TD Ameritrade Collective Investment Funds for Employee Benefit Plans Managed Retirement Funds. Financial Reports Year Ended December 31, 2011

Transcription

1 TD Ameritrade Collective Investment s for Employee Benefit Plans Financial Reports Year Ended December 31, 2011

2 Contents Independent Auditor s Report 1 Financial Statements Statements of Assets and Liabilities 2 Schedules of Portfolio Investments 3-5 Statements of Operations 6 Statements of Changes in Participants Interest 7 Statements of Cash Flows 8 Financial Highlights 9 Notes to Financial Statements Other Financial Information (Unaudited) Summary Schedules of Monthly Values 18 Aggressive Summary Schedule of Investment Changes 19 Balanced Summary Schedule of Investment Changes 20 Conservative Summary Schedule of Investment Changes 21 Growth Summary Schedule of Investment Changes 22 Moderate Summary Schedule of Investment Changes 23

3 Independent Auditor's Report To the Trust Committee Denver, Colorado We have audited the accompanying statements of assets and liabilities, including the schedules of portfolio investments, of the (the s), which include the Aggressive, Balanced, Conservative, Growth, and Moderate (five of the funds constituting the ), as of December 31, 2011, and the related statements of operations, changes in participants interest, cash flows and financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the Aggressive, Balanced, Conservative, Growth, and Moderate as of December 31, 2011, and the results of their operations, their cash flows and their financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Our audits were conducted for the purpose of forming an opinion on the basic financial statements as a whole. The other financial information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audits of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. Denver, Colorado March 12,

4 Statements of Assets and Liabilities December 31, 2011 Aggressive Balanced Conservative Growth Moderate ASSETS Investments at fair value (1) $ 6,087,336 $ 54,415,128 $ 32,297,997 $ 52,653,270 $ 12,189,964 Cash and cash equivalents , Dividends receivable ,388 51,162 24,639 14,989 Receivable for investments sold Receivable for participant units issued 13, ,829 17,533 76,149 - Total assets $ 6,101,322 $ 54,648,329 $ 32,367,390 $ 52,757,525 $ 12,205,100 LIABILITIES AND PARTICIPANTS' INTEREST LIABILITIES Trustee fee payable - Share Class I $ 146 $ 1,042 $ 864 $ 924 $ 381 Trustee fee payable - Share Class II 270 2,708 1,269 2, Custodian fee payable - Share Class II 844 8,462 3,967 8,223 1,221 Accrued audit fee Payable for investments purchased 13 45,266 45,489 20,130 12,864 Payable for participant units redeemed 1,166,044 5,337,454 1,554,663 6,347,672 1,974,103 Total liabilities 1,167,953 5,395,712 1,606,384 6,379,747 1,989,598 PARTICIPANTS' INTEREST Participants' interest - Share Class I 891,539 9,632,707 11,682,665 7,476,149 3,525,267 Participants' interest - Share Class II 4,041,830 39,619,910 19,078,341 38,901,629 6,690,235 Total participants' interest 4,933,369 49,252,617 30,761,006 46,377,778 10,215,502 Total liabilities and participants' interest $ 6,101,322 $ 54,648,329 $ 32,367,390 $ 52,757,525 $ 12,205,100 (1) Cost $ 6,274,045 $ 54,660,636 $ 32,123,338 $ 53,515,717 $ 12,240,306 See Notes to Financial Statements. 2

5 Schedules of Portfolio Investments December 31, 2011 % of Participants' Interest (1) Aggressive Number of Shares Cost Fair Value % of Participants' Interest (1) Balanced Number of Shares Cost Fair Value Short-term money market Federated Treasury Obligation 29.5% 1,457,072 $ 1,457,072 $ 1,457, % 10,379,802 $ 10,379,802 $ 10,379,802 TDBank Institutional MMDA (2) 0.0% % Total short-term money market 29.5% 1,457,073 1,457, % 10,379,803 10,379,803 Collective investment fund Galliard Wells Fargo Stable Value D % 437,647 8,513,250 8,844,849 Total collective investment fund % 8,513,250 8,844,849 Mutual funds United States stock Aston/River Road Independent Value 12.0% 55, , , % 323,215 3,446,600 3,439,010 Nuveen Winslow Large Cap Growth 13.9% 22, , , % 163,304 5,147,032 4,915,439 T. Rowe Price New Horizons 12.0% 19, , , % 110,973 3,487,793 3,443,502 Vanguard Russell 1000 Index 12.0% 5, , , % 44,347 4,616,383 4,917,644 Washington Mutual Investors 13.9% 24, , , % 173,144 4,893,974 4,917,294 Total United States stock 63.8% 3,191,514 3,144, % 21,591,782 21,632,889 International stock DFA Emerging Markets Value Portfolio 3.0% 5, , , % 18, , ,231 DFA International Small-Cap Value 2.0% 7, ,894 99, % 36, , ,600 DFA Japanese Small Company Portfolio 2.0% 6, , , % 32, , ,256 Driehaus Emerging Markets Growth 3.0% 5, , , % 38,294 1,103, ,543 Harbor International 8.0% 7, , , % 28,337 1,539,525 1,486,279 Harding Loevner International Equity Portfolio 8.0% 29, , , % 111,516 1,571,164 1,489,850 TCW International Small Cap 2.0% 14, ,506 99, % 71, , ,920 Total international stock 28.0% 1,528,463 1,387, % 6,504,184 5,953,679 United States bond DoubleLine Total Return Bond % 512,032 5,725,294 5,647,708 Oppenheimer Senior Floating Rate 2.0% 12,154 96,995 97, % 243,308 1,946,323 1,956,200 Total United States bond 2.0% 96,995 97, % 7,671,617 7,603,908 Total mutual funds 93.8% 4,816,972 4,630, % 35,767,583 35,190,476 Total investments 123.3% $ 6,274,045 $ 6,087, % $ 54,660,636 $ 54,415,128 (1) Percentage of participants' interest may not recompute as fair value and participants' interest are rounded. (2) The percentage of participants' interest is less than 0.05% and therefore rounds to 0.0%. See Notes to Financial Statements. 3

