BNP PARIBAS INVESTMENT PARTNERS POOLED TRUST FUND FOR EMPLOYEE BENEFIT PLANS - INCOME PLUS FUND. Financial Statements.

Transcription

1 Financial Statements December 31, 2014 (With Independent Auditor s Report Thereon)

2 December 31, 2014 Table of Contents Page Independent Auditor s Report 1 Financial Statements: Statement of Assets and Liabilities 2 Schedule of Investments 3 Statement of Operations 6 Statement of Changes in Net Assets 7 Statement of Cash Flows 8 9

3 Independent Auditor s Report To BNP Paribas Investment Partners Trust Company, as Trustee of the BNP Paribas Investment Partners Pooled Trust Fund for Employee Benefit Plans: We have audited the accompanying financial statements of BNP Paribas Investment Partners Pooled Trust Fund for Employee Benefit Plans Income Plus Fund (the Fund ), which comprise the statement of assets and liabilities, including the schedule of investments, as of December 31, 2014 and the related statements of operations, of changes in net assets and of cash flows for the year then ended. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on the financial statements based on our audit. We conducted our audit 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 are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Fund s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of BNP Paribas Investment Partners Pooled Trust Fund for Employee Benefit Plans Income Plus Fund at December 31, 2014, and the results of its operations, changes in its net assets, and its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. April 17, 2015 PricewaterhouseCoopers LLP, PricewaterhouseCoopers Center, 300 Madison Avenue, New York, NY T: (646) , F: (813) ,

4 Statement of Assets and Liabilities December 31, 2014 Assets: Investments, at fair value (cost $923,988,983) $923,210,956 Interest receivable 9,844,843 Receivable for fund units sold 1,569,249 Total Assets 934,625,048 Liabilities: Payable for fund units redeemed 111,089,125 Distribution payable 14,305 Payable to Advisor 219,666 Accrued administrative and other expenses 261,085 Payable to unitholders (Note 10) 3,567,780 Total Liabilities 115,151,961 Net assets (at fair value) 819,473,087 Adjustment from fair value to contract value for fully benefit-responsive investment contracts (Note 10) (2,260,410) Net assets (at contract value) $817,212,677 Net asset value per unit (at contract value): Class A (based on net assets of $70,423,906 and 70,424,374 units outstanding) 1.00 Class B (based on net assets of $342,707,409 and 342,707,779 units outstanding) 1.00 Class C (based on net assets of $50,099,368 and 50,099,327 units outstanding) 1.00 Class D (based on net assets of $71,397,629 and 10,030,648 units outstanding) 7.12 Class E (based on net assets of $58,192,694 and 8,146,090 units outstanding) 7.14 Class H (based on net assets of $87,428,316 and 87,428,264 units outstanding) 1.00 Class J (based on net assets of $2,352,382 and 397,453 units outstanding) 5.92 Class K (based on net assets of $23,523,168 and 23,524,422 units outstanding) 1.00 Class L (based on net assets of $62,155,452 and 62,155,410 units outstanding) 1.00 Class M (based on net assets of $2,576,545 and 2,576,463 units outstanding) 1.00 Class N (based on net assets of $18,355,735 and 18,355,718 units outstanding) 1.00 Class O (based on net assets of $7,537,000 and 7,536,988 units outstanding) 1.00 Class P (based on net assets of $20,463,073 and 20,463,019 units outstanding) 1.00 See accompanying notes to financial statements. 2

