The Savings Plus Investment Guide

Transcription

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The Savings Plus
Investment Guide
Making Investment Choices That Work for You
February 2006
CONTENTS
Section 1–How to Invest for Your
Retirement.................................................................1
Did You Know That You Are Dollar-Cost
Averaging with Savings Plus? ................................... 1
Section 2–Know Your Asset Classes ............... 2
Cash or Fixed Income ................................................ 2
Bonds ......................................................................... 2
Stocks ........................................................................ 2
Getting to Know Stock Funds ................................... 2
Capitalization ........................................................ 3
Investment Style ................................................... 3
International Funds ............................................... 4
Other Investment Options..................................... 4
Risk Versus Return .................................................... 5
Section 3–What Type of Investor Am I? ........ 6
Questionnaire ............................................................. 7
Identify Your Time Horizon ................................. 7
Identify Your Risk Tolerance ................................ 7
Identify Your Investor Profile ............................... 8
Selecting Your Personal Investment Portfolio ...... 9
Section 4–How to Select Your Savings
Plus Investments .................................................10
Fund Worksheet ........................................................11
Section 5–Investment Profiles ........................ 12
How to Read Investment Profiles ............................ 12
Cash/Fixed Income
Savings Pool ........................................................ 13
Dwight Stable Value Fund................................... 13
Bond
Vanguard Total Bond Market Index Fund ........... 14
Large-Cap Stock
Savings Plus Large-Cap Value Fund ................... 15
Savings Plus Large-Cap Blend Fund .................. 15
CalPERS S&P 500 Equity Index Fund ............... 16
American Funds–Growth Fund of America ........ 16
Mid-Cap Stock
T. Rowe Price Mid-Cap Value Fund ................... 17
Savings Plus Mid-Cap Blend Fund ..................... 17
T. Rowe Price Mid-Cap Growth Fund ................ 18
Small-Cap Stock
Savings Plus Small-Cap Value Fund ................... 19
J. P. Morgan Investment Management–
Undiscovered Managers Behavorial
Value Fund ...................................................... 19
The Hartford Small Company HLS Fund ........... 20
International
Philadelphia International Advisors, LP.............. 21
Socially Responsible
Savings Plus Socially Responsible Fund ........... 22
Asset Allocation
Gartmore Investor Destinations
Conservative Fund-Service Class ................... 23
Moderately Conservative FundService Class ................................................... 23
Moderate Fund-Service Class ......................... 24
Moderately Aggressive Fund-Service Class ... 24
Aggressive Fund-Service Class ...................... 25
Brokerage Account
Schwab Personal Choice Retirement
Account® ........................................................ 26
Section 6–Glossary of Technical Terms ....... 27
SECTION
1
P
How to Invest for Your Retirement
in the State of Californiaʼs
Savings Plus Program (SPP or Savings
Plus) means that you are not only a saver but
an investor as well. Your deferrals, allocated
among different types of investments called
asset classes, will drive your long-term
returns.
ARTICIPATING
To help you get started, we have provided
a questionnaire (page 7) you can use to determine what your time horizon is and what
kind of investor you are. That information
you should know before you start investing
through Savings Plus.
The information in this Investment Guide
will assist you in choosing the investments
that best fit your goals. Our Web site (www.
sppforu.com) also offers helpful investment
information, including the most current performance data on the individual investment
choices offered through Savings Plus.
If you need more assistance in making your
choices, you should seek the advice of a
financial advisor. Always be sure to read the
prospectus or fund fact sheet for any investment you are considering before investing
your money.
Did You Know That You Are
Dollar-Cost Averaging with
Savings Plus?
Dollar-cost averaging is the practice of putting a fixed amount of money into an investment program at regular intervals—just as
you invest in Savings Plus through payroll
deduction. This strategy is designed to help
you buy more shares or units when the prices
are down and fewer when the prices are up,
thereby averaging the price you pay per share
and theoretically reducing the overall cost of
the investment.
Dollar-cost averaging does not, however,
assure a profit and does not guarantee against
loss in a declining market. This type of strategy involves regular investment in securities
regardless of fluctuating price levels of such
securities. Investors should consider their
Section 1–How to Invest for Your Retirement
financial ability to continue purchases through
periods of low price levels.
For illustration we will assume that you will defer
$100 each month ($1,200 a year) from your payroll
check into an investment option and that the price
of the shares or units of your investment rises and
falls over time (see Figure 1-1). Over a
12-month period the average price per
share or unit shown in Figure 1-1 is
$6 ($72 ÷ 12 months = $6). If you
were investing your $1,200 in a
lump sum at that average price
per share or unit, you would be
purchasing 200 shares or units
($1,200 ÷ $6 = 200).
Under the dollar-cost-averaging
method, your average cost per share
or unit would be $5.33 ($1,200 ÷ 225 shares or
units). You paid less per share or unit and were
able to buy 25 more shares or units than if you had
made a single lump-sum payment.
By participating in Savings Plus and using a dollarcost-averaging investment strategy, you are enabling yourself to be better prepared for retirement.
Congratulations for being on the right track!
Figure 1-1
Dollar-Cost Averaging with Savings Plus
Number
of months
Periodic investment
Price of
shares or units
Number of shares
or units purchased
1
2
3
4
5
6
7
8
9
10
11
12
Totals
$100
100
100
100
100
100
100
100
100
100
100
100
1,200
$10
8
5
4
4
5
5
4
4
5
8
10
72
10.0
12.5
20.0
25.0
25.0
20.0
20.0
25.0
25.0
20.0
12.5
10.0
225.0
1
SECTION
2
T
Know Your Asset Classes
investment choices offered by Savings
Plus fall into three asset classes: cash or
fixed income, bonds, and stocks. These three
asset classes are further broken down into six
categories: cash/fixed income, bonds, large-cap
(capitalization) stock, mid-cap stock, small-cap
stock, and international stock. By spreading
your investment selections across asset classes,
a technique known as diversification or asset
allocation, you can maximize your total return
according to the level of risk you are willing to
accept. (See Figure 2-1.) Keep in mind that asset
allocation does not assure a profit and does not
protect against loss.
HE
Cash or Fixed Income
Cash refers to short-term securities, such as
bank certificates of deposit (CDs) and money
market funds. Fixed income includes investments backed by such assets as U.S. Treasuries,
corporate debt obligations, mortgages, and other
asset-backed securities. Typically, cash and
fixed-income investments encounter less market
risk than do bonds and stocks because of their
short duration. However, they usually provide a
lower rate of return than do bonds and stocks.
Bonds
Bonds are loans or debt instruments issued by
governments or corporations that need to raise
money. Therefore, when investors buy
bonds, they are lending money to those governments or corporations. Bonds are issued
for a set period, during which interest payments are made to the bondholder. Generally
more stable than stocks, they provide a more
steady flow of income than do stocks. However, over a long period of time, bonds often
provide a lower rate of return than do stocks.
Stocks
Stocks are instruments that signify part ownership (called equity) in corporations and
represent claims on proportional shares in
the corporationsʼ assets and profits. Stocks,
which may be invested in U.S. (domestic) or
foreign (international) corporations, can provide a diversified portfolio of corporations
in various sectors of the economy. Usually,
they encounter higher market risk than do
cash or fixed-income investments and bonds
but offer the potential for higher long-term
returns.
