AARPFunds IRA Kit PDF

Individual Retirement Account Opening Kit
Prepare for Retirement
AARP Financial
Focused on investors needs first
For nearly half a century, AARP has worked toward improving the quality of life for people over 50. Founded in 2005, AARP Financial extends this historic commitment through a carefully chosen array of banking, insurance and investment solutions, and straightforward guidance so you can make decisions with confidence.
We Can Help
Investment solutions designed to help you reach your goals
If youre like most people, investing for your retirement is a means to an end. You dont want to sort through an endless array of choices. You want to make good investment decisions, but finding the right investment for you can be challenging. Thats where AARP Financial can help. We support you with a select group of smart, low-cost investment solutions designed to help you reach your goals.
Inside this Guide Youll Find: We Can Help Experienced AARP Financial Investment Counselors Preparing for Retirement Understanding IRAs - Traditional IRA - Roth IRA - SEP IRA - Rollover IRA AARP Funds Investment Options An Easy Way to Take Action Now
Experienced AARP Financial Investment Counselors

AARP Financial was established especially with the needs of investing for retirement in mind. We provide you with the financial support, knowledge and confidence you need to help meet your investment goals. No matter your current life stage, personal goals, or financial situation, our family of five professionally managed, low-cost mutual funds offer a complete choice of investment solutions. You can also count on getting the guidance you need. And our experienced AARP Financial Investment Counselors are there to help. AARP Financial Investment Counselors are: Can help you determine which AARP Fund or type of IRA may be right for you Knowledgeable about the needs of investors preparing for or living in retirement FINRA-Registered representatives, through ALPS Distributors, Inc., and employed by AARP Financial Inc. FINRA is the largest non-governmental regulator for all securities firms doing business in the U.S. Salaried, not commissioned, so they can help you make investment choices
Call us today. Find out more about an AARP Funds Individual Retirement Account by speaking with one of our experienced, knowledgeable Investment Counselors at 1-800-958-6457, MondayFriday, 8:00 a.m.6:00 p.m. Eastern Time.
Preparing for Retirement

Helping you meet the challenge of retirement investing
Because youre reading this brochure, investing for retirement most likely is a top priority. An Individual Retirement Account (IRA) can be an outstanding tool for many people to help them accumulate the additional assets they will need in retirement. However, if your employer offers a retirement plan with a company match, you may want to consider investing in that first, since it allows the easy contribution of pre-tax dollars. For people who dont have company-sponsored retirement plans or even if youre contributing the maximum to your employer-sponsored plan the benefits of tax-deferred* growth potential and fully or partially deductible contributions, depending upon your level of income, make an IRA a great option.
Planning for Your Retirement Income

Make the most out of your retirement by planning for and evaluating the sources of your retirement income. According to the Social Security Administration, 39% of your retirement income will come from Social Security benefits while the rest of your retirement income will need to come from your pension, retirement plans, IRAs and your own personal savings and investments. Part-time employment income may also make up a portion of your retirement income stream. A good way to start planning your retirement income stream is to get a clear sense of what youre spending today. Take time to sit down and calculate your current everyday living expenses and what you are spending annually on special activities. For example, what do you pay for food, heat, home mortgage, maintenance, insurance, and taxes? Then its time to think about what things you will likely spend less on during retirement. What things will cost you more? Will your home be paid off? Will you have more medical and dental expenses in retirement? Will you relocate to a warmer climate? Although, you cannot be certain of all of your future expenses, completing this type of assessment will help you be better prepared when you sit down and plan your retirement savings strategy.
Sources of Retirement Income
38.6% Social Security
26.3% Part-time Employment Earning 19.7% Pension, Retirement Plans and IRAs 12.6% Personal Savings and Investments 2.7% Other
Source: Social Security Administration (SSA); Income of the Aged Chart Book, 2004
*AARP Financial Inc. does not provide tax advice. Please consult a tax advisor for information pertaining to your particular situation. 3
Understanding IRAs
Anyone who wishes to enjoy a more comfortable retirement should consider a tax-advantaged investing vehicle, such as the Individual Retirement Account (IRA), the Roth IRA or the Rollover IRA. If youre a small business owner or self-employed individual with few or no employees, there are small business retirement plan options that can help you and your employees invest for retirement.
The Traditional IRA

The Traditional IRA is a good choice for many investors. It provides tax-deferred growth of earnings, while possibly allowing a tax deduction of the contribution amount, up to IRS limits, depending on your income. Tax-deferral is a powerful tool in helping to grow your retirement assets. The example below shows a hypothetical illustration of the difference that tax-deferred investing can make over time.
You have a chance to catch up

IRA regulations allow investors age 50 and over to make catch-up contributions to their IRAs and other retirement savings
Investments $300,000 250,000 200,000 150,000 100,000 50,000 0 20 years No Catch-up Contributions With Catch-up Contributions
$276,147
plans. These investors can invest an additional $1,000. While the amount may not seem large, when it accumulates over time and the earnings grow tax deferred, it has the potential to increase the value of an account significantly. This illustration estimates what your accumulated assets could total if you took the opportunity to contribute the maximum allowable IRA contribution for the next twenty years.
$237,154
This chart reflects a starting age of 50 and a contribution of $4000 for 2006-2007 and $5000 in 2008 and thereafter; and for the catch-up contributions $5000 for 2006-2007, $6000 in 2008 and thereafter adjusted upward by 3% a year (rounded to the nearest $500). Assumes investments are made on January 1 of the relevant year with an annual return of 6%. Required Minimum Distributions and the effect of taxes on contributions and withdrawals are not factored in. Projections provided by AARP Financial.
The Roth IRA

The Roth IRA is a plan for investors who prefer to receive tax-free distributions in retirement, rather than taking a tax deduction at the time they contribute. Earnings can be withdrawn once the Roth IRA has been established for five years and the account holder is 59. There are exceptions of up to $10,000 for first-time home purchases and the account holders death or disability. The Roth IRA provides tax-free growth of assets, as in a Traditional IRA, as long as the account holder meets certain income limits that are shown on the following page.
Important issues when converting to a Roth IRA

There are some important issues, such as your gross income and state laws that need to be considered before converting to a Roth IRA. An AARP Financial Investment Counselor can help you identify the issues before converting your Traditional IRA or Rollover IRA to a Roth IRA. You should also consult a tax advisor who is familiar with your financial circumstances and knows the law in your state.
Converting an IRA to a Roth IRA

Once you have established a Traditional or Rollover IRA, you may be able to convert those IRA assets to a Roth IRA.1 A Roth IRA is similar to a Traditional IRA, except that taxes are paid upfront and withdrawals from the accountby you after age 59 provided that you have held the account for at least 5 years or your heirs after your deathare free of taxes. With a Roth IRA conversion, you pay income taxes on the full taxable amount of the account being converted, in exchange for tax-free earnings growth for the life of the account. That is, no taxes will be due on the assets in the account once that initial tax is paid.
The SEP IRA

If you are a small business owner or a self-employed individual with few or no employees and want to maximize your retirement investing potential, consider an AARP Funds Simplified Employee Pension (SEP) IRA. This plan is easy to establish and administer. Call an AARP Financial Investment Counselor for details of their features and instructions on how to establish one. Call 1-800-958-6457, MondayFriday, 8:00 a.m.6:00 p.m. Eastern Time.
Rolling Over Your IRA or 401(k)

A Rollover IRA allows you to move retirement plan assets from an employer-sponsored plan or existing IRA into an IRA account. The direct rollover process allows you to move your investments and continue to enjoy tax deferred growth without having to pay any penalty or fees. This option could be beneficial to you, if you: Have assets at a previous employer Have multiple retirement accounts at several financial services providers and would like to consolidate them to make it easier to track and manage them. Would like to control the potential for continued tax-deferred growth
To be eligible for a Roth conversion, your modified adjusted gross income must be less than $100,000, whether single or married. 5
Understanding IRAs
Is the Traditional IRA or Roth IRA right for you?
Traditional IRA
Who Qualifies?
Anyone under age 7012 with earned income can contribute to a Traditional IRA.
Roth IRA
Single lers must have adjusted gross income below $114,000 in 2007 and $116,000 in 2008. Married couples must have adjusted gross income below $166,000 in 2007 and $169,000 in 2008.
How much can you invest?
2007: $5,000 if you are age 50 or older by yearend; $4,000 if you are under age 50 at year-end 2008: $6,000 if you will be age 50 or older by yearend; $5,000 if you are under age 50 at year-end
Same as Traditional IRA
What is the tax treatment of the contribution?
Fully deductible if you are: A single ler or married ling jointly, with no active participation in an employer-sponsored plan An active participant in an employer-sponsored plan and meet MAGI thresholds on page 7 Partially deductible if you are: An active participant in an employer-sponsored plan and meet MAGI thresholds on page 7 An active participant ling jointly with a non-active participant spouse with family MAGI between $156,000 and $166,000 in 2007; and $159,000 $169,000 in 2008.
Contributions are not tax deductible
How can you take money out?
Deductible IRA: Distributions are taxed as ordinary income Non-deductible IRA: Distributions of earnings are taxed as ordinary income; distributions of contributions are considered nontaxable return of capital Withdrawals may be made penalty-free after age 59, or before 59 for the following reasons: Higher education costs Up to $10,000 for rst-time home purchases Medical expenses that exceed 7.5% of adjusted gross income Death or disability of account holder
Withdrawals are tax and penalty free, if the account is held for ve years and distributions are made after age 59 or for: Up to $10,000 for rst-time home purchases Medical expenses that exceed 7.5% of adjusted gross income Death or disability of account holder
Are these required distributions?
Minimum annual distributions based on life expectancy must begin at age 70 6
There are no minimum required distributions from a Roth IRA for the Shareholder.
Traditional IRA Deductibility MAGI** Thresholds

