TSP Fund Information Sheets - Thrift Savings Plan-ag

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TSP Fund Information Sheets - Thrift Savings Plan-ag Powered By Docstoc
					Fund Information
April 2013
                 We’re glad you asked . . .
. . . about your TSP investment options. The information in this booklet will help you
decide how to invest your account.
To get started, first determine your approach to investing. You can manage your
own account or put your money in one of the “Lifecycle” funds — L Funds — that are
invested according to a professionally determined mix of the G, F, C, S, and I Funds
based on various time horizons. Remember that the amount you contribute and your
investment allocation are the most important factors affecting the growth of your
TSP account.
If you choose your own investment mix from the G, F, C, S, and I Funds, think about
these points:
✓     Consider both risk and return. The F Fund (bonds) and the C, S, and I Funds
      (stocks) have higher potential returns than the G Fund (Government securities).
      But stocks and bonds also carry the risk of investment losses that the G Fund
      does not have. On the other hand, investing entirely in the G Fund may not
      give you the returns you need to meet your retirement savings goal.
✓     You need to be comfortable with the amount of risk you expect to take.
      Your investment comfort zone should allow you to use a “buy and hold” strat-
      egy so that you are not chasing market returns during upswings or abandoning
      your investment strategy during downswings.
✓     You can reduce your overall risk by diversifying your account. The five
      individual TSP funds offer a broad range of investment options, including Gov-
      ernment securities, bonds, and domestic and foreign stocks. Generally, it’s best
      not to put all of your eggs in one basket, except in the case of the L Funds,
      which are automatically diversified.
✓     The amount of risk you can sustain largely depends upon your investment
      time horizon. The more time you have before you need to withdraw from your
      account, the more risk you can take. (This is because early losses can be offset
      by later gains.) As your time horizon shortens, you may need to modify your in-
      vestment mix.
✓     Periodically review your investment choices. Check the distribution of your
      account among the funds to make sure that the mix you chose is still appropri-
      ate for your situation. If not, make an “interfund transfer” (IFT) to rebalance your
      account to the allocation you want. For each calendar month, your first two IFTs
      can redistribute money in your account among any or all of the TSP funds. After
      that, for the remainder of the month, your IFTs can only move money into the
      Government Securities Investment (G) Fund. If you have both a civilian and a
      uniformed services account, this applies to each account separately.

For more information about TSP investment options, visit the website www.tsp.gov.
You can get recent and historical rates of return, use the calculators to estimate the
effect of various rates of return on your account balance, and read TSP Highlights ar-
ticles about investing.

Remember, there is no guarantee that future rates of return will match historical rates.
                                                                       L Funds
                                                                           LifecycLe funds
                                                                              lifecycle funds

Information                                                                    Key Features
 as of December 31, 2012
                                         •	 The L Funds diversify participant accounts among the G, F, C, S, and I
                                           Funds using professionally determined investment mixes (allocations)
 net Assets                                that are tailored to different time horizons. The L Funds are rebalanced
 $43.7 billion
                                           to their target allocations each business day. The investment mix of each
                                           fund adjusts quarterly to more conservative investments as the fund’s
 Administrative expenses                   time horizon shortens.
 $0.27 per $1,000 account balance,
 .027% (2.7 basis points)                •	 The objective of the L Funds is to provide the highest expected rate of
                                           return for the amount of risk expected.

 investment Objective                    •	 Investing in the L Funds is not a guarantee against loss and does not
                                           eliminate risk. The L Funds are subject to the risks inherent in the under-
                          Preservation
 Fund       Growth        of Assets        lying funds, and can have periods of gain and loss.
 L 2050     High          Very Low
 L 2040     High          Low
                                         •	 The L Funds’ returns will be approximately equal to the weighted average
 L 2030     Moderate/     Low              of the G, F, C, S, and I Funds’ returns. Earnings are calculated daily, and
            High                           there is a daily share price for each L Fund.
 L 2020     Moderate      Moderate
 L Income   Low           High

                                                                           Allocation Targets
 Time Horizons                                                                         January 2013
 (when you expect to need the money)
                                                              L Income                                                   L 2020
Choose:       If your time horizon is:
L 2050        2045 or later                                            6%                                                    9%
L 2040        2035 through 2044
                                                                            12%
                                                                       F               3%
                                                                                       3%
L 2030        2025 through 2034                                            C      S                            29%           S        16%
                                                                                        5%                               C       I
                                                                                   I
L 2020        2015 through 2024                                    G
                                                                                                                             G
L Income      Now withdrawing                                                                                        F
              or withdrawing soon                                                                              7%
                                                            74%
                                                                                                                                 39%

 inception
 The first L Funds were
 introduced August 1, 2005                      L 2030                                       L 2040                                        L 2050