Getting to Know Stock Funds
Stock funds can be classified according to
whether they consist of large-cap (capitalization), mid-cap, or small-cap stocks and
whether they have growth or value characteristics or are somewhere in between. In
Figure 2-1 Illustration of Asset Classes
BONDS
CASH/
FIXED
INCOME
STOCKS
Potential
Risk/Reward
Low
2
High
Section 2–Know Your Asset Classes
addition, stocks are divided into two
geographic classifications: domestic
(stock of U.S. corporations) or international (stock of corporations
domiciled in foreign countries).
Capitalization
When you invest in a stock
fund, you need to consider
what types of companies
that fund invests in. The professional money managers who select the
companies in stock funds are usually limited
to selecting companies within a specified
capitalization (know as “cap”) or size of a
company. The definitions that follow provide guidelines to indicate the typical size
of companies invested in by a fund. (Note:
Variances in size within groups do occur.)
Capitalization is the market value of a corporation. It is computed by multiplying the
number of shares outstanding by the current
share price. It is important for the investor to diversify among funds with different
capitalizations as the performance and associated risk within each cap group rises and
falls according to changing conditions in the
economy and the market. Market capitalization goes up and down with changes in economic conditions that affect stock markets.
Therefore, there isnʼt one absolute definition
for the different market caps. The following
definitions are the current widely regarded
standards for each capitalization.
♦ Large-Cap Funds. Large-cap funds are
invested in the stocks of companies with
market values exceeding $10 billion. The
securities of these larger, more-established companies typically pay dividends,
which provide income that can help reduce the effects of market swings. Largecap funds tend to be less volatile and offer
lower risk than do funds with smaller
capitalizations.
♦ Mid-Cap Funds. Mid-cap funds are invested in the stocks of companies with
market values of between $2 billion and
$10 billion. These funds can be somewhat
more volatile than large-cap funds but are
generally less risky than funds devoted
exclusively to smaller companies.
♦ Small-Cap Funds. Small-cap
funds are invested in the stocks of
companies with market values of
between $300 million to $2 billion.
Small companies can grow much
faster than big companies but tend to
be more volatile, and
their stocks tend to be
more risky than the
stocks of mid-cap and
large-cap companies.
The reason is that small-cap companies
tend to be less established and less predictable than larger companies.
Investment Style
Investment style refers to the way in which
a fundʼs manager selects investments for
the fundʼs portfolio. Understanding a fundʼs
style and the inherent risk that style carries
can help you determine whether that fund
should play a role in your asset-allocation
strategy.
Fund managers use one of three styles of
stock picking when putting together a fund:
growth, value, and blend. The fund style is
important to consider when you select and
manage your portfolio because different
styles can affect the performance of your
investments during different economic and
market conditions. Over the long term, diversification of fund styles within your portfolio can help smooth out performance.
♦ Growth Funds. A growth fund manager
looks for companies with potential for
rapidly increasing sales and earnings in
the hope that the price of their stocks will
increase. Because these companies tend
to be volatile, their stocks may be vulnerable to correction when earnings growth
does not meet expectations. Growth funds
may be suitable for investors with a high
tolerance for risk and a long-term horizon. Growth fund managers seek companies that have demonstrated rapid and
potentially long-term expansion.
Usually, growth investors look for
companies in new and developing
industries that they think will experience significant appreciation
relative to the rest of the market.
3
♦ Value Funds. A value fund manager
looks for stocks of companies that are
temporarily out of favor with investors
and whose market prices are, therefore,
lower than their perceived intrinsic value.
This investment style focuses on the low
price/earnings (P/E) ratios and price/book
(P/B) values of companies in comparison
with their normal range or that of the industries in which they are situated. The
key to the success of a value strategy is
to evaluate the worth of companies accurately to see whether their stocks can
be purchased at a bargain price or should
be avoided because they deserve their low
price due to their poor fundamentals. If
you think of yourself as a bargain hunter
and a patient investor looking to hold
stocks for the long term, you may want
to investigate the value strategy. Value
funds may be suitable for investors who
have a lower tolerance for risk and want
less volatility in the growth of their stock
funds.
♦ Blended Funds. A blended fund manager
uses the combination of the growth and
value styles. In general, blended funds are
less volatile than pure growth funds and
more volatile than pure value funds. An
investor with a long-term time horizon
who wants to diversify with growth and
value styles may find blended funds to be
an appropriate choice.
International Funds
Another type of stock funds that Savings
Plus offers in its investment lineup falls
outside of the category of U.S. stock market funds. These funds, called international
funds or foreign funds, are invested in companies located outside of the United States in
established, industrialized nations. Because
of currency fluctuations, possible political
instability, differences in accounting standards, and foreign regulations, international
funds carry risks not found with domestic
stock funds. Relative to the other categories
of stock funds, both risk and return are high.
Other Investment Options
Savings Plus offers two additional investment classifications that fall outside the asset
4
categories previously discussed. These funds
are used to meet specific objectives.
♦ Socially Responsible Funds. These are
mutual funds that invest in companies that
meet certain ethical and moral standards.
Some examples include funds that invest
only in environmentally conscious companies (“green funds”); funds that invest
in hospitals and health care centers; and
funds that avoid investing in alcohol,
tobacco, firearms, munitions, or nuclear
power companies. Socially responsible
funds try to maximize returns while staying within these self-imposed boundaries.
A socially responsible fund will use social
screens to determine which companies
will be eliminated from its portfolio. After
the social screens are applied, the fund
manager will follow an investment objective, typically the growth of capital, and
seek companies in an equity asset class.
While the manager attempts to maximize
performance within the investment objective, these funds are constrained by the
social screens they apply.
♦ Asset Allocation Funds. Asset allocation funds, also known as lifestyle funds,
represent mutual funds that include a mix
of cash or fixed income, bond, and stock
funds designed to reduce risk. They allow
the investor to diversify among six asset
categories with one investment selection.
The goal of asset allocation funds is to
maximize total investment return at a
designated risk level (from conservative
to aggressive). Each asset allocation fund
carries a different risk-versus-reward
potential tied to the mission of the fund.
Over a lengthy period of time, conservative funds should experience lower risk
and lower potential returns, whereas the
aggressive funds should experience higher
risk and higher potential returns. In this
type of investment, fund managers reallocate the fundʼs assets according to changing market conditions, the objective being
to keep the asset allocation percentages
steady despite the marketʼs fluctuations.
If you wish to select a single portfolio
tied to your investor profile, a single assetallocation fund may be your best option.
The simplicity of selecting just one
fund that is professionally constructed
and systematically rebalanced makes
an asset-allocation fund a good
choice if you are a hands-off
investor.
Your investor profile is determined
by using your time horizon and
risk tolerance explained in Section 3,
“What Type of Investor Am I?” Section 3 also provides a tool to determine the investor profile that is right
for you.
Risk Versus Return
Because every investment is accompanied
by risks of various kinds, you should not
look only at a fundʼs historical return in
deciding whether to purchase a fund. You
should also take into account the specific
risks to which your investment may be exposed. By looking at the potential return, you
can determine whether you are comfortable
with the trade-off between risk and return.
