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PlanNow
SheetsFund Fact
as of December 31, 2008
Contents
Step 1: Determine your investor profile 3
Step 2: Decide on an asset allocation strategy 5
Step 3: Diversify your investments 6
Step 4: Build your investment mix 7
Fund Overview 8Small-Cap Domestic Stock
T. Rowe Price Small-Cap Stock Fund 9
International StockFidelity Diversified International Fund 10
Vanguard Institutional Developed Markets Index Fund 11
Mid-Cap Domestic StockVanguard Mid Capitalization Index Institutional Fund 12
Large-Cap Domestic StockJanus Twenty Fund 13
Legg Mason Partners Appreciation I Fund 14
Vanguard Institutional Index Plus Fund 15
BalancedDodge & Cox Balanced Fund 16
Vanguard Balanced Index Fund Institutional 17
BondDodge & Cox Income Fund 18
Vanguard Total Bond Market Index Fund Institutional 19
FixedSIF Fixed Interest Account 20
Money MarketSIF Money Market Account 21
A Glossary of Financial Terms 22
60 Empire Drive, Suite 300 Saint Paul, MN 55103-3000Phone: 651-296-2761Toll-free: 1-800-657-5757 Fax: 651-297-5238www.msrs.state.mn.us
Plan administered by Minnesota State Retirement System
Minnesota Deferred Compensation Plan
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 3
Determine your investor profile
Are you a conservative, moderate or aggressive investor—or somewhere in between? You can find out by taking a closer look at:
• Your risk tolerance• Your time horizon for investing
Risk tolerance Every investment offers a balance of risk and return. Some offer higher return potential at a higher risk; others are less risky investments with lower potential returns. The appropriate investments for your situation depend partly on your comfort level with risk—in other words, your risk tolerance. Does the possibility of a drop in value of one of your investment choices make you uneasy? If it does, you may be a more conservative investor. Are you comfortable with the possibility of a temporary setback if it means a higher potential payoff down the road? If the answer is yes, you probably lean toward an aggressive investment style.
Time horizon Your time horizon is the number of years you have to save and invest before you begin to withdraw funds from your account. It’s an important consideration in determining your investor profile. Assume you’re closing in on your retirement date. Even if you’re completely comfortable with riskier investments, you probably won’t want to invest the same aggressive way you would if you were 10 or 20 years younger. And if you’re a younger investor who’s just getting started, you’ll want to consider investing in funds that offer a higher return potential, even if the idea of riskier investments makes you uneasy.Here’s why: The younger you are, the more time you have to hopefully weather the ups and downs in investment performance. You may have more time to recover from any losses—and more time to capitalize on riskier investments that offer higher return potential. On the other hand, the closer you are to retirement, the less time you have to make up for any ground you may lose in a market downturn. As you age, you’ll want to consider shifting a greater portion of your money to more conservative investments that may not be as risky.
You have the freedom to select the investments for your MNDCP account offered to you through the Plan. The following four basic steps will help you decide on an investment strategy and choose specific investments to match your retirement goals. All investments are subject to risk, including the loss of principal.
Step 1: Determine your investor profile
Step 2: Decide on an asset allocation strategy
Step 3: Diversify your investments
Step 4: Build your investment mix
The four-step investment selection process
Minnesota Deferred Compensation Plan
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The following Investor Profile Quiz can help you determine whether you are a conservative, moderate or aggressive investor.
Now that you know your investor profile, proceed to Step 2 to determine an asset allocation strategy.
Determine your investor profile (continued)1
better
Minnesota Deferred Compensation Plan
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Now that you know your investor profile, you can translate that into an asset allocation strategy. Asset allocation is the process of spreading your investments across different asset classes, such as stock funds, bond funds and cash equivalents (which include fixed interest accounts and money market accounts).A smart asset allocation helps you manage investment risk and take advantage of more favorable market conditions. As a general rule, when investments in one asset class underperform, investments in other classes perform better. When stocks go up, bonds tend to go down. When bond performance is strong, stock performance tends to cool. By spreading your investments among different asset classes, you can better weather the ups and downs of the market because you don’t depend on any one type of investment to carry the load for your investment mix .
Stocks
Bonds$
Generally, when corporate earnings are strong stock performances may go up.
Past performance is no guarantee of future results. Source: www.pathtoinvesting.orgThe Minnesota State Retirement System and ING are not responsible for, nor does it endorse the content contained in the additional web sites provided. These websites are for general education and information only.
Bonds
Stocks$
Generally, when interest rates increase stock performances may go down.
2Decide on an asset allocation strategy
Conservative, moderate and aggressive investors usually allocate investments in different ways. See how your score from the Investor Profile Quiz fits into the asset allocation strategies. See chart to the left.As part of your fund lineup, you have the choice to select from one of two balanced funds. A balanced fund is one that buys a combination of common stock, preferred stock, bonds and short-term bonds. In other words, it is an individual mutual fund that is designed to offer diversification in one investment option. Please see pages 16 and 17 for more information on these specific funds.
5%10%
15%
15%25%
30%
20%
25%25%
30%
20%
20% 25%
25%10%
20%
15%
10%10%
25%
20%
30%
25%
25%
20%
Small-cap stocksInternational stocksMid-cap stocksLarge-cap stocks
Small-cap stocksInternational stocksMid-cap stocksLarge-cap stocksBondsFixed
International stocksMid-cap stocksLarge-cap stocksBondsFixed
International stocksMid-cap stocksLarge-cap stocksBondsMoney MarketsFixed
Large-cap stocksBondsMoney MarketsFixed
The Profile allocations are based on an investment strategy based on risk and return. This is not intended as financial planning or investment advice.
Investor Type Suggested Asset Allocation
Aggressive Profile
Moderately Aggressive Profile
Moderate Profile
Moderately Conservative
Profile
Conservative Profile
Minnesota Deferred Compensation Plan
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Once you know your asset allocation strategy, you should pick a diversified lineup of investments to fit that strategy.Diversification and asset allocation are similar concepts, but there’s an important difference between the two. Asset allocation is a way to divide your retirement savings among different asset classes (stock funds, bond funds or cash equivalents). Diversification is the process of choosing multiple investments within an asset class. Both help you avoid putting all of your eggs in one basket. Let’s look at stock funds as an example. According to the sample asset allocation strategy depicted below, you’ll devote a certain percentage of your retirement investments—but not the entire balance—to the asset class of “stock funds.” Within the category of stock funds, you’ll also invest in more than one stock fund—that’s diversification.Well-designed strategies employ both asset allocation and investment diversification*. No single investment choice—and no single asset class—should carry the load for your entire investment mix. You should consider your financial ability to consistently invest in up and down markets.* Asset allocation and investment diversification do not assure a profit and do not protect
against loss in declining markets.
