules applicable to methods to be used by the Stable Asset Return Fund and each Retirement Date Fund to value their respective assets, no additional assets of defined benefit plans may be contributed to or transferred to any such Funds. However, any assets of defined benefit plans invested in the Stable Asset Return Fund prior to January 15, 2006 or any Retirement Date Fund prior to May 1, 2007 may remain so invested, including any earnings thereon.

The Balanced Fund is no longer being offered and thus is no longer an investment option, although certain assets held under the Program continue to be invested in the Balanced Fund. See “Balanced Fund.”

The availability 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 and the Small-Cap Equity Fund, each previously offered as an investment option under the Program, has been terminated effective July 2, 2009.

Transfers Among Investment Options

Transfers may be made among the Funds and Self-Managed Brokerage Accounts generally on a daily basis based on the relevant per Unit net asset value of each Fund. However, short-term or other excessive trading into or out of a Fund may harm its performance by disrupting portfolio management strategies and by increasing expenses. No more than one transfer may be made into the International All Cap Equity Fund or the International Index Equity Fund in any 45 calendar day period. There is no restriction on a Participant’s ability to make transfers out of the International All Cap Equity Fund or International Index Equity Fund on a Business Day. State Street and State Street Bank reserve the right to take such additional actions with respect to excessive trading in the International All Cap Equity Fund, the International Index Equity Fund or other investment options, such as the rejection of transfer requests, as they may deem appropriate and in the best interests of all Participants to curtail excessive trading.

Contributions, Benefits and Distributions

A Participant’s 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.

Additional Information

Persons who are already Employers or Participants 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 Program’s FaxBack line at (877) 202-3930; or

 

   

accessing the Program’s Web site at www.abaretirement.com.

 

 

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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 State Street Bank and Trust Company, P.O. Box 5142, Boston, Massachusetts 02206-5142.

For Unit values for the Funds, and for the 30-day yield of the Bond Core Plus Fund and the Bond Index Fund, call the Program’s Rate Line at (800) 826-8905.

For a recorded message providing current account information, call the Program’s Participant Services Line at (800) 348-2272.

 

 

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RISK FACTORS RELATING GENERALLY TO THE PROGRAM

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 prospectus. Following are some of the general risks of investing in the Funds, as well as the Balanced Fund.

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 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 issuer’s 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 than—and at times will perform differently from—the 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,

 

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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.

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 Fund’s 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

 

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regulations, requirements and restrictions. The Collective Trust cannot predict what additional interim or 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 (see footnote 1 on page 11) 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 ERISA’s 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 Lender’s 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 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

 

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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 borrower’s 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 $0.99 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 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 Fund’s 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

 

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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 this prospectus, 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 Trust’s level of outstanding securities loan balances in 2009, has continued to do so in 2010 through the date of this prospectus, 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 fund’s directors or trustees, the approval of the fund’s contracts with its investment advisors and the approval of changes to the mutual fund’s 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. See “Regulation of Collective Trust.”

A Court Might Determine that the Assets of a Fund are Available to Satisfy the Obligations of Other Funds. The Collective Trust’s 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 “Recent and Expected Changes to the Program; Role of Northern Trust.”

 

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THE PROGRAM

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. 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

The Collective Trust offers five Managed Funds, six Index Funds, the Real Asset Return Fund, five Retirement Date Funds and three Target Risk Funds, which we refer to as the Funds. The Funds are investment options under the Program.

Effective on or about July 2, 2009, the Balanced Fund has ceased to be offered and thus is no longer an investment option, although certain assets held under the Program continue to be invested in the Balanced Fund. See “Balanced Fund. Also effective on or about July 2, 2009, the availability 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 and the Small-Cap Equity Fund, each previously offered as an investment option under the Program, was terminated.

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 that Fund. Assets invested through the ABA Members Plans are held under the Retirement Trust, and assets invested through individually designed plans are held under the Pooled Trust. State Street Bank is the sole trustee of each of the ABA Members Trusts.