Risk-adjusted return measures generally deal with market risk—the risk that
your investments will
fluctuate along with
market conditions.
Risk and reward go
hand in hand; where there
is greater risk, there is a greater potential for performance to be rewarded.
Funds ranking high on a risk-adjusted
return scale demonstrate a favorable
tradeoff between risk and reward. That
is, either the returns were high enough
to compensate for the additional risk
taken, or the returns were not high relative
to other investments but the risk taken was
much lower.
The illustration in Figure 2-2 shows the
range of risk-versus-return potential of
the six investment categories available
through Savings Plus. Please note that
asset-allocation funds do not appear
because those funds diversify investments
across several categories.
Figure 2-2
Range of Relation Between Risk and Return
Large-Cap
BONDS
Mid-Cap
Small-Cap
CASH/FIXED
INCOME
Potential
Risk/Reward
International
Low
High
5
SECTION
3
What Type of Investor Am I?
A
SSET allocation is a strategy for investment selection. Simply put, itʼs the process of diversifying your investment dollars
across different asset categories. It enables
you to maximize your return potential while
reducing your risk of losing money.
How your investments are diversified depends on your willingness to accept a degree
of risk. In general, the greater the risk, the
greater the potential return. By diversifying a portfolio, you can pursue attractive
performance potential while simultaneously
spreading out your investment risk.
How important is asset allocation to
your investment success?
Industry research has shown that more than
90% of the variation in portfolio return is
determined by asset allocation.
In short, while picking specific investments
and deciding when to buy and sell those investments can have an impact on your overall return, a well-diversified portfolio may
be the critical factor in determining how
well your portfolio performs in the long run.
A personal asset allocation strategy
comprises two key elements.
1. Your time horizon—Your time horizon is
the amount of time your money can stay
invested before you need to withdraw it
and is a very important factor in creating
your investment strategy. A shorter horizon, for example, would call for a more
conservative portfolio strategy, regardless
of how comfortable you are with market
fluctuations.
2. Your risk tolerance—Your risk tolerance
is a measure of your personal comfort
with risk and measures your tolerance for
market fluctuations. For example, an aggressive portfolio may not be suitable for a
person with a low tolerance for risk, even
if she or he has a long-term time horizon.
Remember, your risk tolerance can change
over time, which is why itʼs important to
review your strategy every year.
Complete the questionnaire on the following pages to determine the investor profile
that is right for you. Read the question and
circle the number next to the response that
most resembles your own. Circle only one
number per question.
More Than 90% of Variation Is Due to Asset Mix
Market timing 1.8%
Mix of
assets
91.5%
Security
selection 6.7%
Source: Brinson Hood Beebower Study.
Based on 10 years of quarterly data
1977–1987.
6
Section 3–What Type of Investor Am I?
QUESTIONNAIRE
Identify Your Time Horizon
POTENTIAL BEST AND WORST
CASE ENDING VALUES
1. Given your retirement objectives, when will you
begin withdrawing your money?
“I expect to begin making withdrawals in”:
0
4
7
10
12
Two years or less
Three to five years
Six to eight years
Nine to 11 years
12 years or more
2. Once you begin making withdrawals, how long will
the money need to last?
0
2
4
7
10
I need it all at once in one lump sum
For one to five years
For six to 10 years
For 11 to 19 years
For 20 or more years
TOTAL YOUR TIME HORIZON SCORE
Question 1 _______________
$160,000
$150,000
$145,000
$130,000
$115,000
$100,000
$85,000
$70,000
3. Inflation causes prices to rise over time. Which is
more important to you—to avoid loss of money in
the short term or to withstand short-term losses to
beat inflation in the long run?
0
8
16
It’s more important to avoid loss of money in
the short term.
Both concerns are equally important.
It’s more important to withstand short-term
losses to beat inflation in the long run.
4. At the beginning of the year, you have $100,000
invested. The graph on the next column shows the
performance of four different hypothetical portfolios.
Each bar gives the range of potential returns at the
end of one year. Which portfolio are you most comfortable with?
0
6
12
19
Portfolio A
Portfolio B
Portfolio C
Portfolio D
$115,000
Portfolio
A
Portfolio
C
Portfolio
B
$95,000
$90,000
$85,000
$80,000
0
“Minimizing the chance for a decline in value in
my account is critical, so I am willing to accept
the lower long-term returns offered by conservative investments.”
6
“Bearing some short-term decline in value in an
effort to achieve higher long-term returns is okay.
However, I prefer that the majority of my investment be in lower-risk assets.”
12
“Seeking higher, long-term returns is important
to me, so I am willing to accept substantial shortterm declines in value.”
17
“Maximizing long-term investment returns is my
primary objective, and I’m willing to accept
large—and sometimes dramatic—short-term
declines in value to achieve this goal.”
*If your time horizon score equals 0, this questionnaire
should not be used for portfolio selection.
Identify Your Risk Tolerance
$125,000
Portfolio
D
5. Which of the following statements best describes your
attitude about investing for this account:
Question 2 _______________
Your time horizon score* _________
$140,000
6. If you had money invested in a diversified portfolio and
the stock market took a downturn, when would you
sell your riskier investments and put the money in safer
assets?
0
“At the first sign of a decline in value.”
7
“After a large (more than 20%) and/or sustained
(one-year or more) decline in value.”
15
“I wouldn’t sell any of my investments. I would
continue to follow a consistent long-term
investment strategy.”
7
Questionnaire (Continued)
0
7
13
19
5% a year on average over the long term but
has a 10% chance of experiencing a decline in
value in a given year.
Identify Your Investor Profile
Use your time horizon and risk tolerance scores to
find your personal investor profile.
1. Look across the top row to find your time horizon
score.
2. Look down the left column to locate your risk tolerance score.
3. Match the two to find the code that represents your
investor profile.
Time Horizon Score
10+ 8-9
Risk Tolerance Score
7. Which of the following types of investments do you
feel more comfortable with? An investment that
might return:
8. Based on how often you track the performance of
your investment, how long would you wait to change
your investment if your investment suffered a substantial decline in value?
0
4
8
14
One week
One month
One quarter
One year
TOTAL YOUR RISK TOLERANCE
Question 3 _______________
Question 4 _______________
Question 5 _______________
8
0-2
MA
M
MC
C
61–80 MA MA
M
MC
C
M
MC
C
17–38 MC MC MC MC
C
81–100
39–60
1–16
A
M
M
C
C
C
C
C
The key below shows that “M” stands for Moderate, or a
Moderate investor.
Now that you’ve identified your investor profile, you’re
ready to design your asset allocation strategy.
THE INVESTOR PROFILE KEY
Question 7 _______________
Your risk tolerance score _________
3-4
For example:
1. Time horizon score is 8 years
2. Risk tolerance score is 57
3. Portfolio code would be M
Question 6 _______________
Question 8 _______________
5-7
A
Aggressive
MA
Moderately Aggressive
M
Moderate
MC
Moderately Conservative
C
Conservative
Questionnaire (Continued)
Selecting Your Personal
Investment Portfolio
Ibbotson Associates uses a broad approach to diversify
holdings across asset classes, which include combinations of different types of stock investments, bonds, and
cash equivalents. You can implement your asset allocation strategy by selecting the portfolio that matches your
investor profile.