35%bondfunds
55%stockfunds
10%cash
SampleAsset Allocation
SampleDiversification of Stocks
Fund AFund B
Fund C
Fund D
Fund E
Fund F
3Diversify your investments
FOR ILLUSTRATIVE PURPOSES ONLY. Intended to illustrate possible investment allocations that represent an investment strategy based on risk and return. This is not intended as financial planning or investment advice.
Tips for Diversifying Your Investments• Considerinvestinginstock
fundswithvaryinginvestmentstrategies
o Domesticstockfunds(smallcap,midcap andlargecap)
o Internationalstockfunds
• Youmaynotwanttoinvestmorethan20percentofyouraccountinasinglestockfund
• Considerdiversifyingamongbondfundsorfixedfundswithvaryingmaturities
International investing involves special risks such as currency fluctuation, lower liquidity, political and economic uncertainties, and difference in accounting standards.
Minnesota Deferred Compensation Plan
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 7
Your Investor Profile Quiz results can help you identify if you’re a conservative, moderate or aggressive investor—or if you’re somewhere in between. Knowing your investor profile helps you pick the investments that match your goals and risk tolerance.Say you decided you are best suited for a moderate investor profile. Moderate profiles generally have a distinct asset allocation strategy— a plan for balancing risk and return potential—that translates into a specific investment mix.
Sample Moderate Profile
InvestmentAsset Classes
MNDCPInvestment Options
� T. Rowe Price Small-Cap Stock Fund
� Fidelity Diversified International Fund� Vanguard Institutional Developed
Markets Index Fund
� Vanguard Mid Capitalization Index Institutional Fund
� Janus Twenty Fund� Legg Mason Partners Appreciation I Fund� Vanguard Institutional Index Plus Fund
� Dodge & Cox Balanced Fund� Vanguard Balanced Index Fund Institutional
� Dodge & Cox Income Fund� Vanguard Total Bond Market Index
Fund Institutional
� SIF Fixed Interest Account
� SIF Money Market Account
SMALL-CAPDOMESTIC STOCK
INTERNATIONALSTOCK
MID-CAPDOMESTIC STOCK
LARGE-CAP DOMESTIC STOCK
BALANCED
BOND
FIXED
MONEY MARKET
Potentially Lower Risk/Reward
Potentially Higher Risk/Reward
4Build your investment mix
Selecting investments
The next step is to select from the MNDCP investment options to build an investment mix that matches your desired asset allocation mix. For example, an investor with a moderate profile can choose from international, mid-cap and large-cap stock funds, as well as bond funds and fixed investment options, to build a mix that matches his or her investment goals.Remember, asset classes offer a strategy of risk and potential returns, so you’ll want to spread your money across different investment options. As the chart shows, small-cap domestic stock funds and international stock funds offer higher potential return at a higher risk. Money market and fixed investment options offer potentially lower returns at a lower risk.
20%
20% 25%
25%10% International stocks
Mid-cap stocksLarge-cap stocksBondsFixed
FOR ILLUSTRATIVE PURPOSES ONLY. Intended to illustrate possible investment allocations that represent an investment strategy based on risk and return. This is not intended as financial planning or investment advice.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents by contacting an MSRS Representative at 1-800-657-5757, option 3 or online at www.msrs.state.mn.us.
An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.
Minnesota Deferred Compensation Plan
8 www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761
Remember the importance of maintenance
Changes in your age and personal financial situation will mean that different investment options may be more appropriate for you at different times of your life. You can always adjust your mix of investments in your MNDCP account, subject to any fund restrictions. Refer to the Fund Fact Sheets for more information. Regularly reviewing your asset allocation strategy and investment options is always a good idea. As part of the ongoing management of your account, consider rebalancing your account on a regular basis to keep your allocations in line with your investment goals during market fluctuations.
Self-Directed Brokerage Account
MNDCP also provides a Self-Directed Brokerage (SDB) Account through TD AMERITRADE. The SDB Account allows you to select from hundreds of mutual funds beyond MNDCP’s regular fund offerings. Many of the mutual funds are offered as “no load” or “low load,” meaning they do not incur an additional sales charge to purchase or redeem, or the sales charge is considered to be below-normal when compared to other mutual fund sales charges.This account is for knowledgeable investors who understand the risks associated with many of the investments contained in the SDB Account. There is an additional $30 annual fee for the use of this service.By utilizing the account, you acknowledge that none of the available options in the SDB have been reviewed for suitability by your employer, Plan Sponsor, TD AMERITRADE, or ING.
Get the answers you need
For more information about your investment options, go to www.msrs.state.mn.us or contact an MSRS Representative at 1-800-657-5757, option 3, weekdays from 8:00 a.m. to 4:30 p.m. Central Time.
Fund Overview
Build your investment mix (continued)4
Brokerage services provided by TD AMERITRADE, division of TD AMERITRADE, Inc., member FINRA/SIPC. TD AMERITRADE is a trademark jointly owned by TD AMERITRADE IP Company, Inc. and the Toronto-Dominion Bank. TD AMERITRADE is an independent entity and not a corporate affiliate of ING Investment Advisors, LLC (Member SIPC).
Do your homework
It’s always a good idea to read more about your different investment options before you make your selections. Contact an MSRS Representative at 1-800-657-5757, option 3, or go to www.msrs.state.mn.us for more information, including prospectuses and disclosure documents.
MNDCP offers a range of investment choices from different asset classes, so you can build a diversified investment mix that helps meet your investment goals. The following overview of funds provides information on the different investment choices. More detailed individual fund overviews can be found online at www.msrs.state.mn.us under the Investments tab.