Assets contributed or held under the Program may be invested in the following investment options: The Stable Asset Return Fund invests in high quality fixed-income instruments, investment contracts, and other fixed-income investments. The Bond Core Plus Fund invests in debt securities of varying maturities. The Large Cap Equity Fund, the Small-Mid Cap Equity Fund and International All Cap Equity Fund invest in equity securities of various types. The Index Funds are a group of six collective investment funds, each of which is designed to replicate a specific securities index. The Real Asset Return Fund seeks to provide investors with investment returns in excess of inflation. The Retirement Date Funds are a group of balanced investment funds, each of which is designed to correspond to a particular time horizon to retirement. The Target Risk Funds are a group of balanced investment funds, each of which is designed to represent risk and reward characteristics that reflect a certain level of investment risk such as conservative, moderate or aggressive. 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 each of the Funds, other than the Bond Core Plus Fund, are in turn invested in whole or in part in collective investment funds maintained and managed by State Street Bank in compliance with the investment objectives and restrictions of these Funds.

 

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Under the Collective Trust’s Declaration of Trust, interests in the Funds are represented by Units, each of which represents an undivided pro rata share of the net assets of a Fund. Further, the Collective Trust’s 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 that Fund for payment of obligations of that 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. 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 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, which we commonly refer to as mutual funds, the Funds are not required to be and are not registered as investment companies under the Investment Company Act of 1940. The Units representing 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. See “Regulation of Collective Trust. 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 of 1940 because the holder does not have an entitlement to receive approximately the holder’s proportionate share of the Collective Trust’s 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.

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.

 

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MANAGED 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 6, 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 Funds—the Large Cap Equity Fund and the Small-Mid Cap Equity Fund—as investment options as of July  2, 2009.

STABLE ASSET RETURN FUND

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.

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

 

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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 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 Fund’s 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

 

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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 Fund—Risk 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 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 & Poor’s Corp., which we refer to as S&P, or Moody’s Investors Service, Inc., which we refer to as Moody’s, (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 Moody’s, 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 Moody’s. 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 Moody’s. 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 Moody’s.

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

 

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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 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 Fund’s 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 Fund—Risk 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 agency’s 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 country’s 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

 

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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 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 Fund’s 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 Fund’s 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).

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

 

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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 SAFT’s 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 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

 

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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 Withdrawals—Frequent 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 Fund—Risk Factors—Valuation 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 instrument’s remaining maturity. Traditional Investment Contracts and Synthetic GICs held by the Fund are benefit responsive (that is, responsive to 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 Fund’s Unit value. The Fund’s 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 Fund’s yield is determined based upon historical earnings and is not

 

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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.

BOND CORE PLUS FUND

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 bond’s yield, coupon interest payments, final maturity and call features into one measure. Traditionally, a debt security’s “term to maturity” has been used as a reference to the sensitivity of the security’s 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 security’s 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 Fund’s 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 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

 

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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 Fund’s 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 portfolio’s 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 Fund’s 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.

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

 

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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 Fund’s 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 Fund—Risk 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 investor’s 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 Fund’s 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 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 Fund—Risk 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.

 

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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 Fund’s 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 “Risk Factors Relating Generally to the Program—Risks 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 Fund’s ability to terminate existing swap agreements or to realize amounts to be received under these agreements.

Portfolio Turnover. As the level of portfolio turnover increases, transaction expenses incurred by the Bond Core Plus Fund increase, which may adversely affect the Fund’s performance. Portfolio turnover depends on the types and proportions of the Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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

 

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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.

LARGE CAP EQUITY FUND

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 Fund’s 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 Fund’s 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 Advisor’s 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

 

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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 Fund’s assets for which a particular Investment Advisor’s 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 Fund—Risk 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 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 “Risk Factors Relating Generally to the Program—Risks 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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

 

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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 Fund’s 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 Fund’s 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 Fund’s assets.