                                                13%
                                                                                        17%
                                                                                                         22%                         19%            26%
                                                             20%
                                                    S
                                                                                                 S                                         S
                                                        I                                            I                                         I
                                                C                                            C                                                            G 4%
                                          35%           G                                                G                                 C        F
                                                                                       39%           F        13%                                       8%
                                                    F        24%                                                                     43%
                                                                                                         9%
                                                8%




                                                                                                                     THRIFT SAVINGS PLAN | Page 1
L Fund Facts
The L Funds are intended to meet the
investment needs of TSP participants
with time horizons that fall into five differ-                        L Funds and the Efficient Frontier
ent date ranges, as shown on the front.
The five L Funds were designed for the                              10%
TSP by Mercer Investment Consulting,
Inc. The asset allocations are based on
Mercer’s assumptions regarding future
investment returns, inflation, economic                             8%                                                       2050
growth, and interest rates. The TSP re-                                                                              2040
                                                                                                             2030




                                                  expected Return
views these assumptions at least annually                                                            2020
to determine whether changes to the al-                             6%
locations are warranted.                                                                                                            G Fund
                                                                                 Income
L 2050, L 2040, L 2030, and L 2020 are for                                                                                          F Fund
participants with time horizons that fall                           4%                                                              C Fund
within the defined date ranges. The asset
allocations of these funds are adjusted                                                                                             S Fund
quarterly, moving to a more conservative
                                                                    2%                                                               I Fund
mix, gradually approaching that of the
L Income Fund. Between quarterly adjust-
ments, the asset allocation of each fund
is maintained through daily rebalancing                             0%
to that fund’s target allocation. When a                                  0%      5%           10%               15%                20%
fund reaches its horizon, it will roll into the
L Income Fund, and a new fund will be
added with a more distant time horizon.                                        expected Risk (standard deviation)
For example, in 2012, the L 2010 Fund
rolled into the L Income Fund, and shortly
thereafter the L 2050 Fund was created.
                                                  Expected variability of the investment              in proportion to their allocations in each
The L Income Fund is designed to pro-             returns is a measure of risk in investing.          L Fund. The L Funds do not have any
duce current income for participants              For each risk level, there is one “optimal”         additional charges. There are no restric-
who are already receiving money from              asset allocation that has the highest ex-           tions on investing in the L Funds. You may
their accounts through monthly pay-               pected return. The collection of optimal            invest any part of your TSP account in any
ments and for participants who plan to            asset allocations make up the “Efficient            L Fund, and even invest in more than one
withdraw or to begin withdrawing from             Frontier,” which is shown by the curve.             L Fund. But it is recommended that you
their accounts in the near future. The as-        Asset allocations that are below the Ef-            put your entire TSP account into just
set allocation of the L Income Fund does          ficient Frontier are less than optimal, be-         one L Fund — the one with the target
not change over time; it is maintained            cause there is an asset allocation along            date that is closest to your time horizon.
through daily rebalancing.                        the frontier that has a higher expected             Any other strategy may result in an asset
                                                  return for the same level of risk, or lower         allocation that is less than optimal (i.e.,
The pie charts on the front show the              risk for the same expected return. The              not on the Efficient Frontier), or that is not
January 2013 target allocations of the            five TSP L Funds have asset allocations             suited to your investment time horizon.
L Income, L 2020, L 2030, L 2040, and             that correspond to points shown on the
L 2050 Funds in each of the five underly-         Efficient Frontier. Putting your entire             Remember, however, that expected
ing TSP funds. The allocation to the              TSP account into one of the L Funds                 risk and return are based on assump-
G Fund, which has the least amount of             will help you to achieve the best                   tions about future economic conditions
risk, is largest in the L Income Fund, and        expected return for the amount of                   and investment performance. There
becomes successively smaller with the             expected risk that is appropriate for               is no guaranteed rate of return for any
more distant target dates. In contrast,           your time horizon.                                  period, either short-term or long-term.
the allocations to the F, C, S, and I Funds,
which carry varying degrees of risk, but          Over time, the L Funds (except for the              Note: Participants’ interfund transfer
also the potential for higher returns, are        L Income Fund) will “roll down” the Ef-             (IFT) requests redistribute their existing
largest in L 2050 and smallest in the             ficient Frontier. That means that as their          account balances among the TSP funds.
L Income Fund.                                    allocations are adjusted each quarter,              For each calendar month, the first two
                                                  the funds shift left on the line, becoming          IFTs can redistribute money among any or
The graph above depicts the expected              less risky until they eventually merge into         all of the TSP funds. After that, for the re-
return and risk associated with each of           the L Income Fund.                                  mainder of the month, IFTs can only move
the five L Funds based on the target                                                                  money into the G Fund. (For participants
allocations. The expected returns are             The administrative expenses associated              with more than one TSP account, this rule
derived from Mercer’s economic as-                with the L Funds are those of the under-            applies to each account separately.)
sumptions and are not guaranteed.                 lying G, F, C, S, and I Funds, calculated