5 90 BNP Paribas Investment Partners Pooled Trust Fund For Employee Benefit Plans - Income Plus Fund Schedule of Investments December 31, 2014 Percent of Wrap/GIC Wrapper Adjustment from Wrap/GIC Total Net Provider Major Coupon Maturity Investments at Investments at Fair Contracts at Fair Fair Value to Contract Provider Underlying Securities Assets Credit Ratings Rate Date Cost Value Value Contract Value Value Synthetic GIC's (35.5% of Net Assets) Bank of America N.A. variable rate, open maturity A/A2 Mutual Fund BlackRock Liquidity Funds TempFund 0.96% $8,875,903 $8,875,903 U.S. Treasury Obligations United States Treasury Note 2.125% 12/31/15 2,075,938 2,036,400 United States Treasury Note 2.000% 04/30/16 42,301,855 41,864,690 United States Treasury Note 0.250% 05/15/15 3,747,825 3,752,625 United States Treasury Note 0.375% 06/15/15 2,498,535 2,502,925 United States Treasury Note 0.250% 05/15/16 47,710,998 47,898,720 United States Treasury Note 0.500% 06/15/16 40,999,258 41,031,980 Total U.S. Treasury Obligations 15.07% 139,334, ,087,340 $148,210,312 $147,963,243 $0 ($70,232) $147,893,010 Voya Financial variable rate, open maturity A-/A3 Mutual Fund BlackRock Liquidity Funds TempFund 0.02% $156,081 $156,081 Asset-Backed Securities American Express Credit 1.260% 01/15/20 999, ,604 Capital One 1.480% 07/15/20 1,499,599 1,500,338 Chase Issuance Trust 1.380% 11/15/19 1,299,848 1,294,834 GE Equipment Transportation LLC 0.810% 09/24/20 1,999,699 2,001,470 PFS Financing Corp 0.711% 02/15/18 1,999,374 1,999,498 Total Asset-Backed Securities 0.84% 7,798,499 7,793,743 Commercial Mortgage-Backed Securities Boca Hotel Portfolio Trust 1.311% 08/15/26 456, ,882 Commercial Mortgage Trust 1.208% 06/08/30 2,000,000 1,999,218 DBUBS Mortgage Trust 3.386% 07/10/44 1,355,107 1,329,352 GS Mortgage Securities Trust 1.144% 05/01/45 649, ,023 Government National Mortgage Association 2.450% 07/01/38 1,348,925 1,355,164 Government National Mortgage Association 2.875% 11/01/37 493, ,927 Government National Mortgage Association 1.829% 03/01/39 1,712,010 1,708,097 Government National Mortgage Association 1.560% 08/16/41 1,493,385 1,436,438 Government National Mortgage Association 2.023% 06/01/40 1,935,474 1,921,431 Government National Mortgage Association 1.350% 01/01/39 2,393,973 2,342,594 Government National Mortgage Association 2.000% 06/01/36 1,918,725 1,915,042 Government National Mortgage Association 2.150% 08/01/35 1,923,579 1,921,105 Government National Mortgage Association 1.650% 02/01/38 1,474,136 1,462,618 Merrill Lynch Mortgage Trust 5.288% 11/01/37 1,761,818 1,618,607 Motel 6 Trust 1.500% 10/01/25 697, ,718 Commercial Mortgage Trust 1.361% 11/15/30 1,000,000 1,000,122 PFP III 1.331% 06/14/31 1,418,009 1,413,800 WF-RBS Commercial Mortgage Trust 0.864% 08/01/45 848, ,375 Total Commercial Mortgage-Backed Securities 2.66% 24,881,458 24,552,514 Mortgage-Backed Securities Freddie Mac 3.655% 05/01/41 1,534,580 1,563,701 Fannie Mae 3.000% 05/01/38 1,515,037 1,494,648 Fannie Mae 2.500% 01/01/27 1,334,663 1,331,730 Fannie Mae 2.500% 03/01/30 1,383,449 1,389,525 Fannie Mae 2.000% 10/01/40 912, ,526 Freddie Mac 4.000% 09/01/28 1,322,115 1,335,969 Freddie Mac 4.000% 10/01/27 1,260,027 1,252,620 Freddie Mac 4.000% 04/01/40 1,279,629 1,247,110 Freddie Mac 2.000% 03/01/40 1,301,901 1,277,613 Freddie Mac 2.500% 12/01/40 1,263,156 1,256,570 Fannie Mae 6.000% 05/25/34 1,159,345 1,126,731 Fannie Mae 5.807% 01/01/37 1,060,369 1,049,800 Fannie Mae 3.000% 11/01/27 1,401,875 1,371,207 Government National Mortgage Association 4.000% 10/01/39 1,405,391 1,408,380 Government National Mortgage Association 4.000% 11/01/39 1,101,959 1,096,766 Government National Mortgage Association 3.000% 08/01/41 792, ,413 Total Mortgage-Backed Securities 2.15% 20,028,081 19,881,309 3

6 Corporate Bonds AT&T Inc % 12/01/17 994, ,970 American Express Credit 1.550% 09/22/17 998,660 1,001,960 Bank of Montreal 2.500% 01/11/17 1,217,052 1,228,992 Bank of Nova Scotia 2.550% 01/12/17 1,421,392 1,435,756 Barclays Bank PLC 2.250% 05/10/17 1,233,172 1,224,264 Baxter International Inc % 01/15/17 1,536,730 1,517,085 Berkshire Hathaway Finance Corp 1.600% 05/15/17 1,419,514 1,411,970 Caterpillar Financial Services 1.000% 03/03/17 997, ,300 Chevron Corp 1.718% 06/24/18 986,620 1,005,050 Daimler Chrysler NA Holdings 2.375% 08/01/18 1,017,260 1,014,030 Daimler Chrysler NA Holdings 1.125% 03/10/17 999, ,180 John Deere Capital Corp 1.300% 03/12/18 1,255,345 1,276,391 Deutsche Bank Financial 1.350% 05/30/17 997, ,570 Walt Disney Company 1.100% 12/01/17 1,485,825 1,491,015 General Electric Capital Corp 1.600% 11/20/17 2,006,652 2,012,280 Goldman Sachs Group Inc % 04/30/18 503, ,865 Hong Kong Shanhai 1.625% 01/16/18 1,001, ,150 Intel Corp % 12/15/17 999, ,540 JPMorgan Chase & Co % 02/15/17 2,000,480 1,999,960 Medtronic Inc % 03/15/18 1,495,680 1,492,830 National Rural Utilities 5.450% 04/10/17 1,099,250 1,092,490 Nordea Bank AB 1.625% 05/15/18 987, ,490 Oracle Corp % 10/15/17 996, ,440 PNC Funding Corp % 07/02/19 996, ,460 Royal Bank of Canada 1.200% 01/23/17 1,198,908 1,199,124 Simon Property Group LP 2.800% 01/30/17 1,056,080 1,029,750 Statoil ASA 1.250% 11/09/17 997, ,910 Toronto Dominion Bank 1.400% 04/30/18 1,288,953 1,291,862 Total Capital Intl SA 1.550% 06/28/17 1,397,984 1,404,774 Trans-Canada Pipelines 6.500% 08/15/18 1,170,020 1,134,440 Trans-Canada Pipelines 0.750% 01/15/16 598, ,326 United Technologies Corp % 06/01/17 1,021,250 1,013,070 United Health Group Inc % 10/15/17 998, ,020 Wells Fargo & Company 2.625% 12/15/16 1,431,304 1,438,388 Total Corporate Bonds 4.31% 39,806,057 39,765,702 U.S. Treasury Obligations United States Treasury Note 0.875% 11/15/17 7,950,664 7,961,840 Total U.S. Treasury Obligations 0.86% 7,950,664 7,961,840 $100,620,840 $100,111,189 $0 ($2,264,581) $97,846,609 Natixis Financial Products LLC variable rate, open maturity A/A2 Mutual Fund BlackRock Liquidity Funds TempFund 4.99% $46,057,346 $46,057,346 $46,057,346 $46,057,346 $0 ($645,021) $45,412,325 Royal Bank of Canada variable rate, open maturity AA-/Aa3 Mutual Fund BlackRock Liquidity Funds TempFund 0.21% $1,909,540 $1,909,540 Commercial Mortgage-Backed Securities Government National Mortgage Association 2.450% 07/01/38 805, ,099 Total Commercial Mortgage-Backed Securities 0.09% 805, ,099 Mortgage-Backed Securities Freddie Mac 3.655% 05/01/41 719, ,859 Fannie Mae 3.000% 05/01/38 966, ,031 Fannie Mae 2.500% 01/01/27 850, ,041 Fannie Mae 2.500% 03/01/30 884, ,296 Freddie Mac 4.000% 09/01/28 675, ,829 Freddie Mac 4.000% 10/01/27 632, ,310 Total Mortgage-Backed Securities 0.51% 4,729,068 4,738,365 Corporate Bonds American Honda Finance 1.450% 02/27/15 699, ,078 Cisco Systems Inc % 02/22/16 1,390,272 1,266,024 The Coca-Cola Co % 11/15/15 1,535,805 1,514,700 Commonwealth Bank Austria NY 1.950% 03/16/15 1,000,870 1,003,040 Walt Disney Company 5.625% 09/15/16 1,794,090 1,621,440 E.I. Du Pont De Nemours 1.950% 01/15/16 1,308,060 1,316,822 Massmutual Global Funding 2.300% 09/28/15 765, ,351 Microsoft Corp 1.625% 09/25/15 1,308,034 1,311,843 National Rural Utilities CFC 1.900% 11/01/15 1,526,010 1,516,215 Pfizer Inc % 03/15/15 1,508,969 1,311,778 Royal Bank of Canada 2.300% 07/20/16 648, ,351 Wells Fargo & Company 5.625% 12/11/17 960,849 1,001,079 Total Corporate Bonds 1.52% 14,447,167 13,997,721 4