6 Schedules of Portfolio Investments - Continued December 31, 2011 % of Participants' Interest (1) Conservative Number of Shares Cost Fair Value % of Participants' Interest (1) Growth Number of Shares Cost Fair Value Short-term money market fund Federated Treasury Obligation 11.6% 3,582,206 $ 3,582,206 $ 3,582, % 9,366,407 $ 9,366,407 $ 9,366,407 TDBank Institutional MMDA (2) 0.0% % Total short-term money market 11.6% 3,582,207 3,582, % 9,366,408 9,366,408 Collective investment fund Galliard Wells Fargo Stable Value D 39.6% 602,249 11,693,486 12,171, % 231,417 4,563,615 4,676,937 Total collective investment fund 39.6% 11,693,486 12,171, % 4,563,615 4,676,937 Mutual funds United States stock Aston/River Road Independent Value 3.0% 87, , , % 434,887 4,643,682 4,627,200 Nuveen Winslow Large Cap Growth 6.1% 62,650 1,972,774 1,885, % 184,560 5,808,225 5,555,254 T. Rowe Price New Horizons 3.2% 31,794 1,009, , % 149,308 4,661,223 4,633,018 Vanguard Russell 1000 Index 5.4% 14,857 1,586,199 1,647, % 48,908 5,123,267 5,423,367 Washington Mutual Investors 6.5% 70,617 1,986,281 2,005, % 195,682 5,590,792 5,557,370 Total United States stock 24.2% 7,494,873 7,460, % 25,827,189 25,796,209 International stock DFA Emerging Markets Value Portfolio 0.8% 9, , , % 35,715 1,086, ,173 DFA International Small-Cap Value 0.5% 11, , , % 69,020 1,127, ,286 DFA Japanese Small Company Portfolio 0.5% 10, , , % 62, , ,945 Driehaus Emerging Markets Growth 0.8% 9, , , % 36,066 1,036, ,253 Harbor International 2.1% 12, , , % 44,480 2,443,176 2,332,994 Harding Loevner International Equity Portfolio 2.1% 48, , , % 175,044 2,500,039 2,338,585 TCW International Small Cap 0.5% 22, , , % 135,493 1,121, ,679 Total international stock 7.3% 2,434,740 2,238, % 10,261,047 9,352,915 United States bond DoubleLine Total Return Bond 18.2% 506,655 5,664,625 5,588, % 188,489 2,122,004 2,079,036 Oppenheimer Senior Floating Rate 4.1% 156,365 1,253,407 1,257, % 171,861 1,375,454 1,381,765 Total United States bond 22.3% 6,918,032 6,845, % 3,497,458 3,460,801 Total mutual funds 53.8% 16,847,645 16,544, % 39,585,694 38,609,925 Total investments 105.0% $ 32,123,338 $ 32,297, % $ 53,515,717 $ 52,653,270 (1) Percentage of participants' interest may not recompute as fair value and participants' interest are rounded. (2) The percentage of participants' interest is less than 0.05% and therefore rounds to 0.0%. See Notes to Financial Statements. 4

7 Schedules of Portfolio Investments - Continued December 31, 2011 % of Participants' Interest (1) Moderate Number of Shares Cost Fair Value Short-term money market fund Federated Treasury Obligation 29.6% 3,020,358 $ 3,020,358 $ 3,020,358 TDBank Institutional MMDA (2) 0.0% Total short-term money market 29.6% 3,020,359 3,020,359 Collective investment fund Galliard Wells Fargo Stable Value D 31.0% 156,599 3,093,795 3,164,868 Total collective investment fund 31.0% 3,093,795 3,164,868 Mutual funds United States stock Aston/River Road Independent Value 4.1% 39, , ,944 Nuveen Winslow Large Cap Growth 7.2% 24, , ,297 T. Rowe Price New Horizons 4.1% 13, , ,771 Vanguard Russell 1000 Index 8.1% 7, , ,579 Washington Mutual Investors 7.2% 25, , ,555 Total United States stock 30.7% 3,161,323 3,131,146 International stock DFA Emerging Markets Value Portfolio 1.1% 4, , ,528 DFA International Small-Cap Value 0.5% 3,899 62,007 52,944 DFA Japanese Small Company Portfolio 1.1% 7, , ,378 Driehaus Emerging Markets Growth 1.1% 4, , ,130 Harbor International 2.1% 4, , ,888 Harding Loevner International Equity Portfolio 2.1% 15, , ,382 TCW International Small Cap 0.5% 7,652 62,118 53,185 Total international stock 8.5% 939, ,435 United States bond DoubleLine Total Return Bond 15.5% 143,865 1,610,732 1,586,826 Oppenheimer Senior Floating Rate 4.1% 51, , ,330 Total United States bond 19.6% 2,025,426 2,003,156 Total mutual funds 58.8% 6,126,152 6,004,737 Total investments 119.4% $ 12,240,306 $ 12,189,964 (1) Percentage of participants' interest may not recompute as fair value and participants' interest are rounded. (2) The percentage of participants' interest is less than 0.05% and therefore rounds to 0.0%. See Notes to Financial Statements. 5