Page 2
                                                                 G Fund
                                               GOveRnmenT secuRiTies invesTmenT fund

Information                                                            Key Features
    as of December 31, 2012
                                            •	 The G Fund offers the opportunity to earn rates of interest similar to
                                              those of U.S. Government notes and bonds but without any risk of loss
    net Assets                                of principal and very little volatility of earnings.
    $158.5 billion
                                            •	 The objective of the G Fund is to maintain a higher return than inflation
                                              without exposing the fund to risk of default or changes in market prices.
    Administrative expenses
    $0.27 per $1,000 account balance,       •	 The G Fund is invested in short-term U.S. Treasury securities specially
    .027% (2.7 basis points)                  issued to the TSP. Payment of principal and interest is guaranteed by the
                                              U.S. Government. Thus, there is no “credit risk.”
                                            •	 The interest rate resets monthly and is based on the weighted average
                                              yield of all outstanding Treasury notes and bonds with 4 or more years
                                              to maturity.
                                            •	 Earnings consist entirely of interest income on the securities.
                                            •	 Interest on G Fund securities has, over time, outpaced inflation and
                                              90-day T-bills.




Rates of Return                                                     Growth of $100
                    2003 – 2012
                                                                           Since Inception
%
                                            $450
5
                                             400                                                G Fund
4
                                                                                                $ 416
                                             350
3

2

1                                            300
0
    2003                             2012                                                                 Inflation
                                             250                                                          $206
               After Expenses                200
     1-Year                  1.47%
                                             150
     3-Year                  2.24%
     5-Year                  2.69%
                                             100
                                                   4/87                                                               12/12
    10-Year                  3.61%
    Since Inception          5.69%
    April 1, 1987




                                                                                                THRIFT SAVINGS PLAN | Page 3
G Fund Facts
By law, the G Fund must be invested in
nonmarketable U.S. Treasury securities
specially issued to the TSP. The G Fund
                                                                          G Fund Yield Advantage
investments are kept by electronic en-                                                April 1987 – December 2012
tries, which do not involve any transac-
tion costs to the TSP. The G Fund rate is
set once a month by the U.S. Treasury                        12%
based on a statutorily prescribed formu-
la (described below), and all G Fund in-                     10%




                                            Percent Return
vestments earn that interest rate for the
month. (The G Fund rate is also used in                      8%
other Government programs, such as                                                                                         G Fund Rate
                                                             6%
the Social Security and Medicare trust
funds and the Civil Service Retirement                       4%
and Disability Fund.)
                                                                                               90-day T-Bill Rate
                                                             2%
Although the securities in the G Fund
earn a long-term interest rate, the                          0%
                                                                   1987 1989   1991    1993   1995   1997   1999    2001    2003   2005   2007   2009   2012
Board’s investment in the G Fund is re-
deemable on any business day with no                                                                         Year
risk to principal. The value of  G Fund
securities does not fluctuate; only the
interest rate changes. Thus, when the
monthly G Fund interest rate goes up,       The G Fund Yield Advantage — The
G Fund earnings accrue faster; when         G Fund rate calculation results in an in-
the G Fund interest rate declines,          termediate-term rate being earned on
G Fund earnings accrue more slowly.         short-term securities. Because interme-
                                            diate-term interest rates are generally
Calculation of G Fund Rate —                higher than short-term rates, G Fund
G Fund securities earn a statutory inter-   securities usually earn a higher rate of
est rate equal to the average market        return than do short-term marketable
yield on outstanding marketable U.S.        Treasury securities. In the chart above,
Treasury securities with 4 or more years    the G Fund rate is compared with the
to maturity. The G Fund rate is calculat-   rate of return on 90-day marketable
ed by the U.S. Treasury as the weighted     Treasury securities (T-bills). From Janu-
average yield of approximately 125          ary 1988 through December 2012, the
U.S. Treasury securities on the last day    G Fund rate was, on average, 1.78 per-
of the previous month. The yield of the     centage points higher per year than the
security has a weight in the G Fund rate    90-day T-bill rate.
calculation based on the amount out-
standing. (The larger the dollar amount
of a security outstanding, the larger its
weight in the calculation.) The Treasury
securities used in the G Fund rate calcu-
lation have a weighted average maturity
of approximately 11 years.




Page 4
                                                                           F Fund
                                                            fixed iNCOMe iNdex iNvestMeNt fuNd

Information                                                                     Key Features
    as of December 31, 2012
                                                    •	 The F Fund offers the opportunity to earn rates of return that exceed
    Net Assets                                        those of money market funds over the long term (particularly during
    $28.6 billion                                     periods of declining interest rates), with relatively low risk.