7 Foreign Government Bonds BK Nederlandse Gemeenten 1.375% 03/23/15 508, ,160 Total Foreign Government Bonds 0.05% 508, ,160 U.S. Treasury Obligations United States Treasury Note 0.375% 06/15/15 12,015,559 12,014,040 Total U.S. Treasury Obligations 1.30% 12,015,559 12,014,040 $34,415,678 $33,973,925 $0 ($105,927) $33,867,998 Total Synthetic GICs $329,304,177 $328,105,703 $0 ($3,085,761) $325,019,942 Traditional GIC's (47.1% of net assets) Jackson National Life AA/A1 1.06% 10/14/16 $10,000,000 $10,030,353 ($25,498) $10,004,855 Jackson National Life AA/A1 1.15% 11/22/16 13,333,333 13,394,868 (61,744) 13,333,124 Jackson National Life AA/A1 1.13% 06/30/17 15,000,000 14,878, ,381 15,000,000 Jackson National Life AA/A1 1.10% 02/28/17 25,000,000 25,058,469 (58,469) 25,000,000 Jackson National Life AA/A1 1.33% 03/15/18 15,000,000 14,988,748 11,252 15,000,000 Jackson National Life AA/A1 1.31% 05/31/18 15,000,000 14,978,788 21,212 15,000,000 Jackson National Life AA/A1 2.06% 09/28/18 15,000,000 15,104,983 (104,983) 15,000,000 Metropolitan Life AA-/Aa3 1.18% 09/21/15 10,000,000 10,054,552 (54,552) 10,000,000 Metropolitan Life AA-/Aa3 0.93% 09/28/15 15,000,000 15,000,079 (79) 15,000,000 Metropolitan Life AA-/Aa3 1.05% 12/31/15 20,000,000 20,081,614 (81,614) 20,000,000 Metropolitan Life AA-/Aa3 1.20% 12/20/16 10,000,000 10,027,011 (27,011) 10,000,000 Metropolitan Life AA-/Aa3 2.08% 04/01/19 15,000,000 15,163,515 (163,515) 15,000,000 New York Life AA+/Aaa 0.75% 10/17/17 12,000,000 11,907,336 92,664 12,000,000 New York Life AA+/Aaa 0.56% 11/30/17 15,000,000 14,561, ,787 14,999,999 New York Life AA+/Aaa 0.84% 03/15/18 15,000,000 14,936,462 63,538 15,000,000 New York Life AA+/Aaa 1.22% 08/16/18 25,000,000 24,868, ,220 25,000,000 New York Life AA+/Aaa 1.51% 09/30/18 25,000,000 25,064,709 (64,709) 25,000,000 Protective Life AA-/A2 1.46% 07/14/15 10,000,000 9,960,321 39,679 10,000,000 Protective Life AA-/A2 1.33% 08/08/16 20,000,000 19,718, ,964 20,000,000 Protective Life AA-/A2 1.02% 03/31/15 10,000,000 9,934,578 65,422 10,000,000 Protective Life AA-/A2 1.05% 09/29/17 9,000,000 8,644, ,659 9,000,000 Protective Life AA-/A2 1.65% 07/31/18 15,000,000 14,802, ,410 15,000,000 Protective Life AA-/A2 1.55% 12/17/18 10,000,000 9,646, ,678 10,000,000 Prudential Life AA-/A1 1.51% 01/01/16 15,000,000 16,337,654 (167,467) 16,170,187 Prudential Life AA-/A1 0.59% 09/07/16 15,000,000 14,998,843 1,157 15,000,000 Prudential Life AA-/A1 0.70% 05/16/16 10,000,000 10,092,069 (21,101) 10,070,968 Prudential Life AA-/A1 1.79% 06/23/18 15,000,000 15,289,359 (289,359) 15,000,000 Prudential Life AA-/A1 1.85% 12/20/18 15,000,000 15,229,829 (229,829) 15,000,000 United of Omaha A+/A1 0.28% 05/31/15 20,000,000 19,999, ,000,000 Total Traditional GICs $434,333,333 $434,753,781 $0 $825,352 $435,579,132 Investments in Mutual Funds (17.4% of net assets) Dreyfus Cash Management AAAm $156,783,692 $156,783,692 $156,783,692 BlackRock Liquidity Funds TempFund 3,567,780 3,567,780 3,567,780 Total Investments in Mutual Funds $160,351,472 $160,351,472 $0 $0 $160,351,472 Total Investments $923,988,983 $923,210,956 $0 ($2,260,410) $920,950,547 See accompanying notes to financial statements 5