For those who actively participate in an employer-sponsored plan*
Filing Status
Single Married, Joint Married, Joint (not active participant but spouse is)
Tax Year
2007 2007 2007
Full Deduction
< = $52,000 < = $83,000 < = $156,000
Partial Deduction
Between $52,000 and $62,000 Between $83,000 and $103,000 Between $156,000 and $166,000
No Deduction
> = $62,000 > = $103,000 > = $166,000
Single Married, Joint Married, Joint (not active participant but spouse is)
2008 2008 2008
< = $53,000 < = $85,000 < = $159,000
Between $53,000 and $63,000 Between $85,000 and $105,000 Between $159,000 and $169,000
> = $63,000 > = $105,000 > = $169,000
*Contributions are fully deductible if you are a single filer or married filing jointly, with no active participation in an employer-sponsored plan. **Modified Adjusted Gross Income
Call an AARP Financial Investment Counselor for details of their features and instructions on how to establish them. Call 1-800-958-6457, MondayFriday, 8:00 a.m.6:00 p.m. Eastern Time
The Rollover IRA

Which option is right for you? Consider this option if you...
have assets at a previous employer. have multiple Rollover IRAs at various nancial service providers and would like to consolidate them for planning purposes. would like the potential for continued tax-deferred growth.
Transfer your assets to a Rollover IRA

A Rollover IRA is the transfer of retirement plan assets from one eligible account to another. A direct rollover allows you to make this move without ever taking possession of the money yourself.
Move money to your new employers plan

If youve changed employers, you may have the option to move your assets to your new employers plan.
just changed jobs and your new employers plan features attractive investment options. feel condent that you can choose a balanced investment portfolio from your new employers plan options.
Leave your investments in your previous employers plan

You may be able to leave your money in your existing plan, be sure to check your plan documents to determine if this option is allowed.
are satised with the investments and options available in this plan. have a loan outstanding.* may need to take a loan from your account.*
Take a withdrawal
You may take a full withdrawal of your investments and use the money as you would like.
need emergency cash and pay state and federal taxes. have highly appreciated company stock in your plan.**
* Some employers consider the loan a distribution when you leave the organization. **Talk to your tax advisor about the benefits of executing a Net Unrealized Appreciation strategy. Although we may provide general information about the impact of taxes on various investment categories and products, AARP Financial and its employees do not offer legal or tax advice. You should always consult your own legal or tax advisor for information concerning your individual situation.
Advantages
Continued tax-deferred growth potential Investment options you choose Easy to manage and monitor account Penalty-free withdrawals before age 5912 (minimum age for withdrawal from IRA) for education and rst-time home purchase Flexible beneciary designation Eligible investors may convert to a Roth IRA and benet from tax-free growth of earnings. Immediate access to funds IRA protected by creditors under federal law Continue tax-deferred growth potential May offer plan-specic investments Assets protected from creditors under federal law May be eligible for withdrawals at age 55 Plan may have convenient special provisions, such as loan options. Avoid immediate decision Continue tax-deferred growth potential May offer plan-specic investments Assets protected from creditors under federal law May be eligible for withdrawals at age 55 Plan may have convenient special provisions, such as loan options.
Drawbacks
Withdrawals before age 5912 are taxable and potentially subject to a 10% penalty. No loan provisions May have annual fee
Tax impact
Tax advantages for beneciaries who may stretch distribution out over their life expectancy (versus paying taxes on lump-sum inheritance amount)
All assets will be subject to the provisions of the new plan. Limited investment options Limited distribution options (e.g., no penalty-free early withdrawals for education or rst home purchase) New employer may impose probation period before new contributions may start. Employer may restrict transactions. May be charged service fee Contributions may not continue. Limited investment options Limited distribution options Must notify former employer of address changes, contact information and must make sure you are able to nd your employer possibly after many years Employer controls investment choices and providers. Does not allow loans for former employees
Depending on your plan, if you have a beneciary who is not your spouse, he/she may have to fully liquidate and pay taxes on your retirement account assets in the year the account is inherited.
Depending on your plan, if you have a beneciary who is not your spouse, he/she may have to fully liquidate and pay taxes on your retirement account assets in the year the account is inherited.
Immediate access to cash
Assets lose tax-deferred growth potential Decrease in retirement savings A 10% early withdrawal penalty may be imposed if youre under age 5912.***
Withdrawal will be subject to state and federal taxes. 20% of your account may be withheld up front to pay federal income taxes. There may be tax advantages if you have highly appreciated company stock.
*** The 10% federal penalty tax generally applies to withdrawals made before age 5912, unless you have died, are disabled, or have deductible medical expenses that exceed 7.5% of your adjusted gross income. If you leave your employer in the year you reach age 55 or later, withdrawals from your employer-sponsored plan are exempt from the 10% penalty.
AARP Funds Investment Options

For your IRA
Five Funds Offering a Choice of Retirement Solutions
Whether youre just planning for retirement, nearing retirement or currently enjoying your retirement, youll find an AARP Fund to meet your needs. Each of our lifestyle funds (Aggressive, Moderate, Conservative) offers a complete diversified investment program with a clear, easy-to-understand investment strategy. These funds are rebalanced* on a regular basis to help you maintain the right mix of assets and are backed by our no-nonsense investment philosophy. Because regular income is an important component of an investment strategy, our Income and Money Market Funds are designed specifically to provide current monthly income at competitive rates.
AARP Family of Funds

U.S. stocks International stocks U.S. bonds Money market investments Other income investments, including money market
AARP Aggressive Fund AARP Moderate Fund AARP Conservative Fund
Potential Returns
AARP Income Fund1 AARP Money Market Fund

Short-term, lowcost fund seeking to maximize current income and maintain a stable $1.00 per share price.
75%-100% 0%-25%
20% 5% 75%
40% 10% 50%
60% 15% 25%
Bond fund generating current income and conserving capital over the long term.
Medium- to long-term investment providing current income with some growth of capital.
Medium- to long-term fund offering a balance of growth of capital and current income for investors willing to accept some risk in exchange for return potential.
Medium- to long-term investment focusing primarily on the growth of capital and providing some current income.
Lower risk
Higher risk
An investment in the AARP Money Market Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
1
AARP Income Fund may invest a portion of its assets in non-investment grade securities.
Diversification reduces risk but does not eliminate it
*The sale of an investment for the purpose of rebalancing may be subject to taxes. 10
Keep More of Your Retirement Money Working For You

At AARP Financial, we dont believe investors should have to pay high fees to build a retirement nest egg. AARP Financial aims to keep our costs down. AARP Funds are built with a portfolio of low-cost index investments. And, over longer time periods, market indexes historically have outperformed a majority of actively manage funds*. To help you keep more of your retirement money working for you, we offer a complimentary fee analysis so that you can identify how much you may be currently paying in fees and what that may mean over time to your retirement investments. Even a small difference in fees can make a big difference in your investment returns over time.
Low fees now may mean longer-lasting income in retirement

$600,000 500,000 400,000 300,000 200,000 100,000 0
$19,300 annually for 27 years $19,300 annually for 21 years $405,300 $521,100
Find out about our complimentary fees analysis. Just call an AARP Financial Investment Counselor today at 1-800-958-6457, Monday - Friday, 8:00 a.m. - 6:00 p.m. Eastern Time.
In this hypothetical example, the difference between a mid-cost fund and low-cost fund nets six extra years (an extra $115,800) in retirement withdrawals.1
*Standard & Poors Indices Versus Active Funds Scorecard (SPIVA), Q3 2006.
1
The accumulation analysis assumes an annual IRA contribution of $5,000 per year, increased annually by 3% for inflation, for a period of 20 years and then a withdrawal of $19,300 per year until the funds are expended. The balance for each year is decreased by an assumed fund expense of 107 basis points (Investment Company Institute, Research Fundamentals, June 2007) in one analysis and 50 basis points in the other; then, a 7% earnings rate is applied to both situations. In year 21 forward, a withdrawal of $19,300 is applied to each analysis. The cash flows of $19,300 last for almost 21 years in the107-basis-point analysis and for a little over 27 years in the 50-basis-point analysis.
This hypothetical is an example and should not be considered representative of an investment in the AARP Funds. Source: AARP Financial Inc. 11
An Easy Way to Take Action Now