    Administrative expenses                         •	 The objective of the F Fund is to match the performance of the Barclays
    $0.27 per $1,000 account balance,                 Capital U.S. Aggregate Bond Index, a broad index representing the U.S.
    .027% (2.7 basis points)                          bond market.

    Average duration
                                                    •	 The risk of nonpayment of interest or principal (credit risk) is relatively low
                                                      because the fund includes only investment-grade securities and is broad-
    4.56 years
                                                      ly diversified. However, the F Fund has market risk (the risk that the value
    Average Current Yield                             of the underlying securities will decline) and prepayment risk (the risk that
    3.38%                                             a security in the fund will be repaid before it matures).
                                                    •	 Earnings consist of interest income on the securities and gains (or
    Benchmark index
                                                      losses) in the value of the securities.
    Barclays Capital U.S.
    Aggregate Bond Index
    www.barcap.com

    Asset Manager
    BlackRock Institutional Trust
    Company, N.A.
                                                                             Growth of $100
                                                                                    Since Inception
Rates of Return                                     $550
                                                                                                                     F Fund
                                                     500                                                             $543
                   2003 – 2012
%                                                    450
8

6
                                                     400
4
                                                     350
2
                                                     300                                                            Inflation
0                                                    250                                                            $200
     2003                                    2012
                                                     200
                                    Barclays         150
                                      U.S.
                                   Aggregate         100
                       F Fund*       Index                 1/88                                                                 12/12
      1-Year            4.29%        4.22%
      3-Year            6.29%        6.19%
      5-Year            6.06%        5.95%
    10-Year             5.25%        5.18%
    Since               7.01%        7.24%
    Inception
    January 29, 1988
                 *After expenses

                                                                                                         THRIFT SAVINGS PLAN | Page 5
F Fund Facts
By law, the F Fund must be invested in
fixed-income securities. The Federal
Retirement Thrift Investment Board has         Barclays Capital U.S. Aggregate Index
chosen to invest the F Fund in an index
fund that tracks the Barclays Capital
                                                                      Bond Market Sectors
U.S. Aggregate (U.S. Aggregate) Bond                                      December 31, 2012
Index, formerly the Lehman Brothers
U.S. Aggregate Index, a broadly diver-
                                                                                           Government/
sified index of the U.S. bond market.                                                   Government-Related
                                                                                               41%
The U.S. Aggregate Index consists
of high quality fixed-income securities
with maturities of more than one year.
The index is comprised of Treasury and
Agency bonds, asset-backed securi-
ties, and corporate and non-corporate
bonds. On December 31, 2012, the
index included 8,080 notes and bonds.            Asset-Backed
                                                   Securities
Its average current yield was 3.27%,                 32%
which means that on an annual basis,
interest income equaled approximately
3.27% of the return of the U.S. Aggre-                                                                       Credit
gate Index. The average duration (a                                                                           27%
measure of interest rate risk) of the U.S.
Aggregate Index was 4.55 years, which
means that a 1% increase (decrease) in
interest rates could be expected to re-
sult in a 4.55% decrease (increase) in the
price of a security. New issues are added
continuously to the U.S. Aggregate In-
dex, and older issues drop out as they       Note: Participants’ interfund transfer
move to within one year of maturity.         (IFT) requests redistribute their exist-
                                             ing account balances among the TSP
F Fund Investments — The F Fund is           funds. For each calendar month, the
invested in a separate account that is       first two IFTs can redistribute money
managed by BlackRock Institutional           among any or all of the TSP funds. After
Trust Company, N.A. Because the U.S.         that, for the remainder of the month,
Aggregate Index contains such a large        IFTs can only move money into the
number of securities, it is not feasible     G Fund. (For participants with more
for the U.S. Debt Index Fund to invest       than one TSP account, this rule applies
in each security in the index. Instead,      to each account separately.)
BlackRock selects a large representa-
tive sample of the various types of
mortgage-backed, U.S. Government,
corporate, and foreign government
securities included in the overall index.
Within each sector, BlackRock selects
securities that, as a whole, are designed
to match important index characteris-
tics such as duration, yield, and credit
rating. The performance of the U.S.
Debt Index Fund is evaluated on the
basis of how closely its returns match
those of the U.S. Aggregate Index.