8 Statement of Operations Year ended December 31, 2014 Investment income: Investment contract interest (net of wrapper contract fees of $1,107,858) $11,200,783 Interest income on short term investments 63,104 Total investment income 11,263,887 Expenses: Investment advisory fee 2,876,056 Administrative and other expenses 876,308 Total Expenses 3,752,364 Management fee waiver (38,107) Net Expenses 3,714,257 Net investment income 7,549,630 Net increase in net assets resulting from operations $7,549,630 See accompanying notes to financial statements. 6

9 Statement of Changes in Net Assets Year ended December 31, 2014 Operations: Net investment income $7,549,630 Net increase in net assets resulting from operations 7,549,630 Distributions to unitholders: From net investment income: Class A (272,586) Class B (4,896,543) Class C (45,363) Class H (537,058) Class K (157,923) Class L (191,039) Class M (623,341) Class N (117,175) Class O (26,927) Total Distributions to unitholders (6,867,955) Unit transactions: Proceeds from fund units sold 247,599,317 Distributions reinvested 6,844,425 Cost of fund units redeemed (898,860,224) Net decrease in net assets resulting from unit transactions (644,416,482) Net decrease in net assets (643,734,807) Net assets, at contract value, at beginning of year 1,460,947,484 Net assets, at contract value, at end of year $817,212,677 See accompanying notes to financial statements. 7

10 Statement of Cash Flows Year ended December 31, 2014 Cash flows provided from (used in) operating activities: Net increase in net assets from operations $7,549,630 Adjustments to reconcile net increase in net assets resulting from operations to net cash provided by (used in) operating activities: Purchases of long-term portfolio investments (217,815,361) Proceeds from disposition of long-term portfolio investments 660,779,185 Net proceeds from disposition of short-term portfolio investments 105,583,040 Increase in dividend and interest receivable (3,172,237) Decrease in payable for investment advisory fees (48,138) Increase in administration and other expenses payable 27,826 Net cash provided by operating activities 552,903,945 Cash flows from financing activities Proceeds from fund units sold 246,384,856 Payments for fund units redeemed (799,272,966) Distributions paid to unitholders (15,835) Net cash used in financing activities (552,903,945) Net increase in cash 0 Cash and foreign currency at beginning of the year 0 Cash and foreign currency at end of the year $0 Supplemental disclosure of cash flow information: Noncash financing activities not included herein consist of reinvestment of dividends and distributions of $6,844,425. See accompanying notes to financial statements. 8

11 (1) Organization The BNP Paribas Investment Partners Pooled Trust Fund for Employee Benefit Plans (the Pooled Fund ) is a trust established under the laws of the State of Illinois pursuant to a Declaration of Trust dated March 1, 2005, as amended (the Declaration of Trust ). The Declaration of Trust provides that the Pooled Fund may be comprised of one or more separate trusts referred to as funds, and each such fund may be further sub-divided into one or more classes of interests. The Income Plus Fund (the Fund ) is a fund formed under the Pooled Fund. The Fund, which was established in 1985, is a collective investment fund established and maintained by BNP Paribas Investment Partners Trust Company (the Trustee ), the trustee of the Pooled Fund. The Fund s governing instruments are the Declaration of Trust and the Fund Memorandum for the Fund (the Fund Memorandum ). The Trustee is an Illinois state-chartered non-depository trust company. Fischer Francis Trees & Watts, Inc. (the Advisor ) provides investment advice to the Fund. The Advisor is registered as an investment adviser with the U.S. Securities and Exchange Commission (the SEC ) under the Investment Advisers Act of 1940, as amended, and is an affiliate of the Trustee. The Pooled Fund has received a determination letter from the Internal Revenue Service indicating that, based on Revenue Ruling , the Pooled Fund constitutes a group trust exempt from U.S. federal income taxation under Section 501(a) of the Internal Revenue Code of 1986, as amended. The Fund is required to comply with the applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, and the Trustee is subject to the supervision and regulation by the Office of the Comptroller of the Currency, including Regulation 9 of the Rules and Regulations of the Comptroller of the Currency. The Trustee is a wholly owned subsidiary of BNP Paribas Investment Partners USA Holdings Inc., which is a wholly owned subsidiary of Paribas North America, Inc. (a) (b) Investment Objective The Fund s investment objective is to preserve invested principal while providing a competitive current rate of return. The Fund will be invested and reinvested primarily in guaranteed investment contracts ( GICs ), money market funds, money market instruments, repurchase agreements, private placements, bank investment contracts and synthetic GICs. The Fund will operate within a weighted average maturity range selected by the Trustee from time to time. Fund Structure The Fund currently offers thirteen classes of units: Class A, B, C, D, E, H, J, K, L, M, N, O and P. In general, each class of units has equal rights with respect to investment-related income including interest. These amounts are allocated to each class based on relative net assets. As described in Note 3, the primary differences between each class relate to the expense structure and distribution policy, which differ between classes. (2) Summary of Significant Accounting Policies The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ( GAAP ). The Fund is an investment company and, accordingly, follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board Accounting Standards Codification Topic 946 Investment Companies, which is part of GAAP. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the 9