Locate your investor profile
Read across the row from the left column to find the
portfolio that best fits your needs based on your re-
sponses to the risk questionnaire. Whether you are
focusing on one or two investment choices or planning
to allocate assets across a range of investments, you may
want to consult with an investment professional who
can assist you in gauging your long-range goals, tolerance
for risk, and time horizon. Ultimately, this assistance may
help you make thoughtful investment decisions based on
your personal needs.
Now that you’ve identified your personal investor
profile, it’s time to make your Savings Plus investment
choices.
Note: Savings Plus includes asset allocation funds, but these classes are not part of the Ibbotson model used here.
9
SECTION
4
How to Select Your Savings Plus Investments
I
N reading this guide you have learned about asset allocation and the asset categories offered by Savings Plus.
You have determined your risk tolerance, time horizon,
and investor profile. Now is the time to put all of this
information together to build your Savings Plus portfolio.
There are two ways to build your investment portfolio:
• Select an asset allocation fund: If you find selecting
your investments confusing, intimidating, or just too
time consuming, an asset allocation fund may be your
best choice.
• Build your own portfolio: If you are a hands-on investor, you want to select at least one fund in each of the
six asset categories identified in the Ibbotson investor
profile that fits you.
If you choose to invest in one of the Savings Plus asset
allocation funds, you should invest only in the one fund
that matches your investor profile. Asset allocation funds
are designed to manage the allocation of your investments across the different asset categories in appropriate
percentages for you. This relieves you from having to
construct and manage your investment portfolio. Just
remember to reassess your investor profile as you age,
if you experience a major life change, or if you change
your retirement plans.
If you choose to select your own funds, do so from the
funds available within the Savings Plus investment options. Use the Fund Worksheet on page 11 to select the
funds within the six asset categories to match the percentage identified in the investor profile you selected.
Then set up your investment allocation (your current
assets and your future contributions) accordingly.
In the asset categories where you are offered more than
one fund choice, you should evaluate each fund on the
basis of the following factors: investment style, historical
performance (3-year, 5-year, and 10-year or since inception), and the fund managerʼs duration overseeing the
fund. Savings Plus will disclose fund manager changes
in the SPP newsletter, NewsLine. However, you can also
contact the investment provider to find out about any past
or anticipated change(s) in manager(s). Refer to the Fund
Information page on the Savings Plus Web site for performance information, fact sheets, and prospectuses.
Past performance does not guarantee future results.
10
Investor Profiles
Conservative
International stocks 5%
Small-cap stocks
0%
Mid-cap stocks
5%
Large-cap stocks
10%
Bonds
35%
Cash
45%
Moderately Conservative
International stocks
Small-cap stocks
Mid-cap stocks
Large-cap stocks
Bonds
Cash
10%
0%
10%
20%
35%
25%
Moderate
Small-cap stocks
Mid-cap stocks
Large-cap stocks
Bonds
Cash
15%
5%
10%
30%
25%
15%
Moderately Aggressive
Small-cap stocks
Mid-cap stocks
Large-cap stocks
Bonds
Cash
25%
5%
15%
35%
15%
5%
Aggressive
Small-cap stocks
Mid-cap stocks
Large-cap stocks
Bonds
Cash
30%
10%
15%
40%
5%
0%
Section 4 –How to Select Your Savings Plus Investments
Fund Worksheet
Cash/Fixed-Income Funds
Cash/
Fixed
Income
______%
Savings Pool
______%
Dwight Stable Value Fund
______% Subtotal
Bond
Bond
Stock Funds
LargeCap
______%
Vanguard Total Bond Market Index Fund
______%
Savings Plus Large-Cap Value Fund
______%
Savings Plus Large-Cap Blend Fund
______%
CalPERS S&P 500 Equity Index Fund
______%
American Funds–Growth Fund of America
______% Subtotal
MidCap
______%
T. Rowe Price Mid-Cap Value Fund
______%
Savings Plus Mid-Cap Blend Fund (CRM Mid-Cap Value Fund)
______%
T. Rowe Price Mid-Cap Growth Fund
______% Subtotal
______%
Savings Plus Small-Cap Value Fund
______%
J. P. Morgan Investment Management–Undiscovered Managers
Behavioral Value Fund
______%
The Hartford Small Company HLS Fund
SmallCap
______% Subtotal
______%
Philadelphia International Advisors, LP
______%
Savings Plus Socially Responsible Fund (Neuberger Berman
Socially Responsive Fund)
International
Socially
Responsible Fund
TOTAL
Asset
Allocation Funds
100%
Gartmore Investor Destinations Series–Conservative
Gartmore Investor Destinations Series–Moderately Conservative
Gartmore Investor Destinations Series–Moderate
Gartmore Investor Destinations Series–Moderately Aggressive
Gartmore Investor Destinations Series–Aggressive
Section 4 –How to Select Your Savings Plus Investments
11
SECTION
5
Investment Profiles
T
section provides investors with specific information about the investment
choices that are available through Savings
Plus.
Large-Cap Stock
XYZ Fund
LargeCap
Investment Objective: The primary goal of the XYZ Fund is to seek
long-term capital appreciation by actively investing in selected large U.S.
companies. The portfolio management team applies a disciplined value
approach to identify companies believed to be priced below their long-term
earnings power, usually because they are out of favor or in industries that
are out of favor. The Portfolio may also invest in securities that help reduce
portfolio risk and increase diversification. The Portfolio looks to diversify
investments across approximately 125 to 175 companies.
Fund Expense Ratio: 0%
Expense Reimbursement: 0–0.005%
Performance Benchmark: Russell 1000 Value Index
Investment Managers: Washington, Jefferson
Web Site Address: www.xyz.com
Toll-Free Number: 800-000-0000
Ticker Symbol: XYZ
Newspaper Listing: Stock Tr
Savings Plus VRS Fund Number: 0000
Please consider the fundʼs investment objectives, risks, charges,
and expenses carefully before investing. The prospectuses and
fact sheets contain these data and other information about the
investment company. You may obtain prospectuses and fact
sheets by calling (866) 566-4777. Read prospectuses and fact
sheets carefully before investing.
The Gartmore Investor Destinations Funds are designed to provide
diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds.
Therefore, in addition to the expenses of the Investor Destinations
Funds, you are indirectly paying a proportionate share of the applicable fees and expenses of the underlying funds.
Market indexes have been provided for comparison purposes only;
they are unmanaged and no fees or expenses are reflected here.
Individuals cannot invest directly in an index.
Some mutual funds may impose a short-term trade fee.
The sources of information for the profiles are the most recent
prospectuses.
HIS
How to Read
Investment Profiles
Investment Objective. The stated objective
indicates a fundʼs investment goals as specified in a fundʼs fact sheet or prospectus, such
as aggressive growth, growth and income,
and so forth. (Note: Investing may involve
market risk, and there is no assurance that
the investment objectives of any fund will be
achieved.)
Fund Expense Ratio is the percentage of
fund assets used to pay operating expenses
and management fees. Included among expenses are 12b-1 fees, administrative fees,
custodial fees, and all other asset-based costs
incurred by the fund with the exception of
brokerage costs. (Note: Fund performance is
reported net of the fees.)