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
SMA
LL CAP
Information as of: 12/31/2008
Inceptiondate: 06/01/1956 TickerSymbol:OTCFX
Investment ObjectiveThe investment seeks to provide long-term capital growth. The fund will normally invest at least 80% of assets in stocks of small companies. The holdings will be widely diversified by industry and company. Under most circumstances, it will invest less than 1.5% of assets in any single company. While the fund invests most assets in U.S. common stocks, it may also purchase other securities including foreign stocks, futures, and options.
Who Is Most Likely to Choose This Type of Investment?Small-cap investments may be most appropriate for someone with a longer investment horizon, seeking long-term capital growth, and willing to accept larger market fluctuations. Small-cap securities may be more volatile than securities of larger, more established companies.
Fund Operating Expenses: 0.89%
Total Fund Assets: $3,534.54 MM
Total Plan Assets: $236.47 MM
FUND INFORMATION
Largest HoLdings
T. Rowe Price Reserve 4.83%
Russell Index (Fut) 2.04%
First Niagara Financial Group 1.57%
Seacor Holdings, Inc. 1.45%
Jack Henry & Associates 1.44%
Infinity Property and Casua 1.19%
ESCO Technologies, Inc. 1.18%
FactSet Research Systems, Inc. 1.14%
Knight Transportation, Inc. 1.13%
Corinthian Colleges, Inc. 1.12%
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 9
T. Rowe Price Small-Cap Stock FundHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
asset aLLocation
Domestic Stock 92.82%
Cash 5.34%
Foreign Stock 1.72%
Other 0.12%
sector diversification
Industrials 20.07%
Financials 19.30%
Information Technology 18.24%
Health Care 14.26%
Consumer Discretionary 11.14%
Energy 5.46%
Utilities 5.31%
Materials 3.76%
Consumer Staples 1.38%
Telecommunication Services 1.08%
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Minnesota Deferred Compensation Plan | Investment Options Fund Fact SheetsIN
TERN
ATIO
NA
L Information as of: 12/31/2008
Inceptiondate:12/27/1991 TickerSymbol:FDIVX
Investment ObjectiveThe investment seeks capital appreciation. The fund normally invests in non-U.S. securities. It primarily invests in common stocks and allocates investments across countries and regions while considering the size of the market relative to size of the international market as a whole.
Who Is Most Likely to Choose This Type of Investment?International investments may be most appropriate for someone looking for greater potential returns and willing to accept a higher degree of risk. International investments may provide diversification for a domestic portfolio. Foreign funds involve special risks, including currency fluctuations and political developments.
Fund RestrictionsDue to restrictions imposed by the Fidelity Diversified International Fund, a 1% fee will apply to all redemptions made from this fund for any shares held under 30 calendar days.
Fund Operating Expenses: 0.93%
Total Fund Assets: $27,130.24 MM
Total Plan Assets: $171.54 MM
FUND INFORMATION
diversification
United Kingdom 15.41%
Switzerland 12.59%
Japan 10.59%
Germany 9.79%
France 7.70%
United States 6.81%
Canada 5.18%
Spain 4.39%
Australia 3.62%
Italy 2.06%
10 www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761
Fidelity Diversified International FundHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
asset aLLocation
Foreign Stock 83.36%
Cash 9.79%
Domestic Stock 6.81%
Other 0.04%
Largest HoLdings
Fidelity Revere Street Trust 6.39%
Jpy (Fut) 3.36%
Nestle 2.94%
Telefonica 2.41%
E.ON 2.09%
Vodafone Group PLC ADR 1.78%
Roche Holding Ltd 1.73%
Reckitt Benckiser Grp 1.55%
Tesco PLC 1.50%
Bayer 1.33%
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Investment ObjectiveThe investment seeks to track the performance of a benchmark index that measures the investment return of stocks issued by companies located in the major markets of Europe and the Pacific region. The fund normally invests in the Vanguard European Stock Index Fund Institutional Shares and Pacific Stock Index Fund Institutional Shares. Vanguard European Stock Index Fund intends to track the MSCI Europe index while Pacific Stock Index Fund attempts to replicate the returns of the MSCI Pacific Free index; both MSCI indices comprise the MSCI EAFE index. It may invest in options, futures, and other derivative instruments. You cannot invest directly in an index.
Who Is Most Likely to Choose This Type of Investment?International investments may be most appropriate for someone looking for greater potential returns and willing to accept a higher degree of risk. International investments may provide diversification for a domestic portfolio. Foreign funds involve special risks, including currency fluctuations and political developments.
Fund RestrictionsDue to restrictions imposed by Vanguard, any participant who transfers money out of this fund is not permitted to transfer money back into the fund for a period of 60 calendar days. A 2% fee will apply to all redemptions made from this fund for any shares held under 60 calendar days.
Fund Operating Expenses: 0.09%
Total Fund Assets: $3,801.64 MM
Total Plan Assets: $52.88 MM
FUND INFORMATION
Largest HoLdings
Vanguard European Stock Index Instl 67.87%
Vanguard Pacific Stock Index Instl 32.13%
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 11
asset aLLocation
Foreign Stock 97.75%
Other 1.06%
Cash 0.94%
Preferred 0.19%
Domestic Bond 0.05%
countries
United Kingdom 21.09%
Japan 21.04%
France 9.81%
Germany 8.87%
Switzerland 6.99%
Australia 6.87%
Spain 4.06%
Italy 3.55%
Netherlands 3.24%
Sweden 2.10%
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
INTERN
ATION
AL
Information as of: 12/31/2008
Inceptiondate: 06/01/2000 TickerSymbol:VIDMX
Vanguard Inst’l Developed Markets IndexHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Minnesota Deferred Compensation Plan | Investment Options Fund Fact SheetsM
ID C
AP
Information as of: 12/31/2008
Inceptiondate: 05/21/1998 TickerSymbol:VMCIX
Investment ObjectiveThe investment seeks to track the performance of a benchmark index that measures the investment return of mid-capitalization stocks. The fund employs a passive management investment approach designed to track the performance of the MSCI US Mid Cap 450 index, a broadly diversified index of the stocks of medium-size U.S. companies. It attempts to replicate the target index by investing all, or substantially all, of assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index. The MSCI US Mid Cap 450 Index represents the universe of medium capitalization companies in the US equity market. You cannot invest directly in an index.