Page 6
                                                                        C Fund
                                                                           und
                                                      Common StoCk Index InveStment Fund
                                                      cOmmOn sTOck index invesTmenT fund


Information                                                                   Key Features
      as of December 31, 2012                    •	 The C Fund offers the opportunity to earn a potentially high investment
                                                   return over the long term from a broadly diversified portfolio of stocks
      net Assets                                   of large and medium-sized U.S. companies.
      $88.9 billion
                                                 •	 The objective of the C Fund is to match the performance of the Standard
                                                   & Poor’s 500 (S&P 500) Index, a broad market index made up of stocks of
      Administrative expenses                      500 large to medium-sized U.S. companies.
      $0.27 per $1,000 account balance,
      .027% (2.7 basis points)                   •	 There is a risk of loss if the S&P 500 Index declines in response to changes
                                                   in overall economic conditions (market risk).
      Benchmark index                            •	 Earnings consist of gains (or losses) in the prices of stocks and dividend
      Standard & Poor’s 500
                                                   income.
      Stock Index
      www.standardandpoors.com


      Asset manager                                                        Growth of $100
      BlackRock Institutional Trust                                               Since Inception
      Company, N.A.
                                                 $1000
                                                                                                C Fund
                                                   800                                          $966

Rates of Return                                    600

                     2003 – 2012
                                                   400                                                  Inflation
                                                                                                        $200
 %
30                                                 200
20
10
 0                                                    0
-10                                                       1/88                                                            12/12
-20
-30
-40
      2003                                2012




                         C Fund*
                                     S&P 500
                                      Index
                                                                 S&P 500 Top Ten Holdings
      1-Year             16.07%       16.00%
                                                                              as of December 31, 2012
       3-Year            10.90%       10.87%
       5-Year             1.71%        1.66%
                                                   Apple, Inc.                                     Microsoft Corp.
      10-Year             7.12%        7.10%       Exxon Mobil Corp.                               Johnson & Johnson
      Since               9.50%        9.71%       General Electric Co.                            AT&T, Inc.
      Inception                                    Chevron Corp.                                   Google, Inc.
      January 29, 1988
                                                   International Business Machines Corp.           Procter & Gamble
                   *After expenses



                                                                                                      THRIFT SAVINGS PLAN | Page 7
C Fund Facts
By law, the C Fund must be invested in
a portfolio designed to replicate the
performance of an index of stocks rep-                                        S&P 500 Index
resenting the U.S. stock markets. The                                     Major Industry Groups
Federal Retirement Thrift Investment
Board has chosen as its benchmark the                                              December 31, 2012
Standard & Poor’s 500 (S&P 500) Index,
which tracks the performance of major
U.S. companies and industries.                                                         Health Care
                                                                           Health Care   12.0%           Energy
                                                                                                         11.0%
The S&P 500 Index is an index of 500                                         12.0%                                    Energy
large to medium-sized U.S. compa-                             Consumer                                                11.0%
                                                               Staples                                                       Financials
nies that are traded in the U.S. stock                     Consumer
                                                                10.6%                                                          15.6%
markets. The index was designed by                          Staples
Standard & Poor’s Corporation (S&P)                          10.6%

to provide a representative measure of
U.S. stock markets’ performance. The
companies in the index represent 165                 Industrials                                                                   Financials
                                                       Industrials
                                                        10.1%                                                                        15.6%
sub-industries classified into the 10 ma-                10.1%
jor industry groups shown in the chart.                                                                                            Information
                                                                                                                                   Technology
The stocks in the S&P 500 Index repre-                                                                                                19.0%
sent approximately 81% of the market
                                                        Consumer
value of the U.S. stock markets.                       Discretionary
                                                          11.5%
                                                                  Consumer
The S&P 500 is considered a “big com-                            Discretionary                                             Information
                                                                       Utilities                                           Technology
pany” index. As of December 31, 2012,                               11.5%
                                                                        3.4%           Utilities    Materials     Telecom
                                                                                   Materials                      Services    19.0%
the largest 100 companies in the S&P                                                    3.4%           3.6%
                                                                                                   Telecom
                                                                                    3.6%           Services        3.1%
500 represented approximately 65%
                                                                                                     3.1%
of the index’s market value. The S&P
500 Index includes 390 securities trad-
ed on the New York Stock Exchange
and 110 securities that are traded on
the NASDAQ. The market value of the         C Fund Investments — The C Fund                           G Fund. (For participants with more
largest company in the index is approxi-    is invested in a separate account that                    than one TSP account, this rule applies
mately $500 billion; the market value of    is managed by BlackRock Institutional                     to each account separately.)
the smallest company is approximately       Trust Company, N.A. The C Fund holds
$1.4 billion.                               all the stocks included in the S&P 500
                                            Index in virtually the same weights
The S&P 500 Index is weighted by            that they have in the index. The per-
float-adjusted market capitalization, in    formance of the C Fund is evaluated
which a company’s market value and its      on the basis of how closely its returns
weighting in the index are calculated       match those of the S&P 500 Index. A
using the number of shares that are         portion of the C Fund assets is reserved
freely traded, rather than all outstand-    to meet the needs of daily participant
ing shares. Shares that are not freely      activity. This liquidity reserve is invested
traded, such as the holdings of control-    in S&P 500 Index futures contracts.
ling shareholders and their families,
company management, and other               Note: Participants’ interfund transfer
companies, are excluded from the cal-       (IFT) requests redistribute their exist-
culation. A company’s weighting in the      ing account balances among the TSP
index is the float-adjusted market value    funds. For each calendar month, the
of the company (that is, the share price    first two IFTs can redistribute money
multiplied by the number of freely trad-    among any or all of the TSP funds. After
ed shares outstanding) as a percentage      that, for the remainder of the month,
of the combined float-adjusted market       IFTs can only move money into the
value of all companies in the index.