Expense Reimbursements represent a portion of the fundʼs expense ratio paid to Savings Plus to reduce administrative expenses.
Performance Benchmark is an index representing the market performance of a specific
asset category. The benchmark listed is the
benchmark used by Savings Plus to evaluate
the fundʼs performance.
The remaining profile information is selfexplanatory:
Investment Manager(s)
Web Site Address
Toll-Free Number
Ticker Symbol
Newspaper Listing
Savings Plus VRS Fund Number
Retirement specialists are registered representatives of Nationwide
Investment Services Corporation.
12
Section 5–Investment Profiles
Cash/Fixed Income
Savings Pool
Cash/
Fixed
Income
Investment Objective: The goal of the Savings Pool is to provide safety
and stability with money market-like returns through Washington Mutual
Bank and City National Bank. The Savings Pool is FDIC insured, which
guarantees deposits up to $100,000 per individual registration per financial
institution by the full faith and credit of the U.S. Government under the
Federal Deposit Insurance Corporation (FDIC). The return is quoted based
on the 90-day London Interbank Offered Rate (LIBOR) minus 0.20 percent
and is adjusted quarterly. LIBOR is the base interest rate paid on deposits
traded between banks in London.
Fund Expense Ratio: 0%
Expense Reimbursement: 0–0.005%
Performance Benchmark: 90-day LIBOR minus 0.20%
Investment Managers: Washington Mutual Bank and City National Bank
Web Site Address: www.sppforu.com
Ticker Symbol: N/A
Newspaper Listing: N/A
Dwight Stable Value Fund
Investment Objective: The goal of the Stable Value Fund is to provide
a competitive, current income level while preserving the dollars you
invest. The Fund is a conservative vehicle that seeks to provide principal
preservation, a competitive interest rate, and daily participant liquidity
through high-quality fixed income investments.
Fund Expense Ratio: 0.12%
Expense Reimbursement: 0.01%
Performance Benchmark: Lehman Brothers 1–3 Year Government Index
Investment Manager: Dwight Asset Management Co.
Web Site Address: www.dwightinvestor.com (user ID california, password
savingsplus)
Ticker Symbol: N/A
13
Bond
Vanguard Total Bond Market Index Fund
Bond
Investment Objective: Vanguard Total Bond Market Index FundInstitutional Shares seeks to track the performance of the Lehman Brothers
Aggregate Bond Index. The Fund provides investors with broadly diversified
exposure to the investment-grade U.S. bond market and seeks a high level
of interest income. The Fundʼs passive investment style uses a sampling
technique to closely match key benchmark characteristics, such as sector
weight, coupon, and credit quality.
Fund Expense Ratio: 0.07% (Institutional Shares)
Performance Benchmark: Lehman Brothers Aggregate Bond Index
Investment Manager: Kenneth E. Volpert
Web Site Address: www.vanguard.com
Ticker Symbol: VBTIX
Newspaper Listing: TotBdInst
14
Large-Cap Stock
Savings Plus Large-Cap Value Fund
LargeCap
Investment Objective: The primary goal of the Savings Plus LargeCap Value Fund, a Bernstein U.S. Diversified Value Portfolio, is to seek
long-term capital appreciation by actively investing in selected large U.S.
companies. The portfolio management team applies a disciplined value
approach to identify companies believed, according to Bernsteinʼs rigorous
in-depth research, to be priced below their long-term earnings power, usually
because they are out of favor or in industries that are out of favor. The
Portfolio may also invest in securities that help reduce portfolio risk and
increase diversification. The Portfolio looks to diversify investments across
approximately 125 to 175 companies.
Fund Expense Ratio: 0.37%–0.77%
Investment Manager: Bernstein Investment Research and Management
Ticker Symbol: N/A
Savings Plus Large-Cap Blend Fund
Investment Objective: The primary goal of Goldman Sachs Asset
Managementʼs Enhanced U.S. Large Cap portfolio is growth of capital and
consistent relative outperformance versus the Russell 1000 Benchmark Index
by investing primarily in large cap stocks. In working toward this goal, the
Quantitative Equity portfolio management team seeks to: generate potential
excess returns that are positive, consistent, and explainable; maintain style,
sector, risk, and capitalization characteristics similar to the Russell 1000
Index; and employ low-cost trading techniques.
Performance Benchmark: Russell 1000 Index
Investment Manager: Goldman Sachs Asset Management
Ticker Symbol: N/A
15
Large-Cap Stock (Continued)
CalPERS S&P 500 Equity Index Fund
Investment Objective: To obtain broad domestic equity exposure by closely
tracking the designated benchmark index, the S&P 500 Index. The Fund shall
be managed to enhance the total returns of the overall investment program
through broad U.S. stock market exposure at low cost and to deliver the
performance results of the U.S. stock market defined as the Standard &
Poorʼs 500 Stock Index, with broad stock diversification.
Performance Benchmark: S&P 500
Investment Manager: CalPERS
Ticker Symbol: N/A
American Funds-Growth Fund of America
Investment Objective: Growth Fund of America (GFA) seeks to make your
investment grow by investing primarily in common stocks of companies that
appear to offer superior opportunities for growth of capital. GFA is designed
for investors seeking capital appreciation through stocks. Investors in GFA
should have a long-term perspective and be able to tolerate potentially wide
price fluctuations. Your investment in GFA is subject to risks, including
the possibility that the value of GFAʼs portfolio holdings may fluctuate in
response to events specific to the companies in which the fund invests,
as well as economic, political or social events in the U.S. or abroad. Your
investment in the fund is not a bank deposit and is not insured or guaranteed
by the FDIC or any other government agency, entity, or person. You may lose
money by investing in GFA. The likelihood of loss is greater if you invest for
a shorter period of time.
Fund Expense Ratio: 0.66% (Class A Shares)
Expense Reimbursement: 0.175%–0.225%
Performance Benchmark: Russell 1000 Growth Index
Investment Manager: Capital Research and Management Company
Web Site Address: AmericanFundsRetirement.com
Ticker Symbol: AGTHX
Newspaper Listing: GwthA (The Wall Street Journal)
16
Mid-Cap Stock
T. Rowe Price Mid-Cap Value Fund
MidCap
Investment Objective: The T. Rowe Price Mid-Cap Value Fund seeks to
provide long-term growth of capital appreciation by investing primarily in
mid-size companies that appear to be undervalued.
Performance Benchmark: Russell Mid-Cap Value Index
Investment Manager: David J. Wallack
Web Site Address: www.troweprice.com
Ticker Symbol: TRMCX
Newspaper Listing: MCapVal
Savings Plus Mid-Cap Blend Fund
(CRM Mid-Cap Value Fund)
Investment Objective: The Cramer Rosenthal McGlynn (CRM) Mid-Cap
Value Fund seeks long-term capital appreciation by investing in valueoriented Mid-Cap US equities in the capitalization (market size) range of
approximately $1 billion to $10 billion.