Follow these simple steps to open a traditional or Roth IRA or to move your assets from your former employers plan to an AARP Rollover IRA.
Opening a Traditional or Roth IRA

1. Choose a Traditional or Roth IRA. 2. Choose your fund. 3. Complete the AARP Funds IRA Application & Adoption Agreement. 4. Send your completed application to AARP Funds in the postage-paid envelope.
Opening and transferring assets to a Rollover IRA

1. 2. 3. 4. 5. Contact your former employer or plan administrator. Choose your fund. Complete the AARP Funds IRA Application & Adoption Agreement. Complete the AARP Funds Transfer/Direct Rollover of Assets Form. Send your completed forms to AARP Funds in the postage-paid envelope.
Investment guidance from dedicated professionals

If you have questions about IRAs or your investments, it is easy to get straight answers. Our AARP Financial Investment Counselors* are ready to answer your questions Am I investing enough? Which AARP Fund is appropriate given my age and risk tolerance?as well as specific questions about IRAs or AARP Funds. AARP Financial Investment Counselors can be reached at 1-800-958-6457 from 8:00 am to 6:00 pm Eastern time, MondayFriday. Our goal is to help you understand your investment options and make sure youre on track. Most forms, as well as booklets that provide details of our retirement services, can also be downloaded at www.aarpfunds.com.
*AARP Financial Investment Counselors are FINRA registered representatives through ALPS Distributors, Inc., and employed by AARP Financial. 12
Contact Information
AARP Financial Investment Counselors To learn more about our products, services or have questions answered 1-800-958-6457 option 1 Monday-Friday, 8:00 a.m. 6:00 p.m. Eastern Time Shareholder Services Representatives For assistance in executing account transactions, or requesting forms call our automated account service phone line or visit www.aarpfunds.com This automated line allows you to access many account functions 1-800-958-6457 option 2 MondayFriday, 8:00 a.m. 6:00 p.m. Eastern Time 1-800-958-6457 option 3 Available 24 hours
Automated Account Service
Website
Go online to manage your account, access educational content and use tools and calculators
www.aarpfunds.com Available 24 hours
Mailing addresses
For overnight delivery:
AARP Funds 30 Dan Road Canton, MA 02021 AARP Funds P.O. Box 8035 Boston, MA 02266-8035
For regular mail:
This material must be accompanied or preceded by a current prospectus. Investing in the Funds involves risk, including possible loss of principal. Investors should carefully consider a funds investment objectives, risks, fees, charges and expenses before investing any money. The prospectus contains this and other important information about the Funds. Please read the prospectus carefully before investing. While AARP has licensed the use of its name to AARP Funds and endorses the services provided by AARP Financial Inc., AARP does not offer financial products of services itself, and cannot recommend that you or any specified individual should purchase any particular product or service. AARP Financial Inc. is a registered investment advisor and a subsidiary for AARP. AARP Financial Investment Counselors are FINRA- registered representatives through ALPS Distributors, Inc., and employed by AARP Financial Inc. AARP Funds are advised by AARP Financial Inc. and distributed by ALPS Distributors, Inc., a registered broker/dealer. AARP Financial Inc. is not affiliated with ALPS Distributors, Inc
AARP Funds P.O. Box 8035 Boston, MA 02266-8035 1-800-958-6457 www.aarpfunds.com 2008 AARP Funds
ARP-BR-003-0208 ARP000459 0209
Investments designed to t your needs

A smarter, no-nonsense way to invest
If youre like most people, investing is a means to an end. You dont want to sort through an endless array of choices. You want to make a few good decisions that will give you peace of mind. AARP Financial Inc. supports you with a select group of smart, affordable investment solutions designed to help you reach your goals.
The AARP Financial advantage

1. Competitive returns: We keep your
money working hard by providing mutual funds that strive to track the performance of broad markets over time.
2. Low fees: You keep more of what you earn

because we make sure our fees are low. Lower expenses historically have meant higher returns, which then have the ability to compound year after year.
3. Easy startup: We make it easy for you to
AARP Financial: A strong partner focused on investors needs rst

At AARP Financial, our goal is to make investing straightforward. We offer ve professionally managed, low-cost funds to t your investment needs, providing a mix of principal conservation, income generation and asset accumulation. Whatever your objectives are, the AARP Funds are here to meet your needs.
start investing with our low $100 investment minimum. But investors shouldnt stop there. In order to fund a healthy retirement, you should consider investing on a regular basis. An Automatic Investment Plan* is one of the best ways to do that.
4. Education and guidance: Our experienced

Investment Counselors will provide personalized service and help you make informed choices based on your needs and goals. And because they are salaried employees, you can feel free to discuss your goals in a no-pressure environment.
A NAME YOU KNOW AND TRUST

For nearly half a century, AARP has worked toward improving the quality of life for people over 50. Founded in 2005, AARP Financial extends this historic commitment through a carefully chosen array of banking, insurance and investment solutions, and straightforward guidance so you can make decisions with condence.
5. Clear and easy to understand communications: Investing shouldnt be

a mystery. We work to make everything from your statement to shareholder reports and educational materials concise and easy to understand, so you can make informed decisions about your investments.
Questions? Call the AARP Financial Center at 1-800-958-6457.
* An Automatic Investment Plan does not assure a profit and does not protect against a loss in a declining market. While AARP has licensed the use of its name to AARP Funds and endorses the services provided by AARP Financial Inc., AARP does not offer financial products or services itself and cannot recommend that you or any specific individual should purchase any particular product or service. AARP Financial Inc. is a registered investment adviser and a subsidiary of AARP.
N O T PA RT O F T H E P R O S P E C T U S
Why AARP Funds?

Investing can be unnecessarily complex, with too many products and services that dont always put investors needs rst. When we created the AARP Funds, we thought hard about what people actually need from their investments, rather than adding a fund for every potential market opportunity. The result is ve intelligently designed, carefully managed funds that may help meet your needs.
Built with low-cost index investments

AARP Funds are built with multiple low-cost index portfolios, which seek to match the returns of broader markets over time. Its a smart, cost-effective approach that keeps more of your money working for you.
Low fees now may mean longer-lasting income
$500,000 $400,000 $300,000 $200,000 $100,000 $0 1.07% fund expense 0.50% fund expense
$15,500 annually for 27 years $15,500 annually for 21 years
In this hypothetical example, the difference between a mid-cost fund and low-cost fund nets six extra years (an extra $94,500) in retirement savings.
The accumulation analysis assumes an annual IRA contribution of $4,000 per year, increased annually by 3% for ination, for a period of 20 years and then a withdrawal of $15,500 per year until the funds are expended. The balance for each year is decreased by an assumed fund expense of 107 basis points in one analysis and 50 basis points in the other; then, a 7% earnings rate is applied to both situations. In year 21 forward, a withdrawal of $15,500 is applied to each analysis. The cash ows of $15,500 last for almost 21 years in the 107-basis-point analysis and for a little over 27 years in the 50-basis-point analysis.
Source: AARP Financial Inc.
Diversied and regularly rebalanced to keep you on track

Diversication reduces risk, although it doesnt necessarily eliminate it. The more securities and the more types of securities you hold, the less you may be affected by price swings in any single one of them. Thats why our funds invest in broadly diversied portfolios within their specic investment discipline. Our Conservative, Moderate and Aggressive Funds are designed to function as complete investment programs in themselves. All of these funds are rebalanced regularly to help you maintain the right mix of assets to meet your goals. While rebalancing may trigger taxes caused by selling securities in an asset class that has grown too large, we believe it is a wise strategy for maintaining your desired level of risk.
Current monthly income and competitive rates

Regular income is an important component of any investment strategy, allowing investors to supplement their earnings. Our Income and Money Market Funds are designed specically to provide current monthly income at competitive rates. An investment in the AARP Money Market Fund is not insured or guaranteed by the FDIC, or any other government agency. Although the fund seeks to preserve the value of your investment at a $1.00 share price, it is possible to lose money by investing in the AARP Money Market Fund.
A choice of solutions
Every investor is different, with a unique set of experiences, preferences, goals and challenges. No single investment can work for everyone, and while too many choices can be confusing, too few would be just as ineffective. Thats why AARP Financial offers a select choice of smart, low-cost solutions to t your tolerance for risk, investment objective and life stage.
A spectrum of funds for a full range of needs

