MEMORANDUM
TO:
All Participants in the Apogee 401(k) Retirement Plan whose
accounts in the 401(k) Plan were invested in the SSgA Daily Bond
Market Fund at any time during the period from July 1, 2007
through August 30, 2007
FROM:
Apogee Retirement Plan Committee
DATE:
March 8, 2010
RE:
Apogee 401(k) Retirement Plan
ATTACHMENT:
401(k) Confirmation Statement
This memo is to notify you that on March 3, 2010, the Apogee 401(k) Retirement
Plan (the “401(k) Plan”) received a payout from a Fair Fund that State Street Bank and
Trust Company (“State Street”) established as a result of a settlement between State
Street and the Securities and Exchange Commission (“SEC”). State Street’s settlement
with the SEC resulted from an investigation that the SEC launched into losses incurred in
certain of State Street’s fixed income funds, including the SSgA Daily Bond Market Fund
(the “Bond Fund”), in which the 401(k) Plan was invested. The 401(k) Plan received
$3,486,351.33 from the Fair Fund (the “Fair Fund Distribution”). The 401(k) Plan will
deduct from the Fair Fund Distribution litigation expenses (attorneys’ and experts’ fees
and expenses and discovery costs) incurred in its ongoing litigation against State Street
and CitiStreet that have been paid by Apogee on behalf of the 401(k) Plan. The litigation
fees and expenses total $909,408 through February 28, 2010, leaving $2,576,943.33 (the
“Allocable Proceeds”) to be distributed to 401(k) Plan participants.
The Allocable Proceeds will be allocated among 401(k) Plan participants who
were invested in the Bond Fund at any time during the period from July 1, 2007
through August 30, 2007, the date the 401(k) Plan exited the Bond Fund. If you
received a copy of this memorandum, we have determined one or more of your 401(k)
investment funds were invested in the Bond Fund at some time from July 1, 2007 through
August 30, 2007. The Allocable Proceeds will be allocated among 401(k) Plan
participants’ individual accounts in proportion to the accounts’ losses resulting from the
Bond Fund’s drop in value (as required by the federal law governing the 401(k) Plan, the
Apogee 401(k) Retirement Plan
Page 2
Employee Retirement Income Security Act (“ERISA”)). Approximately 96.5% of the
losses in the Bond Fund were incurred during the period from July 1, 2007 through
August 30, 2007. The Plan of Allocation, which Apogee’s Pension Investment
Committee (the “Committee”) has approved, is described on page three of this
memorandum. Allocations range from less than $100 to more than $10,000. The
amount of your allocation of the Allowable Proceeds is shown on the 401(k)
Confirmation Statement attached to this memorandum.
The SEC filed its action against State Street and notice of settlement with the
United States District Court for the District of Massachusetts on February 4, 2010.
Copies of the SEC’s filings are posted at the Faegre & Benson website,
www.faegre.com/apogeelitigation. The settlement was approved by the court on
February 25, 2010. Apogee anticipates that the Allocable Proceeds will be allocated to
participants’ individual accounts in accordance with the Plan of Allocation on or about
March 10, 2010. Only those participants who were invested in 401(k) Plan funds
that were invested in the Bond Fund and who suffered losses from July 1, 2007
through August 30, 2007 will receive a portion of the Allocable Proceeds.
After its investigation into losses incurred in certain of State Street’s fixed income
funds, including the Bond Fund, the SEC ultimately concluded, as reflected in the
complaint filed February 4, 2010, that State Street improperly provided information
concerning its fixed income investments and performance to certain favored investors,
but not to other such investors. These claims are similar to the claims the 401(k) Plan has
asserted against State Street and CitiStreet in the ongoing litigation.
Please note that the Fair Fund Distribution does not impact the 401(k) Plan’s
claims against State Street and CitiStreet to recover certain losses the 401(k) Plan
suffered in 2007, other than to reduce the amount of damages the 401(k) Plan may seek
under those claims. Apogee estimates that the losses suffered by the 401(k) Plan were
approximately $4,975,000 and after reducing its claimed damages by the Fair Fund
Distribution, the 401(k) Plan has approximately another $1.5 - $2 million in investment
losses that it will continue to pursue. In addition, the 401(k) Plan intends to seek
recovery of the attorneys’ fees and costs the 401(k) Plan has expended in the litigation, as
permitted under ERISA.
CitiStreet has challenged the 401(k) Plan’s claims against it, and has filed a
motion to dismiss the 401(k) Plan’s complaint. State Street has not filed its own motion
to dismiss. CitiStreet’s motion has been fully briefed and is before the court, awaiting
decision. Copies of the briefs submitted to the court regarding this motion to dismiss,
redacted for confidentiality, are available at the Faegre & Benson website,
www.faegre.com/apogeelitigation. Apogee anticipates that once the court rules on
CitiStreet’s motion to dismiss, discovery will proceed and the parties will move to
immediately schedule depositions.
Apogee 401(k) Retirement Plan
Page 3
The Plan of Allocation
A damages expert was retained to assist in calculating the 401(k) Plan’s damages
and to develop a formula for allocating the Allocable Proceeds to individual participants.
As noted above, the purpose of the Plan of Allocation is to distribute the Allocable
Proceeds of the SEC Fair Fund Distribution among participant accounts in proportion to
the accounts’ losses resulting from the Bond Fund’s drop in value. The Plan of
Allocation is designed to balance the interests of precision and cost by employing an
allocation formula that measures the losses participant accounts experienced over ten
separate time periods from July 1, 2007 through August 30, 2007 (the “Loss Periods”),
when the 401(k) Plan exited the Bond Fund. As stated above, 96.5% of all losses 401(k)
Plan participants suffered in 2007 occurred in this timeframe.
The Bond Fund was offered as a standalone fund in the 401(k) Plan in 2007. The
Bond Fund also served as the bond fund component of the 401(k) Plan’s three Strategy
Funds at that time – the Conservative Strategy Fund (which had a Bond Fund target
percentage of 45%), the Moderate Strategy Fund (which had a Bond Fund target
percentage of 30%), and the Aggressive Strategy Fund (which had a Bond Fund target
percentage of 15%). The Bond Fund and these three Strategy Funds will be referred to
herein collectively as the “Four Affected Funds.”
Each participant invested in at least one of the Four Affected Funds during at least
one of the ten Loss Periods will receive his or her proportionate share of the Allocable
Proceeds attributable to that Loss Period. An individual participant’s total allocated share
of the Allocable Proceeds is equal to the sum of his or her allocated share with respect to
each of the Four Affected Funds for a given Loss Period.
The Committee has instructed the 401(k) Plan’s recordkeeper, ING Institutional
Plan Services, Inc., to invest each participant’s share of the Allocable Proceeds across all
401(k) Plan funds according to your current or most recent investment elections.
If you have any questions regarding the investment of your allocation, please call
ING at 1-888-284-3725. You can select zero at any time to speak to a customer service
representative. You will need your four-digit PIN to access this information about your
account. If you do not have your PIN, you can request that it be sent to you when you
call. If you are no longer an Apogee employee, you will have the option to request a
distribution of your account. Please call ING to discuss your options regarding your
401(k) Plan balance. The amount of your allocation will be listed as additional earnings
in your account.
We will continue to keep you apprised of significant developments in the ongoing
State Street and CitiStreet litigation. Meanwhile, if you have any questions, please feel
free to contact your local HR representative, or Kelly Pietsch, Apogee Benefits &
Compensation Analyst, at (952) 487-7554.
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