8 Statements of Operations Year Ended December 31, 2011 Aggressive Balanced Conservative Growth Moderate Investment income: Dividends $ 184,642 $ 1,576,843 $ 782,601 $ 1,472,601 $ 284,502 Total investment income 184,642 1,576, ,601 1,472, ,502 Expenses: Custodian fees - Share Class II 8, ,901 45, ,075 16,218 Audit fees 3,000 7,000 6,000 6,000 4,000 Trustee fees - Share Class I 1,724 13,943 10,331 11,018 4,407 Trustee fees - Share Class II 2,834 32,288 14,630 32,344 5,190 Total expenses 16, ,132 76, ,437 29,815 Net investment income 168,229 1,422, ,920 1,322, ,687 Realized and unrealized gain (loss) on investments: Net realized gain on investments sold 205,350 3,572,735 1,095,569 3,409, ,560 Net change in unrealized appreciation on investments (607,164) (4,145,377) (1,093,578) (5,201,118) (339,130) Net realized and unrealized gain (loss) on investments (401,814) (572,642) 1,991 (1,791,218) (89,570) Net increase (decrease) in participants' interest resulting from operations $ (233,585) $ 850,069 $ 707,911 $ (469,054) $ 165,117 See Notes to Financial Statements. 6

9 Statements of Changes In Participants' Interest Year Ended December 31, 2011 Aggressive Balanced Conservative Units Amount Units Amount Units Amount Participants' interest at beginning of year 445,842 $ 4,557,616 5,346,822 $ 63,470,975 2,572,844 $ 32,060,057 From operations: Net investment income 168,229 1,422, ,920 Net realized gain on investments sold 205,350 3,572,735 1,095,569 Net change in unrealized appreciation on investments (607,164) (4,145,377) (1,093,578) Net increase (decrease) in participants' interest resulting from operations (233,585) 850, ,911 From participating unit transactions: Issuance of units - Share Class I 176,808 1,812, ,854 9,749, ,732 6,527,565 Issuance of units - Share Class II 233,578 2,498, ,457 8,135, ,323 5,219,200 Redemption of units - Share Class I (278,046) (2,771,304) (1,749,387) (20,179,648) (563,331) (6,930,505) Redemption of units - Share Class II (89,250) (930,457) (1,027,859) (12,773,111) (529,605) (6,823,222) Net increase (decrease) from participating unit transactions 43, ,338 (1,290,935) (15,068,427) (161,881) (2,006,962) Participants' interest at end of year 488,932 $ 4,933,369 4,055,887 $ 49,252,617 2,410,963 $ 30,761,006 Growth Moderate Units Amount Units Amount Participants' interest at beginning of year 5,011,261 $ 57,369, ,627 $ 7,597,300 From operations: Net investment income 1,322, ,687 Net realized gain on investments sold 3,409, ,560 Net change in unrealized appreciation on investments (5,201,118) (339,130) Net increase (decrease) in participants' interest resulting from operations (469,054) 165,117 From participating unit transactions: Issuance of units - Share Class I 369,007 3,950, ,846 3,201,462 Issuance of units - Share Class II 432,373 5,196, ,260 10,228,819 Redemption of units - Share Class I (930,376) (9,669,999) (350,267) (4,225,211) Redemption of units - Share Class II (832,738) (9,998,753) (559,126) (6,751,985) Net increase (decrease) from participating unit transactions (961,734) (10,522,481) 203,713 2,453,085 Participants' interest at end of year 4,049,527 $ 46,377, ,340 $ 10,215,502 See Notes to Financial Statements. 7

10 Statements of Cash Flows Year Ended December 31, 2011 Aggressive Balanced Conservative Growth Moderate Cash Flows from Operating Activities Net increase (decrease) in participants' interest resulting from operations: $ (233,585) $ 850,069 $ 707,911 $ (469,054) $ 165,117 Adjustments to reconcile net increase (decrease) in participants' interest resulting from operations to net cash provided by (used in) operating activities: of investments (17,420,156) (154,212,132) (84,996,413) (135,807,674) (51,945,811) Proceeds from sales of investments 15,484, ,572,715 84,722, ,661,899 47,257,371 Net realized gain on investments sold (205,350) (3,572,735) (1,095,569) (3,409,900) (249,560) Net change in unrealized appreciation on investments 607,164 4,145,377 1,093,578 5,201, ,130 Changes in assets and liabilities: Dividends receivable (706) 41,863 17,238 9,075 (2,715) Receivable for investments sold 94, , , , ,000 Trustee fee payable - Share Class I 11 (320) Trustee fee payable - Share Class II 95 (233) (19) (356) 187 Custodian fee payable - Share Class II 297 (728) (58) (1,111) 584 Accrued audit fee (496) (2,839) (3,487) (2,074) (2,247) Payable for investments purchased (96,788) (906,254) (883,651) (233,204) (383,312) Payable to affiliate (338,057) - Net cash provided by (used in) operating activities (1,770,214) 9,758, ,671 4,190,207 (4,434,128) Cash Flows from Financing Activities Issuance of units - Share Class I 1,812,398 9,749,287 6,527,565 3,950,216 3,201,462 Issuance of units - Share Class II 2,498,701 8,135,045 5,219,200 5,196,055 10,228,819 Change in receivable for participant units issued (7,144) (86,020) (6,642) (11,931) 3,478 Redemptions of units - Share Class I (2,771,304) (20,179,648) (6,930,505) (9,669,999) (4,225,211) Redemptions of units - Share Class II (930,457) (12,773,111) (6,823,222) (9,998,753) (6,751,985) Change in payable for participant units redeemed 1,166,044 5,337,454 1,554,663 6,347,672 1,974,103 Net cash provided by (used in) financing activities 1,768,238 (9,816,993) (458,941) (4,186,740) 4,430,666 Net increase (decrease) in cash and cash equivalents (1,976) (58,689) (338,270) 3,467 (3,462) Cash and cash equivalents: Beginning of year 1,987 58, ,968-3,609 End of year $ 11 $ - $ 698 $ 3,467 $ 147 See Notes to Financial Statements. 8