AARP family of funds
U.S. stocks International stocks U.S. bonds Money market investments Other income investments, including money market
Potential Returns
60% 15% 25%
AARP Income Fund* AARP Money Market Fund
40% 10% 50% 20% 5% 75%
75% 100% 0% 25%
Lower risk
Higher risk
*AARP Income Fund may invest a portion of its assets in non-investment grade securities.
to t your needs
The rst step in developing an investment plan is understanding your own personal goals and preferences. Before you choose a fund, spend some time deciding what type of investor you are. In other words, what are your goals and objectives? Whats your time horizon? And whats your tolerance for risk? Then, choose the fund thats right for you. If you need help, you can always talk to one of our Investment Counselors.
Consider the AARP Fund that matches the type of investor you are
Consider investing in this fund if you want A diversied mid- to long-term investment portfolio seeking the growth potential of stocks, while seeking to reduce overall risk through diversication into bonds. The potential for some investment growth at relatively moderate risk over the midto long-term. Ideal for investors who are willing to accept some risk in exchange for return potential. A diversied mid- to long-term investment focused on providing current income through sound investments, but also provides limited exposure to U.S. and international stocks. A good source of supplemental current income that can help preserve capital over the long term by focusing primarily on U.S. bonds. A low-cost investment that offers competitive rates and a smart way to make your short-term investments work harder without sacricing easy access to your money.
Fund AARP Aggressive Fund
Objective Growth of capital with some current income
AARP Moderate Fund
A balance of growth of capital and current income
AARP Conservative Fund
Primarily current income with some growth of capital
AARP Income Fund
Current income and long-term conservation of capital
AARP Current income Money Market Fund consistent while maintaining a net asset value of $1 per share
How AARP Financial can help

At AARP Financial, we know that Americans are concerned about investing for retirement and other goals, and we want to help. We offer you a straightforward investment approach that gives you the tools, information, and guidance you need to invest with condence.
Education and guidance when you need it

Our professional Investment Counselors are available by phone at any time during business hours. They can help you determine your goals, your tolerance for risk and the investment strategies that make sense for you. And, you can rely on them to put your interests rst, because they are compensated with salary, not via commissions on the products they sell you.
Choosing a fund that ts your needs

Your Investment Counselor will spend time with you to learn about what you hope to achieve with your investments, help you determine if youre on track to meet those goals, and gauge how you might react to market risk. Then he or she will recommend the AARP Fund(s) that may best meet your goals. If you have any questions about these funds, your Investment Counselor can help answer them at any time. They are there not only to make sure you make the right choices, but that you feel comfortable and condent about them. Investment Counselors are FINRA-registered representatives through ALPS Distributors, Inc., and employed by AARP Financial Inc.
THREE SIMPLE STEPS TO START INVESTING NOW
1 2 3
Read the prospectus. Fill out the application or visit www.aarpfunds.com. Call 1-800-958-6457, if you need help.
This information should be read in conjunction with the AARP Funds prospectus relating to the AARP Funds. An investor should consider the investment objectives, risks, charges and expenses of AARP Funds carefully before investing. This and other important information is included in the attached prospectus and should be read carefully before investing. If you need an additional copy, please call 1-800-958-6457 or download the le from www.aarpfunds.com. AARP Funds are advised by AARP Financial Inc. and distributed by ALPS Distributors, Inc., a registered broker/dealer. AARP Financial Inc. is not afliated with ALPS Distributors, Inc.
ARP000393 10/29/2008 ARP-PR-W07-1007
AARP FUNDS
Prospectus
October 29, 2007
Aggressive Fund Moderate Fund Income Fund
AARP AARP AARP
Conservative Fund
AARP AARP
Money Market Fund
As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved of these securities or determined whether the information in this prospectus is accurate, adequate or complete. Any representation to the contrary is a criminal offense.
Table of Contents
The Funds
This section describes our five mutual funds first in summary, then in more detail. Theres information on each funds goal, strategies, costs, and overall risks. Theres also a table to help you find the funds that may be most appropriate for you. Before investing in any AARP fund, read this prospectus carefully.
Your Account
This section gives information that concerns your account with AARP Funds and how to do business with us. Youll find step-by-step instructions for placing orders as well as descriptions of policies concerning your account. There is also information on dividends and taxes. At the end is a glossary; if youre not sure about the meaning of a word you see in this prospectus, it may be explained there. And if you still have questions, please give us a call at the number below, and we will be happy to provide you with the information you need.
Fund Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Who May Want to Invest The Funds at a Glance Past Performance Fees and Expenses 1 2 4 6
Buying and Selling Shares . . . . . . . . . . . . . . . . 22

How to Open a New Account How to Add Money to an Account How to Exchange Between Funds How to Take Money Out of an Account 22 24 25 26
Fund Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Investing Through Underlying Funds Investment Policies: AARP Funds Investment Policies: Underlying Funds Risks of Investing Whos Who Financial Highlights 8 8 10 12 16 20
Account and Transaction Policies . . . . . . . . . 27

Transaction Policies Share Price Policies General Business Policies 27 29 30
Distributions and Taxes . . . . . . . . . . . . . . . . . . . 32 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

General Investment Terms Prospectus-Specific Terms 33 34
Questions? Call the AARP Financial Center at 1-800-958-6457.
AARP FUNDS PROSPECTUS
The Funds
Fund Summary
Who May Want To Invest
The five AARP Funds cover a broad range of goals. Whether you are saving for retirement or college or are looking for a cash option, we have a fund that can meet your needs. The table below shows eight common investor goals. A checkmark under a fund name means that fund could be an appropriate choice for the goal at the left. If you would like help determining whether a given fund is right for you, consult your financial adviser or an AARP Financial Center representative.
Which funds may be appropriate for various goals

AARP AARP AARP AARP AARP
Investor goals Mainly seeking long-term gain Seeking a blend of regular income and long-term gain Mainly seeking regular income Investing for long-term goals Investing for medium-term goals Investing for short-term goals Earning a return while deciding where to invest Seeking a diversified, all-in-one investment
Aggressive Fund
Moderate Fund
Conservative Fund
Income Fund
Money Market Fund
The Funds
The Funds at a Glance

AARP Aggressive Fund
Investment objective Seeks growth of capital and some current income.
AARP Moderate Fund
Seeks a balance of growth of capital and current income.
Seeks primarily current income, with some growth of capital.
Strategy Pursued by investing in underlying funds Emphasizes stock investments over bond investments, with an indexing approach being used to choose individual securities. Seeks to maintain a specific asset allocation.
Asset class allocations
Emphasizes stock and bond investments equally, with an indexing approach being used to choose individual securities. Seeks to maintain a specific asset allocation.
Emphasizes bond investments over stock investments, with an indexing approach being used to choose individual securities. Seeks to maintain a specific asset allocation.
Target allocation
Target allocation
Target allocation
60% 15% 25%
U.S. stock International stock Bond
40% 10% 50%
20% 5% 75%
Comparative level of risk High Risk profile The funds overall risk profile is likely to depend in large part on how stocks perform. Many factors can cause stock prices to fall, including negative economic or financial news, investor perceptions, market liquidity, and catastrophic events. International stocks can be more volatile than U.S. stocks. Although the funds exposure to bond investments is designed to help lower its overall risk, they do mean the fund is exposed to the risks of bond investing. See Risks of Investing, page 12 for more information.
Moderate
Low to moderate
The funds overall risk profile is likely to be affected by the performance of both stocks and bonds. Many factors can cause stock prices to fall, including negative economic or financial news, investor perceptions, market liquidity, and catastrophic events. International stocks can be more volatile than U.S. stocks. Bond prices typically fall when interest rates rise, and when economic pressures make bond issuers less creditworthy. See Risks of Investing, page 12 for more information.
The funds overall risk profile is likely to depend in large part on how bonds perform. Bond prices typically fall when interest rates rise, and when economic pressures make bond issuers less creditworthy. Because stocks are generally riskier than bonds, stock investments may have a disproportionate effect on the funds overall risk. See Risks of Investing, page 12 for more information.
The Funds
AARP Income Fund

Investment objective Seeks current income and preservation of capital over the long term.
AARP Money Market Fund Investing through underlying funds

Seeks to maximize current income while providing for liquidity, the preservation of capital, and a stable $1.00 per share price. While many mutual funds invest directly in securities (such as stocks and bonds), each of the AARP Funds invests in one or more other funds that in turn invest in securities. Among them, the AARP Funds use two different methods of investing in underlying funds (as they are called in this prospectus): fund-of-funds and master-feeder funds. These are explained more fully in the section Investment Policies: Underlying Funds that begins on page 10. Investing through underlying funds offers certain advantages to AARP Funds and their shareholders, including simplicity, diversification, and liquidity benefits. Investing through the underlying funds adds certain risks as well. Although AARP Financial, the funds investment adviser, believes these risks are unlikely to be significant, these risks are discussed in the section Risks of Investing that begins on page 12. All investors should be sure to read this section carefully before investing in any AARP fund.
Strategy Pursued by investing in underlying funds Emphasizes bonds and other income-producing investments, through investments in a bond index fund and other income funds.
Invests exclusively in money market investments by investing in the State Street Money Market Portfolio.
Asset class allocation
Allocation range
Fixed allocation
75% 100% 0% 25%
Bond Other income investments, including money market
100%
Money market investments
Comparative level of risk Low Risk profile The funds overall risk profile is likely to depend in large part on how bonds perform. Bond prices typically fall when interest rates rise, and when economic pressures make bond issuers less creditworthy. See Risks of Investing, page 12 for more information.
Very low
The funds overall risk profile is likely to depend in large part on the behavior of short-term interest rates. When rates fall, the funds yield typically falls also. Over the long term, money market funds may not keep pace with inflation. Although the fund is designed to maintain a stable $1.00 share price, there is no guarantee that it will always be able to do so. See Risks of Investing, page 12 for more information.
The Funds
Past Performance
This section shows the actual returns for each fund, on a year-by-year and average annual basis. This information is intended to help you understand the risks of investing in a fund. All figures assume that distributions were reinvested. Unless otherwise noted, fund results reflect any fee waivers and/or expense reimbursements. The table below shows the annual return for the Aggressive, Moderate, and Conservative Funds. The Income and Money Market Funds are too new to have performance figures to show. Remember that fund returns vary over time, and that future performance (both before and after taxes) may differ from past performance.
Annual total returns (%) as of 12/31 AARP Aggressive Fund