12 reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from such estimates. A description of the significant accounting policies follows. (a) Valuation of Investments Investments held are reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets of a fund attributable to fully benefit-responsive wrapper contracts (also known as Synthetic GICs) and investment contracts that are direct obligations of the issuing insurance company (GICs), because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of their employer sponsored definedcontribution plans which invest in the Fund. As of December 31, 2014, all contracts were deemed to be fully benefit-responsive. Accordingly, the accompanying Schedule of Investments ( SOI ) reflects both the fair value of each wrapper contract and GIC, as well as the adjustment to contract value. The Statement of Operations and Statement of Changes in Net Assets were prepared on a contract value basis and reflect the income credited to unitholders in the Fund. Unless otherwise noted, references to net assets within the Fund s financial statements and accompanying notes denote net assets at contract value. Contract value represents contributions made under the wrapper contracts and investment contracts less any participant-directed withdrawals plus accrued interest. Wrapper contracts and GICs are generally permitted to be valued at contract value, rather than fair value, to the extent they are fully benefit-responsive and held by a trust offered only to qualified employer-sponsored definedcontribution plans. Wrapper contracts and GICs are considered fully benefit-responsive if: 1) they are effected directly between the trust and the issuer and may not be transferred without the consent of the issuer, 2) in the case of a traditional GIC, the repayment of principal and interest is a financial obligation of the issuer, or, in the case of synthetic GICs and separate account contracts, the issuer of a wrapper contract provides assurance that the contract crediting rate will not be adjusted to less than zero, 3) the wrapper contract or GIC requires all permitted participant-initiated transactions with the trust to occur at contract value without limitation, 4) it is improbable that an event will occur that would limit the ability of the trust to transact at contract value with both the issuer and trust unitholders, and 5) the trust allows unitholders reasonable access to their funds. Wrapper contracts and GICs that do not meet the criteria for valuation at contract value as prescribed by accounting principles generally accepted in the United States of America will be valued as determined by the Trustee, and such value may be more or less than contract value. The fair value of the wrapper contracts and GICs are generally determined using a discounted cash flow technique. Debt securities are generally traded in the over-the-counter market. Debt securities are valued at prices furnished by dealers who make markets in such securities or by an independent pricing service, which consider yield or price of bonds of comparable quality, coupon or interest rate, maturity, and type, as well as prices quoted by dealers who make markets in such securities. The fair value of wrapper contracts reflects the discounted present value of the difference between the current wrap contract cost and its replacement cost. Securities or other assets for which market quotations are not readily available or for which market quotations do not, in the good faith opinion of the Trustee, represent the fair value of the security or 10

13 asset at the time of pricing (including certain illiquid securities) are fair valued in accordance with procedures established by and under the supervision and responsibility of the Trustee. The Trustee, via its Parent, BNP Paribas Investment Partners USA Holdings Inc. ( BNPP IP ), has established a Regional Fair Value Valuation Committee ( RFVC ) that is comprised of senior representatives from the Investment Management and Investment Operations teams along with representatives from the Legal and Compliance and Risk Management groups. The aim of the RFVC is to establish and apply a standard pricing policy which can be applied to all valuations and is fully documented and auditable, with a transparent process. The RFVC provides a coherent and consistent approach to pricing and valuation across all BNPP IP managed funds, independent of the investment function. It is possible that the estimated values may differ from the values that would have been used had a ready market for the investments existed, and such differences could be material. The Fund is responsible for monitoring developments that may impact fair values and for discussing and assessing fair values on an ongoing and at least quarterly basis with the RFVC, as applicable. Investments in money market funds are valued at net asset value. Investments in GICs represent deposits that guarantee a stated interest rate for the term of the contract. The fair value of GICs is determined based on the present value of the contract s expected cash flows, discounted at current market interest rates for like quality and duration investments. Synthetic GICs are comprised of an underlying pool of securities combined with a wrapper instrument issued by a separate entity that allows for participants to transact at contract value for qualified withdrawals. The securities supporting the synthetic GICs are valued by independent pricing sources, as described above. GAAP defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. In addition, GAAP specifies a hierarchy of valuation techniques based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect management s market assumptions. Various inputs are used in determining the value of the Fund s investments. These inputs are summarized in the three broad levels listed below. Level 1 quoted prices in active markets for identical securities Level 2 other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.); and Level 3 significant unobservable inputs (including the Fund s own assumptions in determining the fair value of investments). A financial instrument s level within the fair value hierarchy is based on the lowest level of any input both individually and in aggregate that is significant to the fair value measurement. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. 11