11 Financial Highlights Year Ended December 31, 2011 Aggressive Balanced Conservative Growth Moderate Selected per unit data Share Class I Share Class I Share Class I Share Class I Share Class I Unit value beginning of year $ 9.82 $ $ $ $ Income from investment operations: Net investment income (a) Net realized and unrealized gain (loss) on investments (0.58) (0.14) 0.02 (0.37) 0.00 Total from investment operations (0.27) (0.08) 0.29 Unit value end of year $ 9.55 $ $ $ $ Total return (2.75)% 1.35% 2.66% (0.77)% 2.45% Ratios and supplemental data Participants' interest, end of year $ 891,539 $ 9,632,707 $ 11,682,665 $ 7,476,149 $ 3,525,267 Ratio of net investment income to average 3.05% 2.56% 2.42% 2.75% 2.42% participant's interest Ratio of expenses to average participants' interest 0.14% 0.09% 0.10% 0.09% 0.12% Aggressive Balanced Conservative Growth Moderate Selected per unit data Share Class II Share Class II Share Class II Share Class II Share Class II Unit value beginning of year $ $ $ $ $ Income from investment operations: Net investment income (a) Net realized and unrealized gain (loss) on investments (0.62) (0.17) 0.02 (0.39) 0.01 Total from investment operations (0.31) (0.11) 0.25 Unit value end of year $ $ $ $ $ Total return (2.94)% 1.06% 2.36% (0.93)% 2.12% Ratios and supplemental data Participants' interest, end of year $ 4,041,830 $ 39,619,910 $ 19,078,341 $ 38,901,629 $ 6,690,235 Ratio of net investment income to average 2.94% 2.42% 2.15% 2.33% 1.95% participant's interest Ratio of expenses to average participants' interest 0.38% 0.34% 0.35% 0.34% 0.36% (a) Net investment income per share was calculated using the average shares method. See Notes to Financial Statements. 9

12 Notes to Financial Statements Note 1. Organization The (the s) are collective investment funds established under the Declaration of Trust establishing the TD Ameritrade Trust Company (TDATC, referred to herein as the Trustee) Collective Investment s for Employee Benefit Plans to provide for the collective investment and reinvestment of assets of qualified employer sponsored retirement plans. TDATC serves as the trustee, custodian, transfer agent, and record-keeper for the s. Axia Advisory Corporation (referred to herein as the Sub-Advisor) provides investment sub-advisory services for the s. Each fund offers two share classes, Share Class I and Share Class II, which differ by their allocation of class specific expenses. The following describes the individual s, as set forth in the Declaration of Trust: Aggressive : The fund seeks long-term capital appreciation. The strategy is designed for investors who have a long-term focus, but can tolerate a relatively high level of volatility. The selection of underlying funds is structured to produce returns that are consistent with a diversified asset allocation mix of 40% United States mid/large cap stocks, 30% United States small cap stocks, and 30% international stocks. The Aggressive utilizes a core and satellite approach whereby the core of the portfolio will be invested in an index or enhanced index strategy and the balance (satellite) will be invested with active managers to enhance returns. The underlying funds will be evaluated on a consistent basis. Tactical changes may be made to take advantage of valuation opportunities from time to time. To ensure the strategy remains consistent, regardless of market conditions, any divergence from the strategic (long-term) allocation may be addressed by rebalancing. Balanced : The fund seeks a combination of capital growth and income. The strategy is designed for those investors who seek to limit potential losses but who desire an opportunity for moderate capital growth. The selection of underlying funds is structured to produce returns that are consistent with a diversified asset allocation mix of 10% stable investments, 30% bonds, 30% United States mid/large cap stocks, 15% United States small cap stocks, and 15% international stocks. The Balanced utilizes a core and satellite approach whereby the core of the fund will be invested in an index or enhanced index strategy and the balance (satellite) will be invested with active managers to enhance returns. The underlying funds are evaluated on a consistent basis. Tactical changes may be made to take advantage of valuation opportunities from time to time. To ensure the strategy remains consistent, regardless of market conditions, any divergence from the strategic (longterm) allocation may be addressed by rebalancing. Conservative : The fund seeks income and stability, with the opportunity for capital growth. The strategy is designed for those investors who desire higher long-term return with limited volatility. The selection of underlying funds is structured to produce returns that are consistent with a diversified asset allocation mix of 25% stable investments, 45% bonds, 18% United States mid/large cap stocks, 6% United States small cap stocks, and 6% international stocks. The fund utilizes a core and satellite approach whereby the core of the fund will be invested in an index or enhanced index strategy and the balance (satellite) will be invested with active managers to enhance returns. The underlying funds are evaluated on a consistent basis. Tactical changes may be made to take advantage of valuation opportunities from time to time. To ensure the strategy remains consistent, regardless of market conditions, any divergence from the strategic (long-term) allocation may be addressed by rebalancing. 10