16% 16% 14% 12% 10% 9%
AARP Moderate Fund
14%
13.36%
12%
10.11%
10%
8%
6.96%
6%
6% 4% 2% 0% 2006 Best quarter: 5.91%, Q4 2006 Worst quarter: (1.25%), Q2 2006 Total return, 1/1/079/30/07: 8.45% (not annualized)
2006 2006
4%
2%
0%
2006 Best quarter: 3.92%, Q3 2006 Worst quarter: (0.55%), Q2 2006 Total return, 1/1/079/30/07: 5.25% (not annualized)
Best quarter: 4.39%, Q4 2006 Worst quarter: (0.84%), Q2 2006 Total return, 1/1/079/30/07: 6.85% (not annualized)
The Funds
The table on the right shows average annual total returns, both before and after taxes. The after-tax figures: reflect an individual federal marginal income tax rate of 35% (the highest such rate as of December 31, 2006) but assume no state and local taxes assume, for returns reflecting the sale of fund shares, that shares were sold on the last day of the period may not reflect your actual after-tax performance may not be relevant to shares held in an IRA, 401(k), or other tax-advantaged retirement account For comparison, the table also includes figures for three relevant indexes. The returns for each index assume that all dividends paid by securities in the index were reinvested.
Average annual total returns (%) as of 12/31/06 1 Year AARP Aggressive Fund Returns before taxes Returns after taxes on distributions Returns after taxes on distributions and sale of fund shares AARP Moderate Fund Returns before taxes Returns after taxes on distributions Returns after taxes on distributions and sale of fund shares AARP Conservative Fund Returns before taxes Returns after taxes on distributions Returns after taxes on distributions and sale of fund shares Indexes2 Lehman Brothers Aggregate Bond Index3 MSCI U.S. Investable Market 2500 Index4 MSCI Europe, Australasia and Far East (EAFE) Index5 13.36% 12.53% 8.66% Since Inception1 13.36% 12.53% 8.66%
10.11% 9.16% 6.55%
10.11% 9.16% 6.55%
6.96% 5.60% 4.49%
6.96% 5.60% 4.49%
4.33% 15.70% 26.34%
4.33% 15.70% 26.34%
For the current seven-day yield of the Money Market Fund, please visit our web site at www.aarpfunds.com or call the AARP Financial Center at 1-800-958-6457.
1
The AARP Aggressive, Moderate and Conservative Funds all commenced operations on January 1, 2006. The one-year and since-inception numbers reflect returns for the same time periods. The securities that compose each index may vary over time. An index containing a large variety of investment-grade U.S. and foreign bonds, covering three major categories: government and corporate bonds, mortgage-backed securities, and asset-backed securities.
An index containing about 2,500 securities listed on the New York and American stock exchanges and the Nasdaq over-the-counter market. The stocks represent companies of all types and sizes. An index containing about 1,000 securities listed on the stock exchanges of 21 developed countries, excluding the United States and Canada.
2 3
The Funds
Fees and Expenses

The AARP Funds are no-load funds, meaning that you pay no sales charge when you invest and no redemption fee when you take money out. However, as an investor in a fund, you do pay a share of that funds operating expenses, because these expenses are paid out of fund assets. The operating costs for
AARP
each AARP Fund include costs for that fund itself as well as the funds share of costs for each underlying fund it invests in. The table below shows the fees and expenses you may pay if you buy and hold shares of the funds.
AARP
AARP
AARP
AARP
Aggressive Fund Shareholder fees Paid directly from your investment None1
Moderate Fund
Conservative Fund
Income Fund
Money Market Fund
None1
None1
None1
None1
Annual operating expenses Directly or indirectly deducted from fund and underlying fund assets Management fees Distribution and/or service (12b-1) fees3 Other expenses Acquired fund fees and expenses5 (underlying fund fees and expenses) Total 0.01% 0.20% 2.03% 0.26% 2.50% 0.01% 0.20% 1.14% 0.26% 1.61% 0.01% 0.20% 2.20% 0.25% 2.66% 0.01% 0.20% 6.81%4 0.25% 7.27% 0.10%2 0.20% 3.91% 0.00% 4.21%
Contractual waivers and/or reimbursements6 2.00% 1.11% 2.16% 6.77% 3.91%
Net annual operating expenses After waivers and/or reimbursements6 0.50% 0.50% 0.50% 0.50% 0.30%
1 2
Note that there is a fee (currently $5) for a redemption by wire. Paid by the Underlying Money Market Fund to its investment adviser. By contract, AARP Financial receives no management fee for any period in which the fund is invested in a master-feeder structure. The funds have adopted a so-called 12b-1 plan, which permits them to use fund assets to pay for the sales and distribution of their shares and for servicing activities. The underlying funds do not charge distribution or servicing fees and do not distribute their shares to the public. Estimated. The AARP Income Fund incurred certain nonrecurring start-up expenses during fiscal-year 2007 (such as Blue Sky start-up and legal expenses) that are not reflected in the above estimated Other expenses.
Except for the Underlying Money Market Fund, these represent a pro-rata portion of the fees and expenses of the underlying funds in which a fund invests. Each underlying funds fees and expenses may include advisory, transfer agent, administration, trustee, legal, audit, insurance, and other miscellaneous expenses. AARP Financial has agreed contractually to waive fees and/or reimburse expenses through November 1, 2008 (November 1, 2009 for the AARP Money Market Fund) to cap each funds Net annual operating expenses to the amounts shown in the above table.
The Funds
Expense example This example is designed to help you compare the costs of the AARP Funds to those of other mutual funds.
Lets say you invest $10,000 for the time periods shown in the Hypothetical fees and expenses table, and that your investment earns 5% a year. Lets also say that the Net Annual Operating Expenses for each fund are as described in the fee table on the preceding page through November 1, 2008 for the
Hypothetical fees and expenses 1 Year AARP Aggressive Fund AARP Moderate Fund AARP Conservative Fund AARP Income Fund AARP Money Market Fund
$51 $51 $51 $51 $31
Aggressive, Moderate, Conservative, and Income Funds, and through November 1, 2009 for the Money Market Fund, and after those dates the Total Annual Operating Expenses apply. Given all these assumptions, the table shows what you would pay in fees and expenses over one-, three-, five-, and tenyear time periods. Remember, this is not a real example. It is shown for comparison only. Actual costs and returns both past and future might be higher or lower.
3 Years
$518 $361 $547 $1,371 $385
5 Years
$1,085 $734 $1,147 $2,888 $1,335
10 Years
$2,629 $1,784 $2,775 $6,389 $3,776
The Funds
Fund Details
Investing Through Underlying Funds
As noted earlier, each of the AARP Funds invests in one or more underlying funds. The chart below shows the specific relationships between each AARP Fund and its underlying fund(s). For ease of description, throughout this prospectus many of the funds investment strategies and risks are discussed in terms of the funds investing directly in securities rather than investing in securities through each funds fund-of-funds or master-feeder structure.
How the AARP Funds invest in underlying funds Master-feeder structure Fund-of-funds structure
These funds invest in two or more underlying funds, according to target allocations. This fund invests in a single underlying fund designed for this purpose.
AARP Income Fund
AARP Money Market Fund
U.S. Stock Market Portfolio
International Stock Market Portfolio
U.S. Bond Market Portfolio
State Street Money Market Portfolio
Investment Policies: AARP Funds