Who Is Most Likely to Choose This Type of Investment?Mid-cap investments may be most appropriate for someone seeking higher potential returns over time and willing to weather market downturns. Medium-sized companies may suffer more significant losses as well as realize more substantial growth than larger-capitalized, more established issuers.
Fund RestrictionsDue to restrictions imposed by Vanguard, any participant who transfers money out of this fund is not permitted to transfer money back into the fund for a period of 60 calendar days.
Fund Operating Expenses: 0.07%
Total Fund Assets: $3,819.61 MM
Total Plan Assets: $90.05 MM
FUND INFORMATION
Largest HoLdings
L-3 Communications Holdings 0.67%
Noble Corporation 0.65%
Murphy Oil Corporation 0.64%
Southwestern Energy Company 0.58%
HCP, Inc. 0.55%
Fluor Corporation 0.55%
UST, Inc. 9.54%
ITT Corporation 0.53%
Noble Energy, Inc. 0.53%
C.R. Bard, Inc. 0.52%
12 www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761
Vanguard Mid Cap Index - Instl FundHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
asset aLLocation
Domestic Stock 96.88%
Foreign Stock 1.06%
Cash 0.04%
Domestic Bond 0.01%
diversification
Financials 17.47%
Industrial 14.89%
Consumer Discretionary 13.68%
Information Technology 12.16%
Energy 10.93%
Health Care 10.72%
Utilities 6.34%
Materials 5.83%
Consumer Staples 5.63%
Telecommunication Services 2.37%Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Investment ObjectiveThe investment seeks long-term growth of capital. The fund primarily invests in equity securities with growth potential. It primarily invests in a core group of 20-30 common stocks selected for their growth potential. The fund is nondiversified.
Who Is Most Likely to Choose This Type of Investment?Large-cap investments may be most appropriate for someone willing to accept market fluctuations in return for long-term capital growth. Stock investments tend to be more volatile than bond or money market investments.
Fund Operating Expenses: 0.86%
Total Fund Assets: $7,046.65 MM
Total Plan Assets: $290.12 MM
FUND INFORMATION
Largest HoLdings
Potash Corporation of Saskatchewan, Inc. 7.88%
Janus Inst Govt Management Inst 7.77%
Gilead Sciences, Inc. 7.23%
Research in Motion, Ltd. 7.88%
Celgene Corporation 6.48%
Research in Motion, Ltd. 6.35%
Apple, Inc. 5.36%
Janus Inst Money Market Inst 5.18%
Google, Inc. 5.02%
Hess Corporation 4.77%
Oracle Corporation 4.16%
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 13
asset aLLocation
Domestic Stock 59.24%
Foreign Stock 27.82%
Cash 12.94%
diversification
Information Technology 29.16%
Health Care 20.55%
Materials 18.79%
Energy 13.15%
Consumer Staples 7.34%
Industrials 5.92%
Consumer Discretionary 4.97%
Financials 2.11%
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
LARG
E CAP
Information as of: 12/31/2008
Inceptiondate: 04/30/1985 TickerSymbol:JAVLX
Janus Twenty FundHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Minnesota Deferred Compensation Plan | Investment Options Fund Fact SheetsLA
RGE
CAP
Information as of: 12/31/2008
Inceptiondate: 01/30/1996 TickerSymbol:SAPYX
Investment ObjectiveThe investment seeks long-term appreciation of shareholders capital. The fund invests primarily in equity securities of U.S. companies. It typically invests in medium and large capitalization companies, but may also invest in small capitalization companies. Equity securities include exchange-traded and over-the-counter common stocks and preferred stocks, debt securities convertible into equity securities, and warrants and rights relating to equity securities.
Who Is Most Likely to Choose This Type of Investment?Large-cap investments may be most appropriate for someone willing to accept market fluctuations in return for long-term capital growth. Stock investments tend to be more volatile than bond or money market investments.
Fund RestrictionsThis fund has restrictions designed to address excessive trading and market timing practices. For more details, contact MSRS or refer to the Fund’s prospectus.
Fund Operating Expenses: 0.57%
Total Fund Assets: $161.87 MM
Total Plan Assets: $93.05 MM
FUND INFORMATION
Largest HoLdings
Barclays 1 Day Repo Barclay 6.36%
Berkshire Hathaway Inc. A 4.25%
Johnson & Johnson 3.24%
Wal-Mart Stores, Inc. 3.18%
ExxonMobil Corporation 2.97%
The Travelers Companies, Inc. 2.78%
Procter & Gamble Compan 2.66%
AT & T, Inc. 2.55%
General Electric Company 2.44%
United Technologies 2.36%
14 www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761
Legg Mason Partners Appreciation Fund IHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
asset aLLocation
Domestic Stock 89.91%
Cash 6.36%
Foreign Stock 3.19%
Other 0.54%
diversification
Industrials 15.84%
Information Technology 14.81%
Financials 14.77%
Energy 13.90%
Consumer Staples 12.41%
Health Care 9.15%
Consumer Discretionary 8.02%
Materials 6.36%
Telecommunication Services 3.47%
Utilities 1.27%Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Investment ObjectiveThe investment seeks to track the performance of a benchmark index that measures the investment return of large-capitalization stocks. The fund attempts to replicate the target index by investing all, or substantially all, of assets in the stocks that make up Standard & Poor’s 500 index, which is a widely recognized benchmark of U.S. stock market performance that is dominated by the stocks of large U.S. companies. The S&P 500 Index is an unmanaged, market-weighted index that consists of the 500 largest publicly traded companies and is considered representative of the broad U.S. stock market. You cannot invest directly in an index.
Who Is Most Likely to Choose This Type of Investment?Large-cap investments may be most appropriate for someone willing to accept market fluctuations in return for long-term capital growth. Stock investments tend to be more volatile than bond or money market investments.
Fund RestrictionsDue to restrictions imposed by Vanguard, any participant who transfers money out of this fund is not permitted to transfer money back into the fund for a period of 60 calendar days.