13 Notes to Financial Statements Growth : The fund seeks long-term capital growth. The strategy is designed for those investors who seek long-term returns with reduced volatility. The selection of underlying funds is structured to produce returns that are consistent with a diversified asset allocation mix of 5% stable investments, 15% bonds, 36% United States mid/large cap stocks, 22% United States small cap stocks, and 22% international stocks. The Growth utilizes a core and satellite approach whereby the core of the fund is invested in an index or enhanced index strategy and the balance (satellite) is invested with active managers to enhance returns. The underlying funds are evaluated on a consistent basis. Tactical changes may be made to take advantage of valuation opportunities from time to time. To ensure the strategy remains consistent, regardless of market conditions, any divergence from the strategic (long-term) allocation may be addressed by rebalancing. Moderate : The fund seeks a combination of income and moderate capital growth. The strategy is designed for those investors who seek to limit potential losses but who desire an opportunity for moderate capital growth. The selection of underlying funds is structured to produce returns that are consistent with a diversified asset allocation mix of 20% stable investments, 40% bonds, 22% United States mid/large cap stocks, 8% United States small cap stocks, and 10% international stocks. The Moderate utilizes a core and satellite approach whereby the core of the fund will be invested in an index or enhanced index strategy and the balance (satellite) will be invested with active managers to enhance returns. The underlying funds are evaluated on a consistent basis. Tactical changes may be made to take advantage of valuation opportunities from time to time. To ensure the strategy remains consistent, regardless of market conditions, any divergence from the strategic (long-term) allocation may be addressed by rebalancing. Note 2. Summary of Significant Accounting Policies The following is a summary of the significant accounting policies followed by the s in the preparation of the accompanying financial statements. Principles of accounting: The s follow Generally Accepted Accounting Principles (GAAP), as established by the Financial Accounting Standards Board (FASB), to ensure consistent reporting of financial condition and results of operations. Use of estimates: The preparation of financial statements in conformity with GAAP required the s Trustee to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported results of operations during the reporting period. Actual results could differ from those estimates. Cash and cash equivalents: The s consider all highly liquid instruments with original maturities of three months or less to be cash equivalents. Cash balances of the s and other affiliated entities are combined into a deposit account provided by an affiliate of the Trustee. The balance of the deposit account is in excess of federally insured limits; however, the s do not believe they are exposed to any significant credit risk. 11

14 Notes to Financial Statements Investment valuation: The s record investments at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The s utilize valuation techniques to maximize the use of observable inputs and minimize the use of unobservable inputs. Assets and liabilities recorded at fair value are categorized within the fair value hierarchy based upon the level of judgment associated with the inputs used to measure their value. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability. The three levels of the fair value hierarchy are described below: Level 1 - Unadjusted quoted prices in active markets for identical assets that the s have the ability to access at the measurement date. The s do not adjust the quoted price for these investments, even in situations where the s hold a large position and a sale could reasonably impact the quoted price. The type of investments included in Level 1 includes listed money market vehicles and listed mutual funds. Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset, either directly or indirectly. A significant adjustment to a Level 2 input could result in the Level 2 measurement becoming a Level 3 measurement. Level 3 - Inputs are unobservable for the asset and include situations where there is little, if any, market activity for the asset or liability. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation. Investments which are included in this category include investments in collective investment funds. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment. The s assess the levels of the investments at each measurement date, and transfers between levels are recognized on the actual date of the event or change in circumstances that caused the transfer in accordance with the s accounting policies regarding the recognition of transfers between levels of the fair value hierarchy. For the year ended December 31, 2011, the only transfer among levels was a reclassification of the s investments in collective investment fund from level 2 to level 3 because of redemption restrictions put in place by the investee fund s adviser. The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those investments. A description of the valuation techniques applied to the s major categories of assets measured at fair value on a recurring basis follows. Short-term money market - Short-term investments are valued at cost, which approximates fair value. Mutual funds - Mutual funds are valued at their daily net asset value. 12

15 Notes to Financial Statements Collective investment fund - Depending on the redemption options available, as a practical expedient it may be possible that for investments in other funds, the reported net asset value (NAV) represents fair value based on observable data such as ongoing redemption and/or subscription activity. In these cases, the NAV is considered as a Level 2 input. However, certain funds may provide the manager with the ability to suspend or postpone redemptions (a gate), or a (lock-in period) upon initial subscription, within which the s may not redeem in a timely manner. If there is an imposition of a gate, if a lock-in period in excess of 3 months is remaining at the balance sheet date, or if the s may not redeem its holding in the fund within 3 months or less, the Trustee's ability to validate or verify the NAV through redeeming is impaired, and the investment is classified as Level 3. All investments in collective investment funds are classified as Level 3 by the s as of December 31, The following table represents the s fair value hierarchy for those assets measured at fair value on a recurring basis as of December 31, 2011: Fair Value Measurements Quoted Prices Significant in Active Other Significant Fair Value at Markets for Observable Unobservable December 31, Identical Assets Inputs Inputs 2011 (Level 1) (Level 2) (Level 3) Aggressive : Short-term money market $ 1,457,073 $ 1,457,073 $ - $ - Mutual s 4,630,263 4,630, Balanced : Short-term money market 10,379,803 10,379, Collective investment fund 8,844, ,844,849 Mutual s 35,190,476 35,190, Conservative : Short-term money market 3,582,207 3,582, Collective investment fund 12,171, ,171,444 Mutual s 16,544,346 16,544, Growth : Short-term money market 9,366,408 9,366, Collective investment fund 4,676, ,676,937 Mutual s 38,609,925 38,609, Moderate : Short-term money market 3,020,359 3,020, Collective investment fund 3,164, ,164,868 Mutual s 6,004,737 6,004,