Page 8
                                                                           s Fund
                                                   smAll cAPiTAlizATiOn sTOck index invesTmenT fund

Information                                                                     Key Features
      as of December 31, 2012
                                                   •	 The S Fund offers the opportunity to earn a potentially high investment
                                                     return over the long term by investing in the stocks of small and medium-
      net Assets
                                                     sized U.S. companies.
      $29.3 billion
                                                   •	 The objective of the S Fund is to match the performance of the Dow Jones
      Administrative expenses                        U.S. Completion Total Stock Market (TSM) Index, a broad market index
      $0.27 per $1,000 account balance,              made up of stocks of U.S. companies not included in the S&P 500 Index.
      .027% (2.7 basis points)
                                                   •	 There is a risk of loss if the Dow Jones U.S. Completion TSM Index de-
                                                     clines in response to changes in overall economic conditions (market risk).
      Benchmark index
      Dow Jones U.S.                               •	 Earnings consist of gains (or losses) in the prices of stocks and dividend
      Completion TSM Index                           income.
      www.djindexes.com


      Asset manager
      BlackRock Institutional Trust
                                                                             Growth of $100
      Company, N.A.                                                                 Since Inception

                                                   $200                                                  S Fund
                                                                                                         $223

Rates of Return                                     150

                     2003 – 2012
                                                                                                                   Inflation
 %
                                                    100
                                                                                                                   $130
 50
 40
 30
 20
 10
  0
-10
-20                                                  50
-30
-40
                                                          5/01                                                                12/12
       2003                                 2012




                                   Dow Jones
                                      U.S.          Dow Jones U.S. Completion TSM Index
                                   Completion
                     S Fund*       TSM Index                                 Top Ten Holdings
       1-Year         18.57%        17.89%                                     as of December 31, 2012
       3-Year         13.92%        13.43%
       5-Year          4.22%         4.10%            General Motors Co.                         Facebook, Inc.
      10-Year         10.79%        10.75%            Las Vegas Sands Corp.                      Liberty Media Corp.
      Since            7.12%         7.10%            Transocean, Ltd.                           Regeneron Pharmaceuticals, Inc.
      Inception                                       Liberty Global, Inc.                       Bunge, Ltd.
      May 1, 2001                                     Annaly Capital Management, Inc.            Liberty Interactive Corp.
                    *After expenses