Fund Operating Expenses: 0.025%
Total Fund Assets: $17,643.43 MM
Total Plan Assets: $292.73 MM
FUND INFORMATION
Largest HoLdings
ExxonMobil Corporation 3.95%
General Electric Company 2.49%
Procter & Gamble Company 2.07%
Microsoft Corporation 2.05%
Johnson & Johnson 1.90%
J.P. Morgan Chase & Co 1.68%
Chevron Corporation 1.66%
AT&T, Inc. 1.56%
Bank of America Corporation 1.56%
International Business Mach 1.55%
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 15
asset aLLocation
Domestic Stock 99.66%
Cash 0.24%
Foreign Stock 0.08%
Domestic Bond 0.02%
diversification
Information Technology 15.96%
Financials 15.85%
Energy 13.37%
Health Care 13.10%
Consumer Staples 12.21%
Industrials 11.09%
Consumer Discretionary 8.48%
Utilities 3.56%
Materials 3.37%
Telecommunication Services 3.01%
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
LARG
E CAP
Information as of: 12/31/2008
Inceptiondate: 07/07/1997 TickerSymbol:VIIIX
Vanguard Institutional Index Fund PlusHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
BA
LAN
CED
Information as of: 12/31/2008
Inceptiondate:06/26/1931 TickerSymbol:DODBX
Investment ObjectiveThe investment seeks long-term growth income and conservation of principal. The fund invests in a diversified portfolio of common stocks, preferred stocks and fixed-income securities. It may invest up to 75% of assets in common stocks and convertible securities. Fixed-income investments typically include investment-grade debt securities. It may invest in government obligations, mortgage- and asset-backed securities, CMOs, and corporate bonds. When selecting securities, management may consider yield to maturity, quality, liquidity, and current yield.
Who Is Most Likely to Choose This Type of Investment?Balanced investments may be most appropriate for someone seeking a balance between income from bond investments and capital growth from equity investments in one option. The investor is willing to accept higher risk for greater potential returns than bond investing alone.
Fund RestrictionsThis fund has restrictions designed to address excessive trading and market timing practices. For more details, contact MSRS or refer to the Fund’s prospectus.
Fund Operating Expenses: 0.53%
Total Fund Assets: $14,700.06 MM
Total Plan Assets: $193.01 MM
FUND INFORMATION
Largest HoLdings
Comcast Corporation A 3.64%
Hewlett-Packard Company 3.53%
Novartis AG ADR 2.79%
Sanofi-Aventis ADR 2.42%
Amgen, Inc 2.33%
Time Warner, Inc. 2.23%
WellPoint, Inc 2.11%
GlaxoSmithKline PLC ADR 2.11%
Capital One Financial Corp 1.86%
News Corporation, Ltd. A 1.83%
16 www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761
Dodge & Cox Balanced FundHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
asset aLLocation
Domestic Stock 53.50%
Domestic Bond 30.38%
Foreign Stock 13.39%
Cash 1.74%
Other 0.72%
Foreign Bond 0.21%
Preferred 0.06%
diversification
Health Care 28.56%
Consumer Discretionary 19.73%
Information Technology 18.18%
Financials 11.44%
Energy 10.04%
Industrials 6.54%
Consumer Staples 2.84%
Materials 2.05%
Telecommunication Services 0.63%
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Investment ObjectiveThe investment seeks growth and income. The fund normally invests 60% of assets in equities and 40% in bonds. The equity portion seeks to replicate the Wilshire 5000 Index performance; to this end, the fund invests primarily in the 500 largest companies on the index and samples the rest. The fixed-income portion seeks to replicate the Lehman Brothers Aggregate Bond Index performance; it may purchase investment-grade U.S. government obligations, corporate debt, and mortgage-backed securities to secure this goal. You cannot invest directly in an index.
Who Is Most Likely to Choose This Type of Investment?Balanced investments may be most appropriate for someone seeking a balance between income from bond investments and capital growth from equity investments in one option. The investor is willing to accept higher risk for greater potential returns than bond investing alone.
Fund RestrictionsDue to restrictions imposed by Vanguard, any participant who transfers money out of this fund is not permitted to transfer money back into the fund for a period of 60 calendar days.
Fund Operating Expenses: 0.07%
Total Fund Assets: $2,299.41 MM
Total Plan Assets: $136.35 MM
FUND INFORMATION
Largest HoLdings
ExxonMobil Corporation 1.94%
General Electric Company 1.20%
Microsoft Corporation 1.06%
Procter & Gamble Company 1.01%
Johnson & Johnson 0.92%
J.P. Morgan Chase & Co. 0.81%
Chevron Corporation 0.81%
AT&T, Inc. 0.78%
International Business Machines 0.76%
Bank of America Corporation 0.75%
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 17
asset aLLocation
Domestic Stock 59.69%
Domestic Bond 38.29%
Foreign Bond 0.98%
Cash 0.77%
Foreign Stock 0.19%
Other 0.08%
diversification
Financials 16.74%
Information Technology 16.06%
Health CAre 13.16%
Energy 12.27%
Industrials 11.53%
Consumer Staples 10.62%
Consumer Discretionary 9.33%
Utilities 3.79%
Materials 3.72%
Telecommunication Services 2.78%
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
BA
LAN
CED
Information as of: 12/31/2008
Inceptiondate: 12/01/2000 TickerSymbol:VBAIX
Vanguard Balanced Index Fund - InstlHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Minnesota Deferred Compensation Plan | Investment Options Fund Fact SheetsB
ond
Information as of: 12/31/2008
Inceptiondate: 01/03/1989 TickerSymbol:DODIX
Investment ObjectiveThe investment seeks income consistent with long-term preservation of capital; capital appreciation is a secondary consideration. The fund normally invests in a diversified portfolio of high-quality bonds and other fixed-income securities, including U.S. government obligations, mortgage- and asset-backed securities, corporate bonds, collateralized mortgage obligations and others rated A or better by either Standard & Poor’s Ratings Group or Moody’s.
Who Is Most Likely to Choose This Type of Investment?Bond investments may be most appropriate for someone seeking higher potential income than with a money market or stable value investment. The investor may desire to balance more aggressive investments with one providing potentially steady income. A bond fund’s yield, share price and total return change daily and are based on changes in interest rates, market conditions, economic and political news and the quality and maturity of its investments. In general, bond prices fall when interest rates rise and vice versa.