Primary investments Each of these funds maintains investment exposure to a diversified portfolio (in plain English, a broad mix) of securities. The major asset classes for all of the funds are the same: U.S. stocks, international stocks, and bonds. However, each fund has its own target mix of these asset classes. Within each of the major asset classes, the funds rely on an indexing approach in choosing securities (see sidebar, page 11).
Over time, a funds actual asset mix will tend to change, due to differences in asset class performance. Each fund therefore intends to rebalance its asset mix
from time to time (typically monthly or quarterly, but sometimes more often), in order to bring the actual mix back into line with the target mix. Although it does not expect to do so very often, the funds management team may change a funds target mix without shareholder approval if the management team believes the change is consistent with that funds investment objective.
Secondary investments As a funds assets grow, it may invest up to 10% of its assets in U.S. Treasury inflation-protection securities, small company stocks, emerging market stocks, and real estate investment trusts (REITs). These investments may be indexed or actively managed, but in either case, they are likely to have different risks from a funds primary investments, and they may change the overall risk characteristics of the fund.
The Funds
Temporary defensive investments A fund manager may, as a temporary defensive measure, raise cash levels or may choose to delay the rebalancing, or alter the allocation of, a funds asset mix. Factors influencing these decisions may include AARP Financials outlook for the economy, financial markets, and the relative value of different asset classes. Note that any temporary defensive measure represents a departure from a funds stated strategy, and that a fund is less likely to achieve its investment objectives during any time when it is investing for temporary defensive purposes. Fund-of-funds structure These funds invest through a fund-of-funds structure. In this structure, each fund invests its assets in a mix of three underlying funds: the U.S. Stock Market Portfolio (called the Underlying Stock Fund in this prospectus) the International Stock Market Portfolio (Underlying International Fund) the U.S. Bond Market Portfolio (Underlying Bond Fund)
Any secondary investments will be made through other underlying funds. For more about the underlying funds, see Investment Policies: Underlying Funds starting on page 10.
this 25% may be invested could grow to include any or all of the following: money market instruments inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations high-yield, or junk, bonds (not more than 10% of total assets) foreign government and corporate bonds REITs stocks that pay high dividends These investments may be indexed or actively managed, but in either case, they are likely to have different risks from the funds primary investments, and they may change the overall risk characteristics of the fund.
Temporary defensive investments Depending on its outlook for the economy, financial markets, and other conditions, the funds manager may raise cash levels or otherwise take a temporary defensive position. Note that any temporary defensive measure represents a departure from a funds stated strategy, and that a fund is less likely to achieve its investment objectives during any time when it is investing for temporary defensive purposes. Fund-of-funds structure This fund invests through a fund-of-funds structure. In this structure, the fund normally invests at least 75% of its assets in the Underlying Bond Fund. For any money market investments, the vehicle of choice is the State Street Money Market Portfolio (Underlying Money Market Fund). Secondary investments will be made through underlying funds that are income funds.
For more about the underlying funds, see Investment Policies: Underlying Funds starting on page 10.
AARP Income Fund

Primary investments This fund normally invests at least 75% of its assets in a diversified portfolio of bonds, with individual securities being chosen using an indexing approach (see sidebar, page 11).
The funds management team may change the funds investment mix without shareholder approval if the manager believes the change is consistent with the funds investment objective.
Secondary investments The fund may invest up to 25% of its assets in other types of income-producing securities. As the funds assets grow, the list of potential securities in which
10
The Funds

Investments The fund invests exclusively in money market investments. Only investments that meet certain credit quality standards qualify as money market instruments. Master-feeder structure The fund invests through a master-feeder structure, in which various feeder funds can pool their assets in an underlying master fund to seek economies of scale.
Under this structure, the fund invests in the Underlying Money Market Fund, a master fund that has a substantially similar investment objective as the fund itself. The fund may change to investing in another master fund or in money market instruments directly rather than through an underlying fund, if the funds Board of Trustees determines such a move would be in the best interests of the fund and its shareholders. For more about the underlying funds, see Investment Policies: Underlying Funds below.
a variety of securities and derivatives that are not included in its index, including futures, options, exchange traded funds, cash, and other types of financial contracts and instruments in order to seek to track the performance of its index. The underlying funds will not use these derivatives for speculation or for the purpose of leveraging investment returns.
Underlying Stock Fund

Index The index is the MSCI U.S. Investable Market 2500 Index. This index includes about 2,500 securities listed on the New York and American Stock Exchanges and the Nasdaq over-the-counter market. The stocks represent companies of all types and sizes covering approximately 98% of U.S. market capitalization. The index is the aggregation of the MSCI U.S. Large Cap 300, Mid Cap 450, and Small Cap 1750 indexes.
Underlying International Fund

Index The index is the MSCI Europe, Australasia and the Far East (EAFE) Index. This index includes about 1,000 securities listed on the stock exchanges of 21 developed countries, excluding the United States and Canada.
Investment Policies: Underlying Funds

Except for the Underlying Money Market Fund, each underlying fund is a series of AARP Portfolios, which is a separate registered investment company. The Underlying Money Market Fund is a series of a separately registered investment company called the State Street Master Funds. Shares of the underlying funds are not offered by this prospectus and are not available for sale to the general public. Except for the Underlying Money Market Fund, each underlying fund seeks to match the return of an index as closely as possible, before deduction of expenses of the underlying fund. In pursuing its indexing strategy, an underlying fund, and in particular the Underlying Bond Fund, may use optimization and sampling techniques (see sidebar, next page). In carrying out these techniques, an underlying fund may invest to a limited extent in
Underlying Bond Fund

Index The index is the Lehman Brothers Aggregate Bond Index. This index includes a large variety of U.S. and foreign bonds that are investment grade and taxable nearly all the taxable investment-grade bonds in the U.S. bond market that are registered with the Securities and Exchange Commission and with maturities of more than one year. The index includes three major types of bonds: corporate and U.S. government bonds
The Funds
11
mortgage-backed securities, including mortgage pools securitized by the Government National Mortgage Association, the Federal National Mortgage Association, and the Federal Home Loan Mortgage Corporation asset-backed securities, including securities that are backed by credit card, auto, and home equity loans The index may also include certain foreign corporate and government bonds that are denominated in U.S. dollars.
Credit quality of investments The Underlying Bond Fund will only invest in fixed income securities that are considered investment grade fixed income securities rated Baa or higher by Moodys Investors Services, Inc. or BBB or higher by Standard & Poors Rating Group or are considered to be of comparable quality by the Underlying Bond Funds investment sub-adviser.
Underlying Money Market Fund