16 Notes to Financial Statements Financial instruments classified as Level 3 in the fair value hierarchy represent the s investments in financial instruments in which the Trustee has used at least one significant unobservable input in the valuation model. The following table presents a reconciliation of activity for the Level 3 financial instruments: Aggressive Balanced Conservative Growth Moderate Balance, beginning of year $ - $ - $ - $ - $ - Transfers into Level 3 232,414 12,666,268 12,197,401 6,919,195 2,455,539 Net realized gain 11, , , , ,818 on investments sold Net change in unrealized (3,988) (241,350) (46,178) (129,797) 3,389 appreciation on investments of investments 635,000 9,917,500 7,825,000 10,510,000 5,603,000 Proceeds from sales of investments (874,914) (14,094,702) (8,175,746) (12,974,966) (5,007,878) Balance, end of year $ - $ 8,844,849 $ 12,171,444 $ 4,676,937 $ 3,164,868 The total change in unrealized appreciation on investments included in the statements of operations attributable to Level 3 investments still held as of December 31, 2011 includes: Aggressive Balanced Conservative Growth Moderate $ - 331, , ,322 71,073 Investment transactions, interest, and dividends: Investment transactions are recorded on trade date. Realized gains and losses on investment transactions are determined on the average lot cost method and are included as net realized gain on investments sold in the accompanying statements of operations. The difference between the cost and the fair value of open investments is reflected as unrealized appreciation (depreciation) on investments, and any change in that amount from the prior period are reflected in the accompanying statements of operations. Interest income is recognized under the accrual basis. Dividend income is recognized on the ex-dividend date. Allocation of income and expenses: Income, audit expenses, and the gains/losses of each fund are allocated on a pro-rata basis to each class of shares, except for trustee, sub-advisor, and if applicable, custodian fees, which are unique to each class of shares. 14

17 Notes to Financial Statements Federal income taxes: Each is a "group trust" that meets the requirements of ASC 740, Income Taxes (ASC 740), and is exempt from taxation under ASC 740; therefore, no federal income tax provision is required. FASB provides guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing the s tax returns to determine whether the tax positions are more-likely-than-not of being sustained when challenged or when examined by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and liability in the current year. For the year ended December 31, 2011, management has determined that there are no material uncertain tax positions. The s file income tax returns in U.S. federal jurisdiction, and various states. The current and prior three tax years generally remain subject to examination by U.S. federal and most state tax authorities. Participant transactions: The unit values of the s are determined at the close of each business day when the New York Stock Exchange is open for business. Units could have been issued and redeemed on any business day at the daily unit value. All earnings, gains, and losses of the s are reflected in the computation of the daily unit value and are realized by the participants upon withdrawal from the s. Net investment income and net realized gains are reinvested, and thus, there are no distributions of net investment income or net realized gains to participants. Subsequent events: The s have evaluated subsequent events for potential recognition and/or disclosure through March 12, 2012, the date the financial statements were available to be issued. Recently adopted accounting pronouncements: In January 2010, the FASB issued an amendment to the guidance on determining fair value which requires new disclosures and reasons for significant transfers of financial assets and liabilities between Levels 1 and 2. This amendment also clarifies that fair value measurement disclosures are required for each class of financial assets and liabilities, and disclosures about inputs and valuation techniques are required for both Level 2 and Level 3 measurements. It further clarifies that the reconciliation of Level 3 measurements should separately present purchases, sales, issuances, and settlements instead of netting these changes. With respect to matters other than Level 3 measurements, the amendment was effective for periods beginning on or after December 15, 2009, guidance related to Level 3 measurements was effective for periods beginning on or after December 15, The adoption of this amendment did not have a material impact on the s financial statements. Recently issued accounting pronouncements: In May 2011, the FASB issued an amendment to the guidance pertaining to fair value measurements that included a common definition of fair value and information to assist entities to measure and disclose fair value with regards to U.S. GAAP and International Financial Reporting Standards convergence issues. This guidance becomes effective for periods beginning after December 15, The s are currently evaluating the impact this amendment may have on the s financial statements. 15

18 Notes to Financial Statements Note 3. Investments In accordance with ASC 946, Financial Services Investment Companies, the s are required to provide additional qualitative disclosures for each investment in another non-registered fund whose fair value constitutes more than five percent of each s participants interest balance. As of December 31, 2011, investments that exceeded five percent of each s participants interest balance are as follows: % of TD Ameritrade Collective Participants' Investment Redemptions Investment Investee Interest Objective Permitted Balanced Conservative Growth Moderate Galliard Wells Fargo Stable Value D Galliard Wells Fargo Stable Value D Galliard Wells Fargo Stable Value D Galliard Wells Fargo Stable Value D 18.0% Fixed Income Daily* 39.6% Fixed Income Daily* 10.1% Fixed Income Daily* 31.0% Fixed Income Daily* * The general partner or sponsor of the respective investment partnership reserves the right to require a 12-month notice for withdrawal of assets from the investee fund by the Trustee. Requests for redemptions by the s participants are not subject to this restriction. Information about the investee funds portfolio was not available as of the date these financial statements were issued. Note 4. Related-Party Transactions For liquidity and administrative purposes, the s seek to maintain approximately 3% of their assets in cash or an equivalent. The mandatory cash component for the s could have been comprised of a bank depository account provided by an affiliate of the Trustee or a short-term money market fund. The short-term money market fund option provided is the Federated Treasury Obligation, which is not an affiliate of the Trustee. In the event the audit fee impacts the s unit value as determined on a daily basis, by an amount greater than $0.005 per unit, the Trustee will assume such audit fees. In addition, if the audit fees caused the s total expenses, including the expense of the underlying assets, to exceed 2% annually, the Trustee will assume such audit fees. For the year ended December 31, 2011, the Trustee did not assume any fees. Note 5. Fees The Trustee charges the s a fee equal to 0.08% for Share Class I and 0.33% for Share Class II per annum of net assets (participants interest) held by external participants applicable to each respective share class. This fee accrues on a daily basis and is payable monthly in arrears. For Share Class II, a portion of the Trustee Fee, 0.25%, is paid to the Sub-Advisor for sub-advisory services provided to the s, which is presented on the statements of operations, or to a qualified custodian for unit holder servicing and administrative services. The Trustee may serve as a qualified custodian, in which case the 0.25% will be paid directly to the participating trust account. 16