Fund RestrictionsThis fund has restrictions designed to address excessive trading and market timing practices. For more details, contact MSRS or refer to the Fund’s prospectus.
Fund Operating Expenses: 0.44%
Total Fund Assets: $13,795.86 MM
Total Plan Assets: $98.46 MM
FUND INFORMATION
18 www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761
Dodge & Cox Income FundHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
asset aLLocation
Domestic Bond 93.76%
Cash 3.97%
Other 1.44%
Foreign Bond 0.70%
Preferred 0.13%
sector diversification
United States 93.76%
France 0.34%
Luxembourg 0.24%
United Kingdom 0.12%
Largest HoLdings
FHLMC 6.5% 2.40%
Gmac 6.875% 2.17%
US Treasury Note 3.625% 1.77%
FNMA 1.68%
Ford Motor Credit Co. 7.375% 1.66%
HEWLETT PACKARD 1.51%
FNMA 7% 1.49%
At&T 8% 1.46%
AOL Time Warner 7.625% 1.41%
Ford Motor Credit 7.25% 1.17%
Fixed Income Clearing Corp Repurchase Agrmnt 1.38%
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Dodge & Cox Income Fund
Investment ObjectiveThe investment seeks to track the performance of a broad, market-weighted bond index. The fund invests by sampling the index. It invests at least 80% of assets in bonds held in the index. The fund maintains a dollar-weighted average maturity consistent with that of the index, ranging between 5 and 10 years. The Lehman Brothers Aggregate Bond Index is made up of the Lehman Brothers Govt/Credit Bond Index, Mortgage-Backed Securities Index, and Asset-Backed Securities Index. You cannot invest directly in an index.
Who Is Most Likely to Choose This Type of Investment?Bond investments may be most appropriate for someone seeking higher potential income than with a money market or stable value investment. The investor may desire to balance more aggressive investments with one providing potentially steady income. A bond fund’s yield, share price and total return change daily and are based on changes in interest rates, market conditions, economic and political news and the quality and maturity of its investments. In general, bond prices fall when interest rates rise and vice versa.
Fund RestrictionsDue to restrictions imposed by Vanguard, any participant who transfers money out of this fund is not permitted to transfer money back into the fund for a period of 60 calendar days.
Fund Operating Expenses: 0.07%
Total Fund Assets: $12,431.17 MM
Total Plan Assets: $85.95 MM
FUND INFORMATION
Largest HoLdings
US Treasury Note 4.625% 1.48%
US Treasury Note 3.125% 1.38%
US Treasury Note 6.5% 1.36%
US Treasury Note 4.75% 1.27%
US Treasury Note 3.875% 1.16%
US Treasury Bond 8.75% 0.98%
CMT Market Liquidity Rate 1.87%
US Treasury Bond 6.75% 0.84%
US TREASURY NOTE 0.80%
US Treasury Note 4.75% 0.75%
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 19
asset aLLocation
Domestic Bond 96.16%
Foreign Bond 2.21%
Cash 1.51%
Other 0.26%
Domestic Stock 0.05%
Preferred 0.01%
Convertible 0.01%
sector diversification
United States 96.00%
Canada 1.10%
Brazil 0.24%
Mexico 0.23%
Germany 0.12%
Italy 0.11%
France 0.08%
United Kingdom 0.06%
Luxembourg 0.05%
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
Bond
Information as of: 12/31/2008
Inceptiondate: 09/18/1995 TickerSymbol:VBTIX
Vanguard Total Bond Mkt Index - Instl FundHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information you may obtain mutual fund prospectuses and disclosure documents from your registered representative. Read them carefully before investing.
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
Fixe
d In
tere
st
Information as of: 12/31/2008
20 www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761
SIF Fixed Interest AccountHIGHErLOWEr
RISk/POTENTIAL RETuRN METER
Fund Operating Expenses: 0.09 %
Total Plan Assets: $1,008.03 MM
FUND INFORMATION
Investment ObjectiveThe objective of the Supplemental Investment Fund (SIF) Fixed Interest Account is to maintain the value of a participant’s original investment and earn a fixed rate of interest using somewhat longer-term securities than typically found in a money market type account. The Account is a well diversified portfolio of high quality fixed income instruments with strong credit ratings. The Account also invests in contracts issued by highly rated insurance companies and banks which are structured to provide principal protection for the Account’s diversified bond portfolios, regardless of daily market changes.
Returns from the Account reflect the blended crediting rate available from all investments in the Account, including cash reserves which are maintained to provide liquidity for participant transfers. Due to the nature of the Account’s investments, returns change only modestly from month to month. Currently, the Account is managed by Galliard Capital Management, provided by the State Board of Investment.
Who Is Most Likely to Choose This Type of Investment?This investment option can be an important part of a diversified portfolio. It is appropriate for the portion of a participant’s investments for which a lower level of risk is desirable. The option may also be appropriate for those individuals who are approaching retirement and/or simply wish to take less risk in return for a stable rate of return.
Account RestrictionsDue to restrictions on the SIF Fixed Interest Account, you may not transfer balances directly to the SIF Money Market Account. Balances must be transferred to another investment option and then after 90 days may be transferred to the SIF Money Market Account.
asset aLLocation
Investment Contracts* 56.9%
Security Backed Contracts** 32.6%
Wells Fargo Stable Value Fund 10.5%
HoLdings
Mortgage Backed Securities 44.7%
US Government Securites & Agencies 31.1%
Corporate Securities 10.6%
Asset Backed Securities 3.5%
Cash Equivalents 4.6%
Taxable Municipals 5.5%
* In March, 2008, the Minnesota Fixed Fund merged into the SIF Fixed Interest Account. The investment contracts of the Minnesota Fixed Fund are now owned in this Fixed Interest Account. The investment contracts from Principal Life, Minnesota Life, and Great West Life represent almost the entire asset allocation of Investment Contracts.