State Street Bank manages the indexed portion of the Fund’s assets through the Fund’s 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 Fund’s 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

 

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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.

SMALL-MID CAP EQUITY FUND

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 Fund’s 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 Fund’s 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 Advisor’s 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

 

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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 Fund’s assets for which a particular Investment Advisor’s 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 Fund—Risk 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 Fund’s 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.

 

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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 “Risk Factors Relating Generally to the Program—Risks 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.”

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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s assets.

State Street Bank manages the indexed portion of the Fund’s assets through the Fund’s 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

 

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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 Fund’s 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.

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 firm’s 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

 

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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 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 Fund’s 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 Fund’s 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 Advisor’s style, historical performance and the characteristics of each Investment Advisor’s 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

 

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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 Fund—Risk 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 Fund’s investment objective will not be met by buying equity securities. Under normal conditions, the International All Cap Equity Fund’s 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 Fund’s 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 Fund’s holdings can be significant, unpredictable and long-lasting, depending on the currencies represented in the Fund’s 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.

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

 

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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 Fund’s 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 Fund’s 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 “Risk Factors Relating Generally to the Program—Risks 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 Fund’s 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 Fund’s Investment Advisors 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 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.

 

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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 participant’s ability to make more than one transfer into the Fund within any 45 calendar day period. See “Transfers Among Investment Options and Withdrawals—Frequent 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 Fund’s 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 Fund’s 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 Fund’s 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 Fund’s 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 fund’s inception date to December 31, 2009.

Investment Advisors. The Fund utilizes a “multi-manager” approach whereby the Fund’s 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 Fund’s 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 Fund’s assets.

State Street Bank manages the indexed portion of the Fund’s assets through the Fund’s 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 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 Fund’s 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

 

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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 Participant’s 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 Participant’s 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 Withdrawals—Frequent Trading; Restrictions on Transfers.”

INDEX FUNDS

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 6, 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.

BOND INDEX FUND

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.

 

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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 Bank’s analysis of the security’s impact on the portfolio’s 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 Funds—Investment 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 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 issuer’s 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

 

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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 Fund—Risk 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 Fund—Risk 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.

Portfolio turnover of the Bond Index Fund was 158% for the period from the Fund’s 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 Fund’s 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

 

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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.

LARGE CAP INDEX EQUITY FUND

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 & Poor’s 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.

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 Funds—Investment 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.

 

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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 Fund—Risk 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.

Portfolio turnover of the Large Cap Index Equity Fund was 159% for the period from the Fund’s 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 Fund’s 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 & Poor’s, a division of The McGraw-Hill Companies, Inc. The Large Cap Index Equity Fund is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the Large Cap Index Equity Fund.

ALL 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.

 

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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 Funds—Loans 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 Funds—Investment 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.

 

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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 “Risk Factors Relating Generally to the Program—Risks 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.

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 Fund’s 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 Fund’s 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.

 

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MID CAP INDEX EQUITY FUND

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 market capitalization of approximately $260 million. The S&P MidCap 400 is reconstituted on a periodic basis by the sponsor of the Index. Standard & Poor’s 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 Funds—Investment 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

 

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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.”

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 Fund—Risk 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 Fund’s 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 Fund’s 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 & Poor’s, a division of The McGraw-Hill Companies, Inc. The Mid Cap Index Equity Fund is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of investing in the Mid Cap Index Equity Fund.

 

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SMALL 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.

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 Funds—Investment 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 Fund’s 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

 

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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 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 Fund’s 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 Fund—Risk 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 Fund’s 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.

“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

 

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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 Funds—Investment 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).

Risk Factors. Equity Markets Risk. The International Index Equity Fund’s 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

 

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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 Fund’s holdings can be significant, unpredictable and long-lasting, depending on the currencies represented in the International Index Equity Fund’s 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 Fund’s 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.

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 Fund’s 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,

 

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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 Fund’s 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 participant’s ability to make more than one transfer into the International Index Equit