                                                                                                      THRIFT SAVINGS PLAN | Page 9
S Fund Facts
By law, the S Fund must be invested in a
portfolio designed to replicate the per-
formance of an index of U.S. common              Dow Jones U.S. Completion TSM Index
stocks, excluding those that are held in                                    Major Industry Groups
the C Fund. The Federal Retirement Thrift
Investment Board has chosen as its bench-                                             December 31, 2012
mark the Dow Jones U.S. Completion
Total Stock Market Index, which tracks the
performance of the actively traded non-                                                           Industrials
S&P 500 stocks in the U.S. stock markets.                            Information
                                                                                                    15.3%
                                                                     Technology
                                                                        15.1%                                                Consumer
The Dow Jones U.S. Completion Total                                                                                         Discretionary
Stock Market Index is an index of all                                                                                          15.9%
actively traded U.S. common stocks that
are not included in the S&P 500 Index.
The index is designed to be the broadest               Health Care
                                                         10.4%
measure of the non-S&P 500 domestic
stock markets. As of December 31, 2012,
the index was comprised of 3,105 com-
mon stocks. The Dow Jones U.S. Comple-
tion TSM Index made up approximately
19% of the market value of the U.S. stock                                                                                          Financials
markets; the S&P 500 accounted for the                                                                                               22.7%
                                                               Energy
other 81%. Thus, the combined S Fund                            6.6%
and C Fund cover virtually the entire U.S.
stock markets.                                                            Materials
                                                                           5.9%       Utilities                 Telecom
                                                                                                  Consumer
                                                                                       3.7%        Staples      Services
The Dow Jones U.S. Completion TSM                                                                   3.4%          1.0%
Index is weighted by float-adjusted mar-
ket capitalization, in which a company’s
market value and its weighting in the
index are calculated using the number
of shares that are freely traded, rather
                                                BlackRock’s Extended Market Index Fund                   The S Fund invests in the Extended Market
than all outstanding shares. Shares that
                                                to invest in every stock in the index. The               Index Fund by purchasing shares of the
are not freely traded, such as the hold-
                                                BlackRock fund holds the stocks of most                  Extended Market Index Fund “E,” which,
ings of controlling shareholders and
                                                of the companies in the index with market                in turn, holds a liquidity pool and shares of
their families, company management,
                                                values greater than $1 billion. However,                 the Extended Market Index Master Fund.
and other companies, are excluded from
                                                a mathematical sampling technique is                     As of December 31, 2012, S Fund holdings
the calculation. A company’s weighting
                                                used to select among the smaller stocks.                 constituted $29.3 billion of the Extended
in the index is the float-adjusted market
                                                BlackRock’s mathematical model consid-                   Market Index Master Fund, which itself
value of the company (that is, the share
                                                ers size and industry group to match the                 held $36.8 billion in securities.
price multiplied by the number of freely
                                                industry weights in the index. Within each
traded shares outstanding) as a percent-
                                                industry group, BlackRock selects stocks                 Note: Participants’ interfund transfer
age of the combined float-adjusted mar-
                                                that, together, are expected to produce                  (IFT) requests redistribute their existing
ket value of all companies in the index.
                                                a return that is very close to the industry’s            account balances among the TSP funds.
As of December 31, 2012, the largest
                                                return in the Dow Jones U.S. Completion                  For each calendar month, the first two
100 companies in the Dow Jones U.S.
                                                TSM Index. The performance of the Ex-                    IFTs can redistribute money among any or
Completion TSM Index represented ap-
                                                tended Market Index Fund is evaluated                    all of the TSP funds. After that, for the re-
proximately 25% of the index.
                                                on the basis of how closely its returns                  mainder of the month, IFTs can only move
                                                match those of the Dow Jones U.S. Com-                   money into the G Fund. (For participants
BlackRock’s Extended Market Index
                                                pletion TSM Index. A portion of Extend-                  with more than one TSP account, this rule
Fund — The S Fund is invested in Black-
                                                ed Market Index Fund assets is reserved                  applies to each account separately.)
Rock’s Extended Market Index Fund. The
                                                to meet the needs of daily client activity.
Dow Jones U.S. Completion TSM Index
                                                This liquidity reserve is invested in futures
contains a large number of stocks, includ-
                                                contracts of the S&P 400 and Russell
ing illiquid stocks with low trading volume
                                                2000 (other broad equity indexes).
and stocks with prices lower than $1.00
per share. Therefore, it is not efficient for

Page 10
                                                                             I Fund
                                                   inTeRnATiOnAl sTOck index invesTmenT fund

Information                                                                        Key Features
  as of December 31, 2012
                                                   •	 The I Fund offers the opportunity to earn a potentially high investment
                                                     return over the long term by investing in the stocks of companies in de-
  net Assets
                                                     veloped countries outside the United States.
  $24.6 billion
                                                   •	 The objective of the I Fund is to match the performance of the Morgan
  Administrative expenses                            Stanley Capital International EAFE (Europe, Australasia, Far East) Index.
  $0.27 per $1,000 account balance,
  .027% (2.7 basis points)
                                                   •	 There is a risk of loss if the EAFE Index declines in response to changes in
                                                     overall economic conditions (market risk) or in response to increases in
                                                     the value of the U.S. dollar (currency risk).
  Benchmark index
  Morgan Stanley Capital                           •	 Earnings consist of gains (or losses) in the prices of stocks, currency
  International EAFE Stock Index                     changes relative to the U.S. dollar, and dividend income.
  www.msci.com


  Asset manager
  BlackRock Institutional                                                    Growth of $100
  Trust Company, N.A.                                                               Since Inception
                                                   $200
                                                                                                             I Fund
                                                                                                             $159
Rates of Return                                     150

                  2003 – 2012                                                                                       Inflation
 %
 40
                                                    100                                                             $130
 30
 20
 10
  0
-10
-20                                                  50
-30
-40                                                       5/01                                                                  12/12
-50
      2003                                  2012




                   I Fund*
                                   EAFE
                                   Index                         MSCI EAFE Top Ten Holdings
   1-Year          18.62%         17.32%
   3-Year            4.13%          3.56%                                      as of December 31, 2012
   5-Year          -3.30%         -3.69%
  10-Year            8.39%          8.21%
                                                          Nestlé S.A.                              Royal Dutch Shell PLC
  Since              4.06%          3.97%                 HSBC Holdings (GB) PLC                   Toyota Motor Corp.
  Inception                                               Novartis AG                              BHP Billiton, Ltd.
  May 1, 2001
                                                          Roche Holding Genuss                     Vodafone Group PLC
                *After expenses                           BP PLC                                   Sanofi S.A.