** Holdings represent the underlying securities that make up the asset allocation of Security Backed Contracts.
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 21
Minnesota Deferred Compensation Plan | Investment Options Fund Fact Sheets
Money M
arket
Information as of: 12/31/2008 SIF Money Market Account
HIGHErLOWErRISk/POTENTIAL RETuRN METER
Fund Operating Expenses: 0.01 %
Total Plan Assets: $110.25 MM
FUND INFORMATION
Investment ObjectiveThe Objective of the Supplemental Investment Fund (SIF) Money Market Account is to maintain the value of a participant’s original investment and earn interest that is competitive with rates available in short-term money markets. The Account owns short-term securities backed by the U.S. Treasury and its agencies. The average maturity of the Account is generally 90 days or less. Since the sole source of return for the Account is the interest income on the securities that it holds, returns will closely track the rise and fall of short-term interest rates. Currently, the Account is managed by State Street Global Advisors, an affiliate of State Street Bank and Trust, the organization that manages the cash reserves of retirement assets under the control of the State Board of Investment. While shares of the Account are neither insured nor guaranteed by the U.S. Government, the Account offers a higher degree of safety than non-government short-term funds. There is no assurance that the portfolio will be able to maintain a stable net asset value of $1.00 per share.
Who Is Most Likely to Choose This Type of Investment?Money market investments may be most appropriate for someone wanting to safeguard principal value or to balance a portfolio with more aggressive investments. The investor may be nearing retirement and requiring stability and asset liquidity. Yields may vary.
Characteristics
Average Maturity 29 days
Average Quality A-1+ / P1
Sector Weighting
Repurchase Agreements 56.16%
U.S. Agency 43.84%
* Certificate of Deposits (CD’s) issued by a branch of a foreign bank in US dollars.
Portfolio information is gathered from a variety of sources and is believed to be reliable but is not guaranteed as to completeness or accuracy. Holdings and composition of holdings are subject to change. The expense ratio shown is net of any fee waivers or expense reimbursements.
Minnesota Deferred Compensation Plan
22 www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761
457(b) PlanAn employer-sponsored retirement plan that enables employees of state and local governments and other tax-exempt employers to voluntarily make tax-deferred contributions from their salaries to the plan.
Asset AllocationA way to divide your retirement savings among different asset classes (stock funds, bond funds or cash equivalent).
Assets Anything owned that has monetary value or can be exchanged for monetary value (for example, a house or car).
Bear MarketA period during which security prices in a particular market (such as the stock market) are generally falling.
BeneficiaryThe person or instrument (for instance, a trust or estate) named in the event of a participant’s death. The recipient of proceeds in the event of the participant’s death.
BondsBonds are essentially “IOus” plus interest issued by corporations or the government to raise money over a specific period of time. A bond investor lends money to the issuer and in exchange, the issuer promises to repay the loan amount on a specified maturity date. That duration of time can be short-term (one to three years), intermediate (four to 10 years) or long-term (10 years or more).
Bull MarketA period during which security prices in a particular market (such as the stock market) are generally rising.
CapitalMoney generally available for investment purposes.
Capital Gain (or Loss)An increase (or decrease) in value (of a stock or mutual fund, for example) resulting from favorable (or unfavorable) investment performance. This may also be expressed as appreciation or depreciation.
DiversificationSpreading your money among different types of investments, such as stock funds, bond funds or cash equivalents. using diversification as part of your investment strategy neither assures nor guarantees better performance and cannot protect against loss in declining markets. You should consider your ability to consistently invest in up as well as down markets.
DividendA payment to shareholders that represents their share of a fund’s or company’s earnings available for distribution.
Dollar Cost AveragingThe practice of investing a fixed dollar amount at regular intervals (weekly, monthly, quarterly, etc.) regardless of whether the securities markets are declining or rising. The investor then purchases more shares when prices are low and fewer shares when prices are high, thus potentially lowering the average cost per share over time.
EarningsA company’s or fund’s profit after paying all costs, expenses and taxes.
Expense RatioA ratio for comparing an investment option’s efficiency by dividing its expenses by its net assets.
Investment IncomeInterest or dividends earned from an investment. Investment income is automatically reinvested in a participant’s plan account.
IndexA benchmark against which financial or economic performance may be measured. You can use these indexes to measure the performance of your mutual funds. For example, comparing a small-cap fund’s performance to the performance of the Russell 2000 index can tell you whether the fund has kept up with the performance of small stocks in general. Here are some of the most watched indexes:
The Dow Jones Industrial Average – Tracks the stocks of only 30 big u.S. corporations.
The S&P 500® – Represents 500 of the u.S. stock market’s largest stocks.
The Russell 2000 – Tracks the performance of smaller u.S. company stocks.
The Morgan Stanley Capital International, Europe, Australasia and Far East (MSCI EAFE) – Shows the performance of stocks in 21 developed foreign countries.
InterestMoney credited to a fixed investment account. Money a borrower pays to a lender as the cost of using money, expressed as a percentage per period of time. The period of time is usually one year, in which case it is called an annual rate of interest.
Investment Objective/GoalA statement of the goals an investment option seeks to achieve through its investments. Generally, investors match their financial objectives with investment options that have similar goals, balanced with their risk tolerance.
Investment RiskThe value of investment options available under the contract may fluctuate with the markets and interest rates. You should not participate in the contract in order to invest in these options if you cannot risk getting back less money than you put in.
LiquidityA market is liquid when it has a high level of trading activity, allowing buying and selling with minimum price disturbance. A liquid asset is easily turned into cash.
Management FeesA charge paid to a portfolio’s manager for their service, usually also includes fund administration costs and investor relations. Typically a certain percentage of assets under management.
Market Capitalization/Market CapThe current value or price of a stock multiplied by the number of shares outstanding. For example, if a company has one million shares available and the price is $10 per share, its market cap is $10 million.
• Small-Cap Stock – Stock in a company with a market cap between $300 million and $2 billion.
• Mid Cap – Stock in a company with a market cap between $2 billion and $10 billion.
• Large Cap – Stock in a company with a market cap of more than $10 billion.
Note: The ranges for small cap, mid cap and large cap vary among financial experts and can change over time.