The Underlying Money Market Funds investment adviser selects investments based on its view of what types of money market investments are the most attractive at the time of investment. Interest rates, imbalances in the supply and demand for a particular type of investment, and market conditions may make one type of investment more attractive than another for a period of time.
Indexes
An index is a list of securities representing a market or part of a market. The returns of the index itself do not reflect the costs that would be involved in actually investing in the securities represented in the index, such as fees and brokerage commissions. While no one can invest directly in the index its only a list you can invest in a fund whose goal is to track the performance of the index. As noted in the main text, each of the underlying funds, except the Underlying Money Market Fund, seeks to track a particular index. Index tracking techniques There are different ways to track an index: Replication means buying every security in the index. Managers using this strategy try to make an exact or close replica of the index, buying the same securities in the same proportions as they are in the index. Optimization and sampling are investing techniques used by managers when it is expensive, impractical, or impossible to buy every bond or security in an index. These techniques are used when a fund is fairly new and growing in size. They are also used when an index is very large or contains securities that can no longer be bought. The Underlying Stock Fund and Underlying International Fund are likely to rely on optimization and sampling until they have sufficient assets to use a replication strategy. The Underlying Bond Fund may have to rely on optimization and sampling indefinitely, because its index is very large (9,093 different bonds, as of August 31, 2007) and not all bonds in the index are readily available for investment.
Types of investments Normally, the Underlying Money Market Fund intends to invest more than 25% of its total assets in bank obligations. The Underlying Money Market Fund may invest in the following types of investments: instruments of U.S. and foreign banks, including certificates of deposit (CDs), bankers acceptances, and time deposits (TDs) U.S. Treasury bills, notes, and bonds other obligations issued or guaranteed by the U.S. government and its agencies or instrumentalities commercial paper of U.S. and foreign companies, including Rule 144A and Section 4(2) securities asset-backed securities corporate obligations of U.S. and foreign companies variable and floating rate notes repurchase agreements
Because so-called Rule 144A and Section 4(2) securities are not sold to the public, they may be difficult to value or sell if they are not actively traded. The Underlying Money Market Fund will not invest more than 10% of net assets (measured at the time of purchase) in any Rule 144A securities
12
The Funds
or other types of securities that are considered to be illiquid (hard to sell) by the Underlying Money Market Funds investment adviser.
Credit quality of investments The Underlying Money Market Fund invests in highquality, U.S. dollar-denominated, money market instruments. These may include obligations that are: issued or guaranteed as to principal or interest by the U.S. government or its agencies or instrumentalities (i.e., securities supported by the full faith and credit of the U.S. Treasury, by the right to borrow from the U.S. Treasury, by the discretionary authority of the U.S. Treasury to lend to the issuer, or solely by the creditworthiness of the agency or instrumentality issuing or guaranteeing the security) rated in one of the two highest short-term categories by at least two nationally recognized statistical rating organizations (NRSROs), or by one NRSRO if only one NRSRO has rated the security unrated, but the investment adviser of the the Underlying Money Market Fund has determined that they are of comparable quality to the rated securities described above Portfolio maturity In keeping with SEC regulations, the Underlying Money Market Fund maintains a dollar-weighted average maturity of 90 days or less.
or down. You might lose money when you invest in a fund, or make less money than you expect. An investment in a fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. For each of the funds, the main risks are those associated with the securities held in the underlying funds. To the extent that a fund is exposed to a particular asset class, industry, geographic area, type of security, or securities issuer, it is exposed to the associated risks. For example, because all of the funds except the Money Market Fund hold bond investments, these four funds are all exposed to the risks of bonds. However, because the funds invest in bonds to varying degrees, the role that bond risks play in shaping a funds overall risk profile varies from fund to fund. Similarly all of the funds except the Money Market Fund, may hold varying amounts of stock investments (which generally are riskier than bond investments). Because the funds invest in stock investments to varying degrees, the role that stocks play in shaping a funds risk profile varies from fund to fund. With all mutual funds, there are also risks at the fund level, in addition to those that derive from the stocks, bonds, and other securities held by the fund (whether held directly or indirectly). For each of the funds, fund-level risks exist at both the fund level and the underlying fund level.
Risks of Individual Funds
Risks of Investing
Risks Common to All AARP Funds
All investments involve risk. Before you make any decisions about investing in the funds, its important that you read and understand all the risk information in this prospectus (including the information here and in The Funds at a Glance). With the AARP Funds, as with all mutual funds, there is no guarantee of performance. You should expect that the value of your investment will go up
The risk language in The Funds at a Glance is designed to give a brief summary of each funds overall risk profile. The table on the next page, and the risk descriptions that follow, are designed to offer a more detailed look at the individual risks that contribute to the funds risk profiles. The risks are listed alphabetically.
The Funds
13
Main risks AARP Aggressive Fund Credit risk Foreign risk emerging markets Foreign risk stock markets Income risk Indexing risk Interest rate risk bond investments Market risk Prepayment and extension risk Small company risk Stock market risk Credit risk Foreign risk stock markets Income risk Indexing risk Interest rate risk bond investments Market risk Prepayment and extension risk Small company risk Stock market risk Credit risk Income risk Indexing risk Interest rate risk bond investments Market risk Prepayment and extension risk Stock market risk
Additional risks Derivatives risk High-yield bond risk Manager risk New fund risk Rebalancing risk
AARP Moderate Fund
Derivatives risk Foreign risk emerging markets High-yield bond risk Manager risk New fund risk Rebalancing risk
Derivatives risk Foreign risk bond investments Foreign risk emerging markets Foreign risk stock markets High-yield bond risk Investment grade securities risk Manager risk New fund risk Rebalancing risk Small company risk U.S. government securities risk Derivatives risk Foreign risk bond investments High-yield bond risk Investment grade securities risk Manager risk New fund risk Real estate investment trust risk Rebalancing risk U.S. government securities risk Asset-backed securities risk Banking industry risk Liquidity risk New fund risk Manager risk Master-feeder risk Prepayment and extension risks Repurchase agreement risk U.S. government securities risk Variable and floating rate securities risk
AARP Income Fund
Credit risk Income risk Indexing risk Interest rate risk bond investments Market risk Prepayment and extension risk
Credit risk Foreign risk money market investments Inflation risk Interest rate risk money market investments Money market fund risk
14
The Funds
Risk Descriptions
Asset-backed securities risk Asset-backed securities
are debt securities backed by pools of assets like mortgages, auto loans, and leases. Payments of principal and interest from the loans backing these securities are passed through to the investors in these securities. The values of these securities vary with changes in interest rates. Asset-backed securities that are not backed by mortgages have additional risks. For example, some of these loans may be unsecured, meaning that there is no collateral for the loan. If the issuer defaults, there is no collateral to collect to cover losses. Borrowers also may be protected by state and federal consumer credit laws that may be very favorable to borrowers at the expense of investors. Asset-backed securities can be more difficult to value or trade if a regular trading market does not exist for these securities.
Banking industry risk Banks may be particularly sensitive to certain economic factors such as interest rate changes, adverse developments in the real estate market, fiscal and monetary policy, and general economic cycles. Credit risk If the financial health of a security issuer declines, the price of its debt securities could decline or become more volatile, or the issuer could default on its securities (fail to pay interest or principal when due). High-yield securities have more credit risk than investment-grade securities. Derivatives risk The use of derivatives exposes a fund
the fact that derivatives could produce losses greater than the cost of the derivative; in some cases, the potential for loss is theoretically unlimited the risk that a counterparty will not perform its contractual obligations; this risk is greater with privately negotiated instruments the risk that closing out certain hedged positions could produce adverse tax consequences
Foreign risk bond investments Any investment in
a foreign issuer will have the risks of political and economic instability, poor regulation, insufficient issuer information, controls on currency, high taxes or tariffs, and the confiscation of assets. These risks may be greater in emerging or developing markets.
Foreign risk emerging markets Securities markets
of developing countries involve greater risks than those of more developed markets. Securities markets in developing countries are generally smaller, less liquid, more volatile, and more subject to manipulation than U.S. markets. Developing countries may have significant economic liabilities, such as inadequate infrastructures, obsolete financial systems, excessive regulation, significant international debt, volatile inflation rates, and environmental problems. Their economies may be heavily dependent on a limited number of export commodities, and their agriculture may be highly vulnerable to climate patterns. Developing countries also have higher risk of political instability, popular unrest, and armed conflict.
Foreign risk money market investments U.S.
to additional risks and costs, including: the risk that interest rates, securities prices, and currency markets will not move in the direction that a portfolio manager anticipates the risk that the price of a derivative does not correlate as expected with the prices of the securities, interest rates, or currencies the derivative was intended to reflect the fact that using derivative strategies requires different skills from general portfolio management the risk that it might be impossible to close out a derivatives position when desired
dollar-denominated securities from foreign issuers can pose greater risks than those from U.S. issuers, for reasons that include less stringent regulation, accounting, and reporting practices, as well as the higher risk of political, financial, and economic events among other factors.
Foreign risk stock investments Investments in foreign stocks may be more volatile than investments in U.S. stocks and may perform differently from the U.S. market. Foreign governments might change stock exchange rules, increase taxes or confiscate investors assets. The governments of foreign countries might be less stable than the U.S. government, and issuers in foreign jurisdictions might have
The Funds
15
less thorough regulation and accounting, auditing and recordkeeping requirements. It might cost more to invest directly in a foreign stock than it would to invest in a U.S. stock. Changes in foreign currency exchange rates could also affect the value in U.S. dollars of foreign securities.
High-yield bond risk High-yield bonds, also
somewhat riskier because they are regarded as having only an adequate capacity to pay principal and interest, and are considered to lack outstanding investment characteristics.
Liquidity risk A fund or underlying fund may be
known as junk bonds, are rated below investment grade because there are doubts about whether the companies or entities that issue them will be able to pay interest and principal back on time. Junk bonds pay out higher interest rates than investment grade bonds because they are highly risky and considered speculative.
Income risk The rate of income that a fund or
unable to pay redemption proceeds within the time period stated in this prospectus because of unusual market conditions, an unusually high volume of redemption requests, or other reasons.
Manager risk The investment adviser of a fund or underlying fund may make investment decisions that fail to produce the intended result. These may include decisions about how to allocate assets among different underlying funds, when to rebalance a fund, when to change underlying fund allocations, or which securities to buy and sell and when. Market risk The market values of stocks, bonds, and
underlying fund generates may go up and down as interest rates go up and down. The amount of any dividends you receive will fluctuate over time.
Indexing risk By using an indexing strategy, a mutual fund forgoes the option of taking any steps to lessen the impact of market downturns. In addition, a mutual fund that uses an index strategy might not perform as well as the index it aims to match (tracking risk). The existence of mutual fund fees and expenses, which an index itself does not include, make this risk very likely. To the extent that a mutual fund seeks to overcome tracking risk through using derivatives, it increases its exposure to derivatives risk. Inflation risk Over time, low-risk income investments may fail to keep pace with inflation, making them potentially a poor choice for long-term investing. Interest rate risk bond investments The market
other securities may go up and down as securities markets react to economic, political, geographic, or regulatory factors. These factors may affect the entire market or just certain securities, industry segments, or economic sectors. In general, stock prices have fluctuated more than bond prices over longer time periods. Price changes may be temporary or may last for extended periods.
Master-feeder risk A master funds performance
could be hurt by large cash inflows or outflows created by one of its feeder funds.
Money market fund risk Although a money market
value of bonds typically goes down when interest rates go up. Longer-term bonds are generally more sensitive to interest rate changes, meaning they may suffer deeper declines in value than shorter-term bonds.
Interest rate risk money market investments
fund seeks to preserve the value of your investment at $1.00 per share, it may not succeed in doing so and you might lose money by investing in a money market fund.
New fund risk A fund might not reach or sustain an economically viable size, in which case fund management may determine to liquidate the fund at a time that may not be opportune for shareholders. Prepayment and extension risks Because market
During periods of rising interest rates, money market fund yields may tend to be lower than prevailing market rates.
Investment grade securities risk While all securities
rated at least Baa (by Moodys) or BBB (by Standard & Poors) are considered investment-grade, those rated at the lower end of this spectrum may be
prices for certain debt securities (such as mortgagebacked securities, asset-backed securities, and callable bonds) are based on expectations of how interest rates will behave, any unexpected behavior of interest rates can hurt performance for owners of these securities. For example, a drop in interest rates
16
The Funds
may mean a security is paid off earlier than expected, and the proceeds can only be reinvested at a lower rate. A rise in interest rates can mean that securities are paid off later than expected, leaving investors locked into below-market rates.
Real estate investment trust risk The value of a REIT can be hurt by economic downturns or by changes in real estate values, rents, property taxes, interest rates, tax treatment, regulations, or the legal structure of the REIT. Any stock issued by a REIT is also subject to stock market risk (see below). Rebalancing risk A fund may temporarily stray from
Variable and floating rate securities risk Variable rate
its target mix among the underlying funds and not perform as well as if it had invested according to its target mix at all times.
Repurchase agreement risk A repurchase agreement
securities readjust their interest rates on set dates. Floating rate securities readjust their interest rates whenever a particular interest rate changes. Interest rates on these securities are normally tied to, and are a percentage of, a widely recognized interest rate, such as the yield on 90-day U.S. Treasury bills or the prime rate of a bank. These securities have interest rate and credit risk. They also may have liquidity risk because it is not always easy to sell these instruments if the issuer defaults or a fund or underlying fund cannot exercise demand rights. Demand rights, which are normally a feature of these investments, allow an investor to demand that the issuer repay immediately all unpaid interest and return the principal, the original investment amount.
allows a fund or underlying fund to buy securities with the understanding that the seller will buy them back with interest at a later date. If the seller is unable to honor a commitment to repurchase securities, the fund or underlying fund could lose money.
Small company risk The stocks of smaller, less well-
Whos Who
Entities with Business Responsibilities
Trustees The Board of Trustees for the AARP Funds oversees each fund and its investment strategies, and approves each funds agreements with its investment adviser and other service providers. Investment Advisers and Sub-advisers
AARP Financial Incorporated (AARP Financial) Two Highwood Drive, 2nd Floor Tewksbury, MA 01876 SSgA Funds Management, Inc. One Lincoln Street Boston, MA 02111 AARP Financial provides the overall investment program for each fund and manages each funds investment activities. This includes allocating assets to the underlying funds, deciding when to rebalance these allocations, and overseeing any sub-advisers. AARP Financial is also the investment adviser of all underlying funds except the Underlying Money Market Fund.
known companies are generally more volatile than large company stocks and may perform differently from the market as a whole. Compared to larger companies, small companies may be poorly understood by investors, have less access to cash and credit, and may be heavily dependent on a limited number of products, services, or technologies.
Stock market risk The value of stocks may decline
in response to developments affecting a particular issuer, the issuing companys industry, or general economic conditions. Price changes in stocks may be temporary or may last for an extended period of time.
U.S. government securities risk Although securities
issued directly by the U.S. government are guaranteed by the U.S. Treasury, securities issued by an agency or instrumentality of the U.S. government may not be. No assurance can be given that the U.S. government would provide financial support to its agencies and instrumentalities if not required to do so by law.
The Funds
17
AARP Financial is a wholly owned subsidiary of AARP Services, Inc., which in turn is a wholly owned subsidiary of AARP. AARP is a nonprofit membership organization dedicated to addressing the needs and interests of people age 50 and over in the United States. Founded in 1958, AARP delivers information, advocacy, and services to over 38 million members to advance a society in which everyone ages with dignity and purpose. SSgA Funds Management, Inc. (SSgA FM) serves as the investment sub-adviser for all of the funds except the Money Market Fund. In this capacity, SSgA FM provides AARP Financial with asset allocation advice and rebalances the funds assets under AARP Financials direction. For the Underlying Money Market Fund, SSgA FM serves as the investment adviser and is responsible for the day-to-day investment of assets. For all other underlying funds, SSgA FM is the investment subadviser. SSgA FM manages each underlying funds day-to-day investments. SSgA FM manages over $140 billion in assets and is a wholly owned subsidiary of State Street Corporation. State Street Global Advisors (SSgA) is the investment management group of State Street Corporation and includes SSgA FM. SSgA manages approximately $1.9 trillion in assets (all figures as of September 30, 2007). Except for the Money Market Fund, each of the funds pays AARP Financial 0.01% of its average daily net assets annually to compensate AARP Financial for its advisory services to the fund. Each underlying fund (except the Underlying Money Market Fund) pays AARP Financial 0.05% of its average daily net assets annually to compensate AARP Financial for its advisory services to the underlying fund. AARP Financial pays SSgA FM for its sub-advisory services out of these fees. The Money Market Fund has entered into an investment advisory agreement with AARP Financial that does not provide an investment advisory fee to AARP Financial while the Money Market Fund is invested in a master-feeder structure. If the Money Market Fund were not invested in a master-feeder structure, AARP Financial would receive an investment advisory fee, at an annual rate of 0.10% of average daily net assets.
For the Aggressive, Moderate, and Conservative Funds, the basis for approving the investment advisory and sub-advisory agreements with AARP Financial and SSgA FM is discussed in the funds annual report to shareholders for the period ended June 30, 2006. For the Income and Money Market Funds such information is in the funds semi-annual report for the period ended December 31, 2006. The funds and AARP Financial have received an SEC order that allows AARP Financial to have the ultimate responsibility, subject to Board oversight, to oversee sub-advisers and recommend their hiring, termination, and replacement, as well as change investment sub-advisory agreements, without shareholder approval. The effect of the order is to relieve the funds of legal requirements to obtain shareholder approval of these types of changes.
Administrator AARP Financial provides administrative services to the funds, such as overseeing each funds operations and other service providers. Sub-Administrator, Custodian, and Transfer Agent As sub-administrator, State Street Bank and Trust Company (State Street) assists the administrator in providing administrative services. As custodian, State Street holds the funds assets, prices the funds shares, and oversees payment of dividend and capital gain distributions to shareholders. As transfer agent, State Street handles the opening of new accounts, processes orders to buy or sell shares, provides recordkeeping, and sends account statements and transaction confirmations to investors. Distributor ALPS Distributors, Inc. handles distribution, sales and marketing activities for the funds.
18
The Funds
Portfolio Management Team