                                                                                                      THRIFT SAVINGS PLAN | Page 11
I Fund Facts
By law, the I Fund must be invested in a    index. Similarly, a
portfolio designed to track the perfor-
mance of an index of common stocks
                                            country’s weighting
                                            in the EAFE Index is
                                                                           EAFE Equity Index Fund
representing international stock mar-       the float-adjusted                     Country Composition
kets outside of the United States. The      market value of its
Federal Retirement Thrift Investment        stock market as a                             December 31, 2012
Board has chosen as its benchmark the       percentage of the                                        Percent of        Number of
Morgan Stanley Capital International        combined float-            Country                       Holdings*         Companies
EAFE (Europe, Australasia, Far East)        adjusted market
                                                                       europe
Index, which tracks the overall perfor-     value of all stock          Austria                         0.3                  9
mance of the major companies and in-        markets included in         Belgium                         1.2                 11
dustries in the European, Australian, and   the EAFE Index.             Denmark                         1.2                 11
Asian stock markets.                                                    Finland                         0.8                 14
                                            BlackRock’s EAFE            France                          9.6                 72
A significant component of the return       Index Fund — The            Germany                         8.8                 51
                                                                        Greece                          0.1                  2
of the EAFE Index (and the I Fund) re-      BlackRock Fund                                              0.3                  4
                                                                        Ireland
sults from changes in the value of the      holds common                Italy                           2.3                 25
U.S. dollar relative to the currencies of   stocks of all the           Netherlands                     2.5                 22
the countries represented in the index.     companies repre-            Norway                          0.9                 10
For example, the EAFE Index returned        sented in the EAFE          Portugal                        0.2                  5
                                                                        Spain                           3.0                 23
7.75% in 2010, but that return included a   Index in virtually                                          3.2                 32
                                                                        Sweden
decrease in the value of the U.S. dollar,   the same weights            Switzerland                     8.7                 39
which increased the return by 2.93%.        that they have in the       United Kingdom                 22.4                106
                                            index. The return on           Europe                      65.5%               436
The EAFE Index, published by Morgan         the BlackRock Fund
Stanley Capital International (MSCI), is    (and on the I Fund)         Australasia/far east
an index of the equity markets of the       will differ from that         Australia                        8.9                  69
developed world outside of the United                                     Hong Kong                        3.1                  41
                                            of the EAFE Index             Israel                           0.5                  10
States and Canada. It is the most widely    on days when Black-           Japan                           20.0                317
used international stock index. As of       Rock makes a “fair            New Zealand                      0.1                   5
December 31, 2012, the index covered        valuation” adjust-            Singapore                        1.9                  31
the equity markets of 22 countries, as      ment to reprice the              Australasia/Far East         34.5%               473
shown in the table.                                                     Total EAFE Index                100.0%                909
                                            securities held by
                                            the fund. Fair valu-         Source: BlackRock
The companies in the EAFE Index are
large companies. The index is weight-       ation adjustments
ed by float-adjusted market capital-        are made on days when there are large
                                                                                              turn, holds a liquidity pool and shares
ization, in which a company’s market        movements in either U.S. equity markets
                                                                                              of the EAFE Index Master Fund. As of
value and its weighting in the index are    or currency exchange rates after the
                                                                                              December 31, 2012, I Fund holdings
calculated using the number of shares       foreign markets have closed. Fair valu-
                                                                                              constituted $24.6 billion of the EAFE
that are freely traded, rather than all     ation prevents traders from exploiting
                                                                                              Equity Index Master Fund, which itself
outstanding shares. Shares that are not     “stale” prices, thus diluting the returns
                                                                                              held $58.6 billion in securities.
freely traded, such as the holdings of      of other TSP participants who invest in
controlling shareholders and their fami-    the I Fund.                                       Note: Participants’ interfund transfer
lies, company management, and other                                                        (IFT) requests redistribute their exist-
                                            The performance of the EAFE Equity
companies, are excluded from the cal-                                                      ing account balances among the TSP
                                            Index Fund is evaluated on the basis
culation. Also excluded are shares sub-                                                    funds. For each calendar month, the
                                            of how closely its returns match those
ject to foreign ownership limitations                                                      first two IFTs can redistribute money
                                            of the EAFE Index. A portion of EAFE
imposed by governments or compa-                                                           among any or all of the TSP funds. After
                                            Equity Index Fund assets is reserved to
nies. Within each country, a company’s                                                     that, for the remainder of the month,
                                            meet the needs of daily client activity.
weighting is the float-adjusted market                                                     IFTs can only move money into the
                                            This liquidity reserve is invested in fu-
value of the company (that is, the share                                                   G Fund. (For participants with more
                                            tures contracts.
price multiplied by the number of freely                                                   than one TSP account, this rule applies
traded shares outstanding) as a per-        The I Fund invests in the EAFE Equity          to each account separately.)
centage of the combined float-adjust-       Index Fund by purchasing shares of the
ed market value of all companies in the     EAFE Equity Index Fund “E,” which, in


Page 12
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