A Glossary of Financial Terms
Minnesota Deferred Compensation Plan
www.msrs.state.mn.us • 1-800-657-5757 • 651-296-2761 23
Mutual FundA form of collective investment that pools money from many investors and invests the money in stocks, bonds, short-term money market instruments or other securities with a specific investment goal in mind. Mutual funds may be managed by a professional investment manager. If you own a mutual fund, you own a representative portion of the total mutual fund. A mutual fund may consist entirely of stocks (or certain types of stocks, such as international, small cap, mid cap, large cap), bonds or money market instruments, or it may include a combination of these. Some of the different types of mutual funds include:
• Money Market Funds – Money market funds invest in a variety of high quality, short-term securities, which are offered by government entities and banks, that seek the highest level of income consistent with preservation of capital (i.e., maintaining a stable share price). The interest rate earned varies as short-term rates change. These funds are considered low risk because their investments mature in a year or less.
Reward: Competitive interest rate. Lower and typically more steady returns, historically, than stocks. Risk: Lower risk than stocks or bonds.
• Bond Funds – Most bond funds objective are to provide stable income with minimal capital risk. They invest in income-producing instruments, which may include corporate, government or municipal bonds. Bond funds, therefore, typically earn a somewhat predictable amount of income. Some bond funds invest in lower grade corporate debt and offer higher risk for potentially higher returns.
Reward: A greater potential return than money market funds. Less fluctuation in value than stock funds. Risk: Lower potential returns than stocks over time. Potential reduction in the value of principal.
• Balanced Funds – Balanced funds invest in a mix of stocks and bonds. A percentage of the fund is invested in a portfolio of stocks and a percentage is invested in a portfolio of bonds. The stocks are typically meant to provide price appreciation potential, while the bonds are meant to provide income and a measure of price stability.
Reward: More diversified portfolio that may offer the returns over time of stocks combined with the returns and risk-dampening benefits of bonds.Risk: Investment risk may increase or decrease if the professional investment manager changes the percentage mix between stock and bonds.
• Stock Funds – Stock funds concentrate their investments in stocks, which represent shares of ownership in a company. They offer the potential for current income (from dividends) and capital growth (from an increase in value).
Reward: Over the long term, stocks have historically offered higher returns than other types of investments.Risk: Higher short-term fluctuations in value than other asset classes.
An investor should access risk/potential reward of a mutual fund based on his/her personal risk tolerance.
Fixed Interest Accounts – While fixed interest accounts are not a type of mutual fund, they are considered another type of investment option. Fixed interest accounts (including bonds, debentures, which are unsecured bonds issued by a civil or governmental corporation or agency and backed only by the credit standing of the issuer, and term deposits) are debt securities that provide a fixed flow of income over a fixed investment period (or term).
Reward: Competitive interest rate. Lower and typically more steady returns, historically, than stocks.Risk: Lower risk than stocks or bonds.
PrincipalThe original amount of money invested, not including interest or dividends on that amount. Principal value may fluctuate.
ProspectusThe printed statement describing a particular mutual fund to prospective investors. It explains overall investment goals, investment strategy, fund expenses and the risk and potential reward of investing in the fund.
RebalancingAutomatically redistributes the account balance to select investment options at a frequency chosen by the participant. Counteracts the fact that funds have performed differently (either better or worse) and therefore, results in different percentages of the portfolio than was originally intended.
Risk ToleranceThe amount of risk or potential losses you’re willing to take in your investments in order to achieve higher returns or potential gain in the long term. This will depend a great deal on your personal circumstances, how close you are to retirement (your time horizon) and the other financial obligations you have.
Security(ies)A security is a negotiable instrument representing financial value. Securities are broadly categorized into debt securities, such as banknotes, bonds and debentures, and equity securities, e.g. common stocks. Securities include shares of corporate stock or mutual funds, bonds issued by corporations or governmental agencies, stock options or other options, limited partnership units, and various other formal investment instruments that are negotiable.
StockA share of ownership or equity in a corporation. Ownership in the company is determined by the number of shares a person owns divided by the total number of shares outstanding. For example, if a company has 1000 shares of stock outstanding and a person owns 50 of them, then he/she owns 5 percent of the company. Only corporations issue stock. Other types of companies, such as sole proprietorships and limited partnerships, do not issue stocks.
Time HorizonThe amount of time you have until you reach retirement and when you may need your retirement money. The more time you have until you’ll need your money, the greater your ability to weather short-term declines in the prices of your holdings. So if your time horizon is at least 10 years, emphasizing stocks in your investment program may help you achieve your financial goals more readily.
Total ReturnThe profit or loss on an investment over a specific period of time. Total return includes income and share price appreciation/depreciation. Total return figures generally assume that all dividends and capital gains paid during the period are reinvested to buy additional shares.
VolatilityA measure of price or interest rate fluctuations over a given period of time.
A Glossary of Financial Terms (continued)
The Minnesota State Retirement System (MSRS) administers the Minnesota Deferred Compensation Plan (MNDCP) — a voluntary tax-deferred savings plan, the Health Care Savings Plan (HCSP) — a tax free medical expenses and premiums savings plan. MSRS also administers various retirement, survivor and disability benefit plans for state employees.
MSRS Representatives are also registered representatives of ING Investment Advisors, LLC (Member SIPC).
Please consider the investment objectives, risks, fees and expenses carefully before investing. For this and other important information, you may obtain mutual fund prospectuses from your registered representative. For prospectuses related to investments in your Self-Directed Brokerage (SDB) Account, contact TD AMERITRADE at (866) 766-4015. Read them carefully before investing.
Plan administrative services provided by ING Institutional Plan Services, LLC, a member of the ING family of companies, 1 Heritage Drive, North Quincy, MA 02171. Securities, if offered, are distributed by or offered through ING Investment Advisors, LLC (member SIPC) or other broker-dealers with which it has a selling agreement.
TD AMERITRADE is a separate and unaffiliated company. TD AMERITRADE is not responsible for third-party financial or investment information or services, including market data provided by the exchanges. Brokerage services provided by TD AMERITRADE, Division of TD AMERITRADE, Inc., member FINRA/SIPC. TD AMERITRADE is a trademark jointly owned by TD AMERITRADE IP Company, Inc. and The Toronto-Dominion Bank. Used with permission. Self-directed brokerage accounts are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency, and involve investment risks, including the possible loss of the principal amount invested. Not intended for use in New York. All rights reserved.
60 Empire Drive, Suite 300, Saint Paul, MN 55103-3000651-296-2761 | Toll-free: 1-800-657-5757 | Fax: 651-297-5238 www.msrs.state.mn.us
C09-0508-037R6/09
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