19 Notes to Financial Statements Note 6. Indemnifications In the normal course of business, the s enter into contracts that contain a variety of representations and warranties that provide indemnifications under certain circumstances. The s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the s that have not yet occurred. The s expect the risk of future obligation under these indemnifications to be remote. 17

20 Other Financial Information (Unaudited)

21 Summary Schedules of Monthly Values (Unaudited) December 31, 2011 Month-end: Aggressive Class I Units Outstanding Unit Value Balanced Class I Units Outstanding Unit Value Conservative Class I Units Outstanding Unit Value Growth Class I Units Outstanding Unit Value Moderate Class I Units Outstanding Unit Value December 31, ,565 $ ,768,565 $ ,685 $ ,290,580 $ ,157 $ January 31, , ,769, , ,283, , February 28, , ,800, , ,269, , March 31, , ,790, , ,263, , April 30, , ,746, , ,350, , May 31, , ,428, ,143, ,325, , June 30, , ,419, ,104, ,326, , July 31, , ,419, ,106, ,340, , August 31, , ,417, ,103, ,322, , September 30, , ,368, ,175, ,320, , October 31, , ,364, ,008, ,322, , November 30, , ,368, ,023, ,318, , December 31, , , , , , Month-end: Aggressive Class II Class II Class II Units Outstanding Unit Value Units Outstanding Unit Value Balanced Conservative Units Outstanding Unit Value Growth Class II Units Outstanding Unit Value Moderate Class II Units Outstanding Unit Value December 31, ,277 $ ,578,257 $ ,591,159 $ ,720,681 $ ,470 $ January 31, , ,146, ,357, ,714, , February 28, , ,111, ,355, ,378, , March 31, , ,213, ,370, ,320, , April 30, , ,235, ,369, ,351, , May 31, , ,243, ,362, ,362, , June 30, , ,236, ,367, ,354, , July 31, , ,230, ,424, ,352, , August 31, , ,208, ,438, ,318, , September 30, , ,204, ,445, ,314, , October 31, , ,239, ,439, ,327, , November 30, , ,220, ,423, ,316, , December 31, , ,199, ,463, ,320, ,

22 Aggressive Summary Schedule of Investment Changes (Unaudited) Year Ended December 31, 2011 (in shares) Cost of Aston/River Road Independent 68,909 $ 735,405 DFA Emerging Markets Value Portfolio 6, ,585 DFA Emerging Small Cap Portfolio ,000 DFA International Small Cap Value 8, ,507 DFA International Small Company Portfolio 1,350 24,133 DFA Japanese Small Company Portfolio 15, ,008 DFA US Large Cap Value Portfolio 16, ,858 DFA US Small Cap Value Portfolio 15, ,292 DoubleLine Total Return Bond 76, ,560 Driehaus Emerging Markets Growth 9, ,360 Federated Treasury Obligation 8,995,563 8,995,563 Galliard Wells Fargo Stable Value D 31, ,000 Harbor International 6, ,442 Harding Loevner International Equity Portfolio 27, ,376 Nuveen Winslow Large-Cap Growth 25, ,426 Oppenheimer Develop Markets s 4, ,000 Oppenheimer Senior Floating Rate 37, ,837 Primecap Odyssey Growth 25, ,000 T. Rowe Price New Horizons 14, ,919 TCW International Small Cap 36, ,491 Vanguard Russell 1000 Index 4, ,251 Washington Mutual Investors 32, ,144 Redemptions (in shares) Realized Gain (Loss) Redemptions Aston/River Road Independent 13,478 $ (29) DFA Emerging Markets Small Cap Portfolio 1,618 2,016 DFA Emerging Markets Value Portfolio 3,766 (2,266) DFA International Small Cap Value 1,638 (6,549) DFA International Small Company Portfolio 12,049 4,520 DFA Japanese Small Company Portfolio 8,652 10,154 DFA US Large Cap Value Portfolio 47, ,636 DFA US Small Cap Value Portfolio 37,232 39,020 DoubleLine Total Return Bond 76,104 (6,514) Driehaus Emerging Markets Growth 3,296 (5,177) Federated Treasury Obligation 7,709,471 - Galliard Wells Fargo Stable Value D 43,817 11,488 Harbor International 6,018 (15,284) Harding Loevner International Equity Portfolio 27,815 (9,861) Nuveen Winslow Large-Cap Growth 2,990 (3,914) Oppenheimer Develop Markets s 7,777 (7,291) Oppenheimer Senior Floating Rate 25,544 2,186 Primecap Odyssey Growth 66,738 60,896 T. Rowe Price New Horizons 11,783 17,850 TCW International Small Cap 21,975 (11,190) Vanguard Russell 1000 Index 3,062 17,362 Washington Mutual Investors 7,981 (4,703) $ 205,350 19