The following information applies to all funds except the Underlying Money Market Fund (the individual managers of money market funds are not listed in a prospectus). Richard M. Hisey Chartered Financial Analyst Chief Investment Officer, AARP Financial Treasurer, AARP Funds Began investment career in 1983 Joined AARP Financial in 2006
Daniel Farley Chartered Financial Analyst Vice President, SSgA and SSgA FM Head, SSgA U.S. Global Asset Allocation team Began investment career in 1992 Joined SSgA in 1992
At SSgA, Mr. Farley is responsible for strategic/ tactical asset allocation and overlay clients in the U.S. He leads the team that handles SSgAs responsibilities for the AARP Funds. Mr. Farleys previous responsibilities at SSgA include serving as a senior portfolio manager in Global Asset Allocation, assisting clients in the development of strategic investment policy, managing tactical and static asset allocation portfolios, and leading the investment team for the firms Charitable Asset Management group. Michael Lear Principal, SSgA and SSgA FM Portfolio Manager, SSgA U.S. Global Asset Allocation team Began investment career in 1997 Joined SSgA in 2000 Mr. Lear is responsible for managing active and passive asset allocation portfolios, as well as derivative overlays. Previously, Mr. Lear worked as a Junior Portfolio Manager in the Indirect Implementation team. Prior to joining SSgA, he worked as an Assistant Portfolio Manager at Batterymarch Financial Management.
As the funds portfolio manager, Mr. Hisey is responsible for implementing the funds overall investment program, determining if and when to add other securities and at what levels, determining when to rebalance the funds (based on the advice of SSgA FM), and overseeing and monitoring the activities of SSgA FM. Previously, Mr. Hisey was Executive Vice President and Chief Investment Officer of Cole Management Incorporated, a venture capital firm focused on Russia. Before that, he was Treasurer and Chief Financial Officer of the MFS Group of Mutual Funds. He has also held senior positions at The Bank of New York and Lexington Global Asset Managers, Inc. (now ING/Reliastar). Mr. Hisey holds a BA and an MBA from the University of Connecticut.
The Funds
19
Michael O. Martel Vice President, SSgA and SSgA FM Portfolio Manager, SSgA U.S. Global Asset Allocation team Began investment career in 1992 Joined SSgA in 1994 Mr. Martel is responsible for developing and implementing multi-asset class solutions for clients including strategic and tactical global balanced funds, equitization and overlay strategies, and country selection portfolios. He also oversees development of proprietary trading systems and assists in ongoing research. Previously, Mr. Martel was with SSgAs Global Structured Products Group, specializing in developed and emerging market index strategies and the valuation of global derivatives. Prior to joining SSgA, Mr. Martel worked for the