14 Level 1 assets represent an investment in a registered money market fund. Level 2 assets are comprised of the underlying investments in each synthetic GIC, except for the money market fund investment, which are primarily structured fixed income securities mainly backed by mortgages. Traditional GICs and wrapper (or wrap) contracts, if any, are classified as Level 3 assets. Both have unobservable inputs and are not actively traded. The Trustee considers factors such as benefit responsiveness and the 12-month put, which are written into the contracts, to determine their fair value. The following is a summary of the inputs used to value the Fund s investments as of December 31, 2014: Level 1 Level 2 Level 3 Total Short-term Investments $217,350,343 $217,350,343 Fixed Income: Government and Agency Securities $159,564, ,564,380 Corporate Debt Securities 53,763,423 53,763,423 Residential Mortgage-Backed Securities 24,619,674 24,619,674 Asset-Backed Securities 33,159,356 33,159,356 Traditional GICs $434,753, ,753,780 Total $217,350,343 $271,106,833 $434,753,780 $923,210,956 For the year ended December 31, 2014, there were no transfers in or out of Level 1, 2, or 3. The following is a reconciliation of the Level 3 assets for which significant unobservable inputs were used to determine the fair value: Traditional Wrapper GIC's Contracts Total Balance as of December 31, 2013 $591,195,644 $243,467 $591,439,111 Change in unrealized appreciation 4,444,574 (243,467) 4,201,107 Purchases 25,000,000 25,000,000 Maturities (185,886,438) (185,886,438) Balance as of December 31, 2014 $434,753,780 $0 $434,753,780 The change in unrealized appreciation (depreciation) presented in the table above is attributable to investments in traditional GICs and wrapper contracts still held at December 31,

15 The following table represents the Fund's level 3 financial instruments, the valuation techniques used to measure the fair value of those financial instruments, and the significant unobservable inputs and the ranges of values for those inputs. Instrument Fair Value Valuation Technique Unobservable Inputs Range (Weighted Average) Traditional GICs $434,753,780 Discounted Discount Rates 0.30% % (1.23%) Cash Flows Duration 0.08 yrs yrs (1.73 yrs) Wrapper Contracts 0 Discounted Discount Rates 0.35% % (0.78%) Cash Flows Current Wrap Fee Rate 0.20% % (0.21%) Re-Price Wrap Fee Rate 0.20% % (0.21%) Generally, a change in assumptions used in any input in isolation may be accompanied by a change in another input. Significant changes in any of the unobservable inputs may significantly impact the fair value measurement. The impact is based on the relationship between each unobservable input and the fair value measurement. (b) Interest Income and Investment Transactions The Fund records investment transactions on trade date. Interest income is recognized on an accrual basis with adjustments for accretion and amortization of discounts and premiums. Interest income, if any, is recorded on the accrual basis. Income from wrapper contracts is recorded at the contract rate, which in the case of the wrapper contracts is referred to as the crediting rate. Crediting rates on the Fund s wrapper contracts reset on a monthly basis and are net of wrapper fees to the issuer. For fully benefit-responsive wrapper contracts, earnings on the underlying assets are factored into the next computation of the crediting rate reset. All income, gains and losses from investments underlying the wrapper contracts are not separately disclosed on the Statement of Operations, as the crediting income for these contracts represents the impact of the combined wrapper contracts and underlying investments on net assets of the Fund. (c) (d) Expenses Common fund level expenses are allocated to each class on a relative net asset basis. Class specific expenses are charged directly to the unit class. Wrapper fees associated with each synthetic GIC are charged to the Fund by the applicable bank or insurance company at an annual rate ranging from 0.20% to 0.22%. Income Taxes Admission to participate in the Fund is restricted to employers pension and profit sharing funds, which are exempt from tax under Section 501(a) of the Internal Revenue Code ( IRC ) by reason of qualifying under Section 401(a) of the IRC. Accordingly, no Federal income tax provision is required. 13

16 The Fund recognizes a tax benefit from an uncertain income tax position only if it is more likely than not that the position is sustainable, based solely on its technical merits and consideration of the relevant taxing authorities widely understood administrative practices and precedents. If this threshold is met, the Fund measures the tax benefit as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. The Fund s open tax years for the prior three years are subject to examination by the taxing authorities. The Trustee is not aware of any tax position with respect to the Fund for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly change in the next twelve months. (e) Unit Value, Subscriptions, Redemptions, and Distributions The net asset value of the Fund s unit classes is determined on a daily basis. Units can be issued and redeemed on any business day at that day s unit value. All earnings, expenses, and gains and losses of the Fund are reflected in the calculation of the daily unit value. Net investment income is distributed on a monthly basis to Class A, B, C, H, K, L, M, N, O and P unit holders. Net investment income is retained, reinvested, and reflected as an increase in the net asset value of the unit class for Class D, E, and J unitholders. Although it is intended to permit daily withdrawals from this Fund, some of the assets of the Fund, especially investment contracts, may require an adjustment in the value of the investment if a withdrawal is made. In any event, the Trustee may, in its sole discretion, defer such withdrawal over such period of time, not to exceed one year, as the Trustee may determine that it is necessary for fair and orderly management of the Fund. (3) Multiple Class Structure and Class-Specific Expenses The Fund has multiple classes of units outstanding, which primarily differ from one another with respect to expenses, net asset value, distribution features, and policies. In general, expenses are accrued based on average daily net assets. A summary of the key unit class attributes is included in the table below: Annual investment advisory fee Distribution rate as a Constant or status percentage of accumulating (distributing Frequency of average daily Net Asset vs. distribution Class net assets Value (NAV) nondistributing) and payout A 0.50% Constant NAV Distributing Daily with monthly payout B None Constant NAV Distributing Daily with monthly payout C 0.75 Constant NAV Distributing Daily with monthly payout D 0.50 Accumulating NAV Nondistributing Not applicable E 0.40 Accumulating NAV Nondistributing Not applicable H 0.26 Constant NAV Distributing Daily with monthly payout J 0.75 Accumulating NAV Nondistributing Not applicable K 0.20 Constant NAV Distributing Daily with monthly payout L 0.56 Constant NAV Distributing Daily with monthly payout M 0.15 Constant NAV Distributing Daily with monthly payout N 0.40 Constant NAV Distributing Daily with monthly payout O 0.65 Constant NAV Distributing Daily with monthly payout P 1.00 Constant NAV Distributing Daily with monthly payout 14