23 Balanced Summary Schedule of Investment Changes (Unaudited) Year Ended December 31, 2011 (in shares) Cost of Aston/River Road Independent 363,226 $ 3,873,257 DFA Emerging Markets Value Portfolio 49,541 1,605,730 DFA International Small Cap Value 79,251 1,306,147 DFA International Small Company Portfolio 5, ,805 DFA Japanese Small Company Portfolio 80,785 1,164,703 DFA US Large Cap Value Portfolio 123,089 2,601,804 DFA US Small Cap Value Portfolio 76,424 1,733,514 DoubleLine Total Return Bond 1,042,976 11,613,992 Driehaus Emerging Markets Growth 42,740 1,231,841 Federated Treasury Obligation 80,131,775 80,131,775 Galliard Wells Fargo Stable Value D 497,215 9,917,500 Harbor International 37,457 2,050,259 Harding Loevner International Equity Portfolio 90,209 1,230,309 Metropolitan West High Yield Bond 48, ,602 Metropolitan West Total Return Bond 227,271 2,372,695 Nuveen Winslow Large-Cap Growth 182,788 5,761,132 Oppenheimer Develop Markets s 2,350 78,000 Oppenheimer Senior Floating Rate 591,833 4,854,692 Pimco Emerging Local Bond 1,601 16,870 PIMCO Long-Term U.S. Government 416,293 5,240,627 PIMCO Total Return 247,773 2,734,793 Primecap Odyssey Growth 160,309 2,280,000 T. Rowe Price New Horizons 65,736 2,140,223 TCW International Small Cap 154,786 1,341,013 Vanguard Russell 1000 Index 16,287 1,722,032 Washington Mutual Investors 232,762 6,582,817 Redemptions (in shares) Realized Gain (Loss) Redemptions Aston/River Road Independent 40,011 $ 261 DFA Emerging Markets Small Cap Portfolio 16,285 31,589 DFA Emerging Markets Value Portfolio 48,207 45,757 DFA International Small Cap Value 42,609 (97,896) DFA International Small Company Portfolio 82,311 73,869 DFA Japanese Small Company Portfolio 47,850 60,911 DFA US Large Cap Value Portfolio 455,256 1,014,078 DFA US Small Cap Value Portfolio 255, ,745 DoubleLine Total Return Bond 530,945 3,924 Driehaus Emerging Markets Growth 4,446 (13,834) Federated Treasury Obligation 71,227,511 - Galliard Wells Fargo Stable Value D 704, ,133 Harbor International 61, ,441 Harding Loevner International Equity Portfolio 148,180 (4,533) Metropolitan West High Yield Bond 285, ,564 Metropolitan West Total Return Bond 227,271 (4,531) Nuveen Winslow Large-Cap Growth 19,484 (26,073) Oppenheimer Develop Markets s 37,519 (31,537) Oppenheimer Senior Floating Rate 493,408 19,192 Pimco Emerging Local Bond 218,604 (139,297) PIMCO Long-Term U.S. Government 416,293 35,397 PIMCO Total Return 834,156 (210,380) Primecap Odyssey Growth 581, ,242 T. Rowe Price New Horizons 69, ,805 TCW International Small Cap 82,855 (89,843) Vanguard Russell 1000 Index 24, ,047 Washington Mutual Investors 59,618 $ (31,296) 3,572,735 20

24 Conservative Summary Schedule of Investment Changes (Unaudited) Year Ended December 31, 2011 (in shares) Cost of Aston/River Road Independent 87,859 $ 940,619 DFA Emerging Markets Value Portfolio 17, ,833 DFA International Small Cap Value 13, ,318 DFA International Small Company Portfolio ,803 DFA Japanese Small Company Portfolio 24, ,319 DFA US Large Cap Value Portfolio 52,639 1,113,241 DFA US Small Cap Value Portfolio 23, ,374 DoubleLine Total Return Bond 859,911 9,577,386 Driehaus Emerging Markets Growth 11, ,420 Federated Treasury Obligation 44,406,868 44,406,868 Galliard Wells Fargo Stable Value D 390,990 7,825,000 Harbor International 14, ,711 Harding Loevner International Equity Portfolio 53, ,074 Metropolitan West High Yield Bond 59, ,380 Metropolitan West Total Return Bond 174,169 1,818,309 Nuveen Winslow Large-Cap Growth 62,650 1,972,774 Oppenheimer Senior Floating Rate 349,964 2,876,526 Pimco Emerging Local Bond 7,698 82,108 PIMCO Long-Term U.S. Government 219,851 2,766,054 PIMCO Total Return 197,235 2,172,666 Primecap Odyssey Growth 77,754 1,119,000 T. Rowe Price New Horizons 21, ,427 TCW International Small Cap 37, ,431 Vanguard Russell 1000 Index 6, ,792 Washington Mutual Investors 82,805 2,329,980 Redemptions (in shares) Realized Gain (Loss) Redemptions DFA Emerging Markets Value Portfolio 15,813 $ 19,646 DFA International Small Cap Value I 1,171 (3,186) DFA International Small Company I 19,042 16,657 DFA Japanese Small Company Portfolio I 14,577 21,917 DFA US Large Cap Value I 161, ,624 DFA US Small Cap Value I 50, ,888 DoubleLine Total Return Bond 353,256 (7,356) Driehaus Emerging Markets Growth 2, Fed Treasury Obligation 42,261,312 - Galliard Wells Fargo Stable Value D 410, ,967 Harbor International Instl 12,308 (11,158) Harding Loevner Internat Equity 46,903 16,524 Metropolitan West High Yield Bond 208, ,542 Metropolitan West Total Return Bond Fd 174,169 (3,473) Oppenheimer Develop Markets s 8,673 (3,178) Oppenheimer Senior Floating Rate 374,707 19,565 Pimco Emerging Local Bond 150,576 (101,837) PIMCO Long-Term U.S. Government 219,851 16,061 PIMCO Total Return 636,331 (192,639) Primecap Odyssey Growth 202, ,599 T. Rowe Price New Horizons 8,258 38,663 TCW International Small Cap 14,904 (14,507) Vanguard Russell 1000 Index 5,128 38,579 Washington Mutual Investors 12,188 (8,370) $ 1,095,569 21