Performance Benchmark: Russell Mid-Cap Index
Investment Managers: Jay Abramson and Chip Rewey
Web Site Address: www.crmfunds.com
Ticker Symbol: CRIMX
Newspaper Listing: CRM Funds-MdCpVl I
17
Mid-Cap Stock (Continued)
T. Rowe Price Mid-Cap Growth Fund
Investment Objective: The T. Rowe Price Mid-Cap Growth Fund seeks
long-term growth of capital by investing primarily in common stocks of
companies with medium-sized market capitalizations and the potential for
above-average earnings growth.
Performance Benchmark: Russell Mid-Cap Growth Index
Investment Manager: Brian W. H. Berghuis
Web Site Address: www.troweprice.com
Ticker Symbol: RPMGX
Newspaper Listing: MCapGro
18
Small-Cap Stock
Savings Plus Small-Cap Value Fund
SmallCap
Investment Objective: The portfolio seeks to provide long-term capital
appreciation by investing in selected small U.S. companies.
Investment Managers: Tasso Coin and Doug Pugh, Peregrine Capital
Management, Inc. and Frank Reichel, Thompson, Siegel & Walmsley, Inc.
Ticker Symbol: N/A
J. P. Morgan Investment Management–
Undiscovered Managers Behavioral Value Fund
Investment Objective: Undiscovered Managers Behavioral Value Fund
seeks to achieve capital appreciation by investing primarily in common
stocks of U.S. companies that the sub-advisors, Fuller and Thaler, believe
have value characteristics. The Fund looks for investorsʼ behavorial biases
that may cause the market to overreact to old, negative information about a
company and underreact to new, positive information. To take advantage of
such behavioral biases, the strategy seeks companies with below-average
price-to-earnings ratios or decreasing stock values. Investments are selected
based on factors such as recent underperformance relative to the market,
share purchases by insiders, or stock repurchases by the insidersʼ or stock
repurchases by the company.
Expense Reimbursement: 0%
Performance Benchmark: Russell 2500 Index
Investment Managers: Sub-Advisors–Russell Fuller and David Potter,
Fuller & Thaler Asset Management, Inc.
Web Site Address: www.undiscoveredmanagers.com
Ticker Symbol: UBVLX
Newspaper Listing: UM Funds, BehavVal
19
Small-Cap Stock (Continued)
The Hartford Small Company HLS Fund
Investment Objective: The investment objective of the Hartford Small
Company HLS Fund is to provide superior returns relative to the Russell
2000 Growth Index by investing in stocks of small growth companies. These
companies typically exhibit relatively high, sustainable revenue growth,
rapid market share gains in a mature market or dominant market share in
a new, emerging market, and accelerating profitability, driven by material
expansion in operating margins over 2-3 years. The Fundʼs investment
approach focuses on adding value through bottom-up, fundamental
security selection. The Fund will contain 75 to 125 securities. International
companies will constitute less than 15% of the Portfolio.
Fund Expense Ratio: 0.75% (Class IA Shares)
Performance Benchmark: Russell 2500 Growth Index
Investment Manager: Sub-Advisor–Steven Angeli, Wellington
Management Company, LLP
Web Site Address: retire.hartfordlife.com
Ticker Symbol: HIASX
Newspaper Listing: Hartford HLS Fds IA: Smallco (in The Wall Street
Journal)
20
International
Philadelphia International Advisors, LP
International
Investment Objective: The Philadelphia International Fund, which is
managed/advised by Philadelphia International Advisors, LP (PIA), seeks
to provide maximum long-term total return consistent with reasonable risk
to principal. The Fund invests primarily in large-cap companies (market cap
minimum of $900 million) located outside the United States that are believed
to be undervalued. PIAʼs approach to international investing is long-term and
risk aware. PIA believes an unhedged portfolio of companies with traditional
value characteristics and positive company-specific catalysts, concentrated
in countries that also exhibit strong value characteristics, will consistently
outperform the market.
Performance Benchmark: MSCI EAFE (net)
Investment Manager: Andrew B. Williams
Web Site Address: www.piadvisors.net
Ticker Symbol: GTIIX
21
Socially Responsible
Savings Plus Socially Responsible Fund
(Neuberger Berman Socially Responsive Fund)
Investment Objective: Neuberger Berman Socially Responsive investment
option seeks long-term growth of capital. The fund normally invests at
least 80% of assets in common stocks issued by mid- to large-capitalization
companies that meet its financial and social criteria. Management seeks to
avoid companies that derive revenue from alcohol, tobacco, gambling, or
weapons or that are involved in nuclear power. The fund also does not invest
in any company that derives its total revenue primarily from non-consumer
sales to the military.
Investment Managers: Co-Managers Arthur Moretti and Ingrid Dyott and
Associate Portfolio Manager Sajjad Ladiwala
Web Site Address: www.retire.hartfordlife.com
Ticker Symbol: NBSTX
This variable annuity option is an underlying investment
of the Savings Plus Programʼs group variable annuity,
an unregistered group variable annuity that is issued by
Hartford Life Insurance Company.
22
Asset Allocation
Conservative Fund-Service Class
Objective: To maximize total investment return for a given level of risk.
Expense Ratio: 0.90%
Performance Benchmark: Conservative Composite Index
Investment Manager: Gartmore Global Investments
Web Site: www.gartmorefunds.com
Ticker Symbol: NDCSX
Newspaper Listing: NDCSX
Moderately Conservative Fund-Service Class
Performance Benchmark: Moderately Conservative Composite Index
Ticker Symbol: NSDCX
Newspaper Listing: NSDCX
23
Asset Allocation (Continued)
Moderate Fund-Service Class
Expense Reimbursement: 0.35% – 0.40%
Performance Benchmark: Moderate Composite Index
Ticker Symbol: NSDMX
Newspaper Listing: NSDMX
Moderately Aggressive Fund-Service Class
Investment Objective: To maximize total investment return for a given
level of risk.
Expense Ratio: 0.88% as of prospectus dated February 28, 2005
Performance Benchmark: Moderately Aggressive Composite Index
Ticker Symbol: NDMSX
Newspaper Listing: NDMSX
24
Asset Allocation (Continued)
Aggressive Fund-Service Class
Investment Objective: To maximize total investment return for a given
level of risk.
Performance Benchmark: Aggressive Composite Index
Ticker Symbol: NDASX
Newspaper Listing: NDASX
25
Brokerage
Account
T
®
Schwab Personal Choice Retirement Account
the Savings Plus association with Schwab,
you have access to a brokerage account that provides investment flexibility and state-of-the-art transaction and information capabilities.
HROUGH
®
A Schwab Personal Choice Retirement Account
(PCRA) allows for greater flexibility with your Savings
Plus investments by giving you the freedom to select and
manage your portfolio from a larger universe of mutual
funds, individual stocks, bonds, and a variety of other investment choices. You can choose a PCRA as well as any
of the core funds in Savings Plus for your investment
choices. The term “core funds” refers to the fund choices
currently offered through Savings Plus. You must choose
at least one core fund in addition to a PCRA.
You may open a PCRA if you have a 401(k) and/or 457
account with Savings Plus. If you participate in both
When you open a PCRA, you may transfer some of
your Savings Plus assets into any of the following
types of investments:
• PCRA offers more than 3,200 additional mutual funds, including more than 2,000 no loads, no transaction fee funds
®
through the Schwab Mutual Fund OneSource service.