17 For Class B units, a management fee is paid to the Trustee. However, this fee is not included as an expense in these financial statements, as the participating trusts, and not the Fund, bear these fees directly. Class specific investment advisory fees for the year ended December 31, 2014, were as follows: Class Investment advisory fee A $399,951 C 376,747 D 586,875 E 251,478 H 240,440 J 15,568 K 48,848 L 381,681 M 135,609 N 106,987 O 91,685 P 240,187 $2,876,056 (4) Unit Capital Unit transactions for the year ended December 31, 2014, by class, were as follows: Dollars Reinvestment Class Subscriptions of distributions Redemptions Net change A $32,196,051 $271,699 ($49,307,165) ($16,839,415) B 89,285,517 4,884,224 (517,585,613) (423,415,872) C 14,568,875 45,363 (15,919,699) (1,305,461) D 14,146,869 0 (88,170,105) (74,023,236) E 11,346,700 0 (22,073,991) (10,727,291) H 8,644, ,262 (20,381,488) (11,200,499) J 1,654,985 0 (1,261,033) 393,952 K 13,378, ,590 (9,292,903) 4,236,251 L 3,965, ,964 (12,857,433) (8,701,438) M 31,658, ,583 (119,019,431) (86,739,600) N 10,344, ,813 (15,138,515) (4,677,293) O 9,940,967 26,927 (16,876,939) (6,909,045) P 6,468,374 0 (10,975,909) (4,507,535) $247,599,317 $6,844,425 ($898,860,224) ($644,416,482) 15

18 Units Reinvested Unit class Subscriptions dividends Redemptions Net change A 32,196, ,699 (49,307,165) (16,839,415) B 89,286,333 4,884,224 (517,585,613) (423,415,056) C 14,568,875 45,363 (15,919,699) (1,305,461) D 1,991,193 0 (12,403,590) (10,412,397) E 1,592,357 0 (3,097,623) (1,505,266) H 8,644, ,262 (20,381,488) (11,200,499) J 279,710 0 (213,139) 66,571 K 13,378, ,590 (9,292,903) 4,236,251 L 3,965, ,964 (12,857,433) (8,701,438) M 31,658, ,583 (119,019,430) (86,739,599) N 10,344, ,813 (15,138,515) (4,677,293) O 9,940,967 26,927 (16,876,939) (6,909,045) P 6,468,374 0 (10,975,909) (4,507,535) 224,314,839 6,844,425 (803,069,446) (571,910,182) (5) Investment Transactions During the year ended December 31, 2014, purchases of new investment contracts and additional deposits to existing contracts were $217,815,361 and the proceeds of the disposition of investment contracts were $660,779,185. Purchases and proceeds from the sales of the underlying securities to the synthetic GICs, excluding short term investments, were $286,118,390 and $290,897,566 for the year ended December 31, 2014, respectively. For a copy of the detailed supporting schedule of statement of transactions in summary form, please contact your client relationship officer. (6) Risks and Uncertainties Investment securities, in general, are exposed to various risks, such as interest rate, credit risk, and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements. There are several risks associated with wrapper (or wrap) contracts. One of the primary risks involved is credit risk of the contract issuer. The Fund may be exposed to credit risk associated with the issuer of investment contracts. If the contract issuer defaults or becomes insolvent, the Fund could sustain a loss if the market value of the covered assets is less than the book value of the contract, and replacement coverage is not obtained. Even in the absence of an actual default, in the event that the creditworthiness of the contract issuer deteriorates materially, the Trustee may be required, pursuant to American Institute of Certified Public Accountants ( AICPA ) guidelines, to mark-to-market a portion of the Fund, which could result in a loss. Secondly, liquidity is limited because of the unique characteristics of wrapper contracts and the absence of an actively traded secondary market. 16

19 (7) Concentrations From time to time, the Fund may have a concentration of several unitholders, which may include other funds or accounts managed by the Trustee or its affiliates holding a significant percentage of units outstanding. Significant unitholder transactions by these unitholders, if any, could have a material impact on the Fund. (8) Indemnifications In the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general indemnifications. The Fund s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Trustee expects the risk of loss to be remote. (9) Financial Highlights The following represents the per-unit information, ratios to average net assets, and the other supplemental information by unit class for the year ended December 31, A B C D E H J K L M N O P Beginning net asset value (a) $1.00 $1.00 $1.00 $7.09 $7.11 $1.00 $5.91 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 Income from operations: Net investment income 0.00(b) (b) (b) 0.00(b) 0.00(b) 0.00(b) 0.00(b) Total from operations 0.00(b) (b) (b) 0.00(b) 0.00(b) 0.00(b) 0.00(b) Distributions: Net investment income 0.00(b) (0.01) 0.00(b) (0.01) 0.00 (0.01) 0.00(b) 0.00(b) 0.00(b) 0.00(b) 0.00 Total distributions 0.00(b) (0.01) 0.00(b) (0.01) 0.00 (0.01) 0.00(b) 0.00(b) 0.00(b) 0.00(b) 0.00 Ending net asset value (a) $1.00 $1.00 $1.00 $7.12 $7.14 $1.00 $5.92 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 Total return 0.34% 0.84% 0.09% 0.42% 0.42% 0.58% 0.17% 0.64% 0.28% 0.69% 0.44% 0.19% 0.00%(b) Ratios to average net assets: Expenses 0.57% 0.07% 0.82% 0.57% 0.47% 0.33% 0.82% 0.27% 0.63% 0.22% 0.47% 0.72% 0.91%(c) Net investment income 0.34% 0.84% 0.09% 0.34% 0.44% 0.58% 0.09% 0.64% 0.28% 0.69% 0.44% 0.19% 0.00%(b) Ending net assets (in millions) (a) $70.4 $342.7 $50.1 $71.4 $58.2 $87.4 $2.4 $23.5 $62.2 $2.6 $18.4 $7.5 $20.5 (a) At contract value. (b) Represents less than $0.005 per share or 0.005%. (c) The ratio is after investment advisory fee waiver. As described in Note 11, the Trustee voluntarily waived a portion of investment advisory fees (equal to 0.16% of average net assets) during the year. The financial highlights are calculated for the class as a whole. The net investment income per unit was calculated based upon the daily average units outstanding during the period. The total return calculation is based on the value of a single unit outstanding throughout the period. It represents the percentage change in the net asset value per unit between the beginning and end of the period. An individual unitholder s total return may vary from this total return based on different advisory fee and the timing of capital transactions. 17

20 (10) Information Regarding Investment Contracts The Fund invests primarily in investment contracts such as traditional GICs and enters into wrapper contracts with underlying securities to create synthetic GICs. In a traditional GIC, the Fund enters into a contract with an issuer (typically a bank or life insurance company), which provides for a stated rate of interest and a fixed maturity. In a synthetic GIC structure, the Fund owns fixed-income investments and enters into a wrap contract from high-quality insurance companies, banks or other financial services companies that serve to substantially offset the price fluctuations in the underlying investments caused by movements in interest rates. Each wrap contract obligates the wrap provider to maintain the contract value of the underlying investments. The contract value is generally equal to the principal amounts invested in the underlying investments, plus interest accrued at a crediting rate established under the contract, less any adjustments for withdrawals (as specified in the wrap agreement). Under the terms of the wrap contract, the realized and unrealized gains and losses on the underlying investments are, in effect, amortized over the duration of the underlying investments, through adjustments to the future contract interest crediting rate (which is the rate earned by participants in the Fund for the underlying investment). The wrap contract provides that the adjustments to the interest crediting rate will not result in a future interest crediting rate that is less than zero. This ensures that the participants principal and accrued interest will be protected. In general, if the contract value of the wrap agreement exceeds the market value of the underlying investments (including accrued interest), the wrap provider becomes obligated to pay that difference to the Fund in the event that unitholder redemptions result in partial or total contract liquidation. In the event that there are partial unitholder redemptions that would otherwise cause the contract s crediting rate to fall below zero percent, the wrap provider is obligated to contribute to the Fund an amount necessary to maintain the contract s crediting rate to at least zero percent. The circumstances under which payments are made and the timing of payments between the Fund and the wrap provider may vary based on the terms of the wrap contract. (a) Calculating the Interest Crediting Rate in Wrap Contracts The key factors that influence future interest crediting rates for a wrap contract include: The level of market interest rates; The amount and timing of participant contributions, transfers, and withdrawals into/out of the Fund; The investment returns generated by the fixed income investments that underlie the wrap contract; The duration of the fixed income investments that underlie the wrap contract 18

21 Wrap contract interest crediting rates are typically reset on a monthly or quarterly basis according to each contract. While there may be slight variations from one contract to another, most wrapper contracts use a formula that is based on the characteristics of the underlying fixed income portfolio: CCR = ((1+YTM) x (MV/CV) 1/Duration 1) WF Where: CCR = Contract interest crediting rate YTM = Yield to maturity of underlying investments MV = Market value of underlying investments CV = Contract value (principal plus accrued crediting rate interest) Duration = Duration of the underlying investments WF = Wrap contract fees (in basis points) Over time, the crediting rate formula amortizes the Fund s realized and unrealized market value gains and losses over the duration of the underlying investments. Because changes in market interest rates affect the yield to maturity and the market value of the underlying investments, they can have a material impact on the wrap contract s interest crediting rate. In addition, participant withdrawals and transfers from the Fund, which exceed the cash buffer, would be drawn from individual wrap contracts. Although wrap contracts are intended to pay contract value, they are funded through the market value liquidation of the underlying investments, which also impacts the interest crediting rate. The resulting difference between the market value of the underlying investments relative to the wrap contract value is presented on the Fund s Schedule of Investments and Statement of Assets and Liabilities as the Adjustment from Fair Value to Contract Value. If the Adjustment from Fair Value to Contract Value is positive for a given contract, this indicates that the wrap contract value is greater than the market value of the underlying investments. The embedded market value losses in the underlying securities will be amortized in the future through a lower interest crediting rate than would otherwise be the case. If the Adjustment from Fair Value to Contract Value is negative, this indicates that the wrap contract value is less than market value of the underlying investments. The amortization of the embedded market value gains in the underlying securities will cause the future interest crediting rate to be higher than it otherwise would have been. Thus, to the extent the interest crediting rate remains below prevailing market interest rates, participants contributing to the Fund will share in that lower interest crediting rate; similarly, to the extent the crediting rate exceeds current market interest rates, withdrawing participants will cede any benefit related to that higher interest crediting rate to the remaining participants. (b) Events that Limit the Ability of the Fund to Transact at Contract Value In certain circumstances, the amount withdrawn from the wrap contract would be payable at fair value rather than at contract value. These events include termination of participating plans, or a material adverse change to the provisions of participating plans. While it is possible that some of the plans participating in the Fund may experience plan terminations, bankruptcy of plans, early termination of wrapper contracts or other events that would trigger fair value payouts under the Fund s wrap agreements, based on prior experience, 19