For a prospectus on any mutual fund available through PCRA
containing more complete information, including management
fees, charges, and expenses, please call the Dedicated PCRA
Call Center at (888) 393-PCRA (7272). Please read the prospectus carefully before you invest or transfer money.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Exchange Traded Funds
Common and preferred stock*
Convertible bonds*
Corporate bonds
Convertible preferred stock*
American depository receipts of foreign corporations*
Taxable open-end and closed-end mutual funds
Listed options (limited to writing covered calls and buying
puts against long positions)
Government bonds and other securities issued or
guaranteed by the United States of America
Securities of any agency or instrumentality of the United
States of America
Commercial paper
Brokered certificates of deposit
Bankers acceptances
Limited partnerships*
Real Estate Investment Trusts (REITs)*
Taxable unit investment trusts
the 401(k) and 457 Plans, you may open a PCRA for
each Plan. If you have two PCRA accounts, the assets in
each account cannot be intermingled. In other words, you
may not transfer money back and forth between the two
PCRAs.
You must retain $2,500 or 50% of your total account
balance, whichever is less, in your Savings Plus core
account. Savings Plus may adjust the minimum total account balance that you are required to maintain in core
funds as a condition of your participation in the PCRA.
More detailed information about the PCRA is provided in
the Savings Plus PCRA handbook titled The Savings Plus
Brokerage Account. You may request this handbook and
enrollment information by calling Savings Plus at (866)
566-4777 and pressing option 4 to order forms and publications or download the handbook from our Web site.
The following investments are not permitted
within a PCRA:
Non-allowed investments include all common and preferred
stocks, convertible bonds, convertible preferred stocks, foreign
securities, REITs, and limited partnerships that are not listed
and traded on approved exchanges or markets.
Additional non-allowed investments include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Bank deposit products
Collateralized mortgage obligations
Collectibles (art, antiques, etc.)
Commodities and commodity futures
Direct participation plans
Foreign currencies
Insurance products (fixed and variable annuities, life
insurance contracts)
Municipal bonds
Precious metals
Real property
Short sales
Trust deeds
Tax-free open-end and closed-end mutual funds
Tax-free unit investment trusts
Unlisted options, option purchases (exception: buying puts
against long positions and writing covered calls), and
writing uncovered call or put options
Any other investments that are not on the list of allowed
investments
*Must be listed on an approved exchange or market which includes the New York Stock Exchange, American Stock Exchange, National Market System
sponsored by the National Association of Securities Dealers (NASD), National Association of Securities Dealers Automated Quotation System (NASDAQ),
National Quotation Bureau a/k/a Pink Sheets LLC, and any other exchange registered as a National Securities Exchange under Section 6 of the Securities
Exchange Act of 1934.
26
SECTION
6
T
Glossary of Technical Terms
following glossary provides definitions used by Savings Plus for technical terms. They should not be
considered as legal or formal definitions.
HE
Account—The record of all transactions affecting a
participantʼs investments. A participant may have a
401(k) Plan account and/or a 457 Plan account.
Aggressive Investing—An approach that accepts higher investment risk in exchange for potentially higher
returns.
Asset Allocation—The strategy of spreading investment funds across asset classes, such as cash and fixed
income, bonds, and stocks, to help offset risks and rewards. The allocation should be based on a participantʼs
goals, time horizon, and risk tolerance.
Benchmarks—Used as a basis for comparison, a
benchmark is a market performance standard by which
an investment optionʼs performance is measured. It is
an index representing the market performance of a specific asset category.
-Cap—An abbreviation of the term capitalization.
When used with large-, mid-, or small- and referring to
funds, cap indicates how much stock the companies in
the fund have issued and is thus available in the market.
Capitalization is computed by multiplying the number
of shares outstanding by the current share price and
often refers to the size of a company.
Conservative Investing—An approach that accepts
lower investment returns in exchange for potentially
more stable (usually lower) risk and less involved account management.
Core Account—Refers to the portion of a participantʼs
account that is invested in any of the investment options offered in the Savings Plus portfolio, excluding
the self-directed brokerage option (PCRA). The term is
used primarily for Savings Plus participants enrolled in
the PCRA to distinguish funds held in their core account from funds held in their PCRA account.
Diversification—A portfolio strategy designed to
spread risk by allocating assets among a variety of investments, such as cash and fixed income, bonds, and
stocks.
Dividend—Earnings paid by a company to its stockholders. Dividends are typically paid in cash or stock.
Depending on the fund where an account holder has
Section 6–Glossary of Technical Terms
money invested, dividends may be paid monthly, quarterly, or annually. Dividends paid by the funds in the Savings Plus Program are reinvested; that is, they are used to
purchase additional shares.
FDIC Insured—A U.S. government agency that insures
cash deposits, including certificates of deposit, that have
been placed in member institutions. The basic insured
amount for each depositor is capped at $100,000. The
FDICʼs mission is to maintain the stability of and public
confidence in the U.S. banking system.
Index—A statistical indicator providing a representation
of the value of the securities that constitute it. Indexes
often serve as barometers for a given market or industry
and benchmarks against which financial or economic
performance is measured. (Note: You cannot invest
directly into an index. Index performances are presented
for comparison only.) Performance of the indexes represented does not take into account fees or charges associated with purchasing securities.
The indexes used in this guide are as follows:
London Inter-bank Offered Rate (LIBOR)–LIBOR
is the base interest rate paid on deposits traded between
major banks in London. The LIBOR is established
daily through a consensus process overseen by the
British Bankers Association.
Lehman Brothers Aggregate Bond Index–The
Lehman Brothers Aggregate Bond Index represents
securities that are U.S. domestic, taxable, and dollar
denominated. The index covers the U.S. investment
grade fixed rate bond market, with index components
for government and corporate securities, mortgage
pass-through securities, and asset-backed securities.
Lehman Brothers 1–3 Year U.S. Government Bond
Index–This index is the one-to-three year component
of the U.S. Government index. It consists of securities
in the U.S. Government index with a maturity from
one up to—but not including—three years.
Morgan Stanley Capital International—Europe,
Australia, Far East (MSCI EAFE) Index (Net
Dividends)–Widely accepted as a benchmark for international stock performance, the MSCI EAFE Index
is an aggregate of 21 individual country indexes that
27
collectively represent many of the major markets of
the world. Net dividends indexes are calculated daily
and take into account actual dividends reinvested
daily before taxes are withheld but exclude special
tax credits declared by companies.
Russell Mid-Cap Index–This index measures the
performance of the 800 smallest companies in the
Russell 1000 Index, which represent approximately
25% of the total market capitalization of the Russell
1000 Index.
Russell 1000 Growth Index–This index measures
the performance of those Russell 1000 companies
with higher price-to-book ratios and higher forecasted growth values.
Russell Mid-Cap Value Index–This index measures
the performance of those Russell mid-cap companies
with lower price-to-book ratios and lower forecasted
growth values. The stocks are also members of the
Russell 1000 Value index.
Russell 1000 Index–This index measures the performance of the 1,000 largest companies in the Russell
3000 Index. The Russell 1000 Index represents approximately 92% of the total market capitalization of
the Russell 3000 Index.
Russell 1000 Value Index–This index measures
growth value.
Russell 2500 Growth Index–This index measures
with higher price-to-book ratios and higher forecasted growth values.
Russell 2500 Index–This index, which tracks the
2,500 smallest companies in the Russell 3000 Index,
represents approximately 17% of the total market
capitalization of the Russell 3000 Index.
Russell 2500 Value Index–This index measures
growth values.
Russell 3000 Index–This index measures the performance of the 3,000 largest U.S. companies on the
basis of total market capitalization, which represents
approximately 98% of the investable U.S. equity
market. As of the latest reconstitution, the average
market capitalization was approximately $4.8 billion;
the median market capitalization was approximately
$944.7 million. The index had a total market capitalization range of approximately $386.9 billion to
$182.6 million.
Russell Mid-Cap Growth Index–This index measures the performance of those Russell mid-cap companies with higher price-to-book ratios and higher
forecasted growth values. The stocks are also members of the Russell 1000 Growth index.
28
Standard & Poorʼs (S&P) 500 Index–The S&P
500 Index consists of 500 stocks chosen for market
size, liquidity, and industry group representation. It
is a market-value weighted index (stock price times
the number of shares outstanding), with each stockʼs
weight in the index proportionate to its market value.
Interest—The fee charged by a lender to a borrower for
the use of borrowed money, usually expressed as an annual percentage of the principal. The rate is determined
by the time value of the money, the credit risk of the
borrower, and the rate of inflation.
Moderate Investing—An approach that seeks to balance investment risk with return, often achieved through
the mixing and matching of various investment vehicles.
Mutual Fund Company—An investment company that
pools money from shareholders and invests in a variety of securities, including stocks, bonds, and money
market instruments. A mutual fund stands ready to buy
back (redeem) its shares at their current net asset value,
which depends on the total market value of the fundʼs
investment portfolio at the time of redemption. As openend investments, most mutual funds continuously offer
new shares to investors.
®
PCRA—Personal Choice Retirement Account . This is
a self-directed brokerage account provided by Charles
Schwab & Co., Inc., and offered through the Savings
Plus Program. Participants choosing to enroll in a PCRA
are allowed to manage investments in their 401(k) Plan
and/or 457 Plan.
Portfolio—A collection of investments owned by the
same individual or organization.
Prospectus—A legal document offering securities or
mutual fund shares for sale. Federal and state securities
regulators require that the prospectus in clude the fundʼs
investment objectives, policies and restrictions, fees and
expenses, and the process for buying and selling shares.
It should be read carefully before investing.
Rate of Return—The percentage of change in an investment, including appreciation or depreciation and
dividends or interest, over a given time period. It may
be expressed on an annual basis or as a return per year.
Total Return—The return on an investment, including
income from dividends and interest as well as appreciation or depreciation in the price of the security, over a
given time period, usually a year.
Separate Accounts—A privately managed investment
account opened through a financial advisor that uses
pooled money to buy individual assets. The privately
managed investment account differs from a mutual
fund because the investor (the Savings Plus Program)
directly owns the securities instead of owning a share in
a pool of securities.
Voice Response System (VRS)—The automated phone
system that allows you to access your account information, perform account transactions, and request SPP
materials. Account access requires a PIN.
Share—A unit of ownership.
Yield—The rate at which an investment pays out interest or dividend income, expressed in percentage terms. It
is calculated by dividing the amount paid by the price of
the security and annualizing the result.
29
in
en
t
ns
zo
ri
SPP
SAVINGS PLUS PROGRAM
o
expa
nd
re tire
m
h
g
ur
yo
State of California
Department of Personnel Administration
1800 15th Street
Sacramento, CA 95814-6614
Voice Response System: (866) 566-4777
Public: (916) 322-5070 • CALNET 492-5070
TTY: (800) 848-0833
Fax: (916) 327-1885 • CALNET 467-1885
DPA Web Site: www.dpa.ca.gov
Savings Plus Program Web Site: www.sppforu.com
The third-party administrator for Savings Plus is
Nationwide Retirement Solutions.
All information is current as of the date this handbook was
printed. The plan administrator reserves the right to amend any
of the procedures or plan provisions as outlined in this handbook or the official plan document to conform with governing
laws or Internal Revenue Code regulations issued subsequent to
the publication of this handbook. Such changes may be enacted
without prior announcement or the expressed consent or
agreement of plan participants. If there is any contradiction between the terms of the official plan document and this Investment
Guide, the official plan document will govern.
NRM 3226CA.1
2006 Investment Guide
Important Notice Addendum Fee Reduction for 5 funds
The enclosed Investment Guide (IG) was printed in February 2006. Five funds
included in this edition have been replaced with funds that have a reduced fee. This
cost savings will help enhance the net rate of return for each fund with no change to
the funds’ investment strategies and objectives.
The table below shows the previous fees prior to October 12, 2006 and the new fees
effective as of October 12, 2006. Additionally, the table shows the fund manager for
each of the new funds available.
Prior Fund Descriptor
Current
expense
ratio (%)
Growth Fund of America
.66
T. Rowe Price Mid Cap Value
.82
New Fund Descriptor
SPP Large Cap Managed Fund
- Growth ((Growth Fund of
America (R5 Shares) (new ticker
symbol: [7315] RGAFX))
SPP Mid Cap Managed Fund Value (separate account
managed by T. Rowe Price)
New
expense
ratio (%)
.38
.62 to .72
[7316
T. Rowe Price Mid Cap Growth
.80
SPP Mid Cap Managed Fund Growth (separate account
managed by T. Rowe Price)
.62 to .72
[7317]
JP Morgan Undiscovered
Managers Behavioral Value
1.40
Philadelphia International
.85
SPP Small Cap Managed Fund Blend (separate account
managed by Fuller & Thaler
Asset Management, Inc.) [7318]
SPP International Managed
Fund (separate account
managed by Philadelphia
International Advisors LP) [7319]
.82 to 1.02
.45 to .55
NOTE: The Voice Response System codes for the new funds have changed. They
are listed in [bold] after each fund. Additionally, ticker symbol for the Growth Fund of
America has changed and is listed in bold & italics.
Mutual funds are sold by prospectus. Prospectuses are available from our Web
site, www.sppforu.com, under Fund Information. Before investing, carefully
consider the fund's investment objectives, risks, charges and expenses. The
prospectus contains this and other important information. Read the prospectus
carefully before investing.
Our Web site also has additional information on the separate account funds. You can
obtain monthly and quarterly fund performance when you log onto your account, then
Select Fund Detail. The separate account funds are not publicly traded and are only
available through the Savings Plus Program.
Investing involves market risk, including the possible loss of principal. Funds investing
in stocks of small or emerging companies may have less liquidity than those investing
in larger, established companies and may be subject to greater price volatility and risk
than the overall stock market. Funds that invest internationally involve risks not
associated with investing solely in the U.S., such as currency fluctuation, political risk,
differences in accounting and the limited availability of information.
Use the IG to learn more about long-term investing and asset allocation.
If you need assistance please call toll-free 1-866-566-4777, and press * 0 to speak
with a customer service representative. Representatives are available Monday
through Friday, 8:30 a.m. to 4:00 p.m., Pacific Time (PT).
Nationwide Investment Services Corporation, member NASD.
NRM-3931 CA

The Savings Plus Investment Guide

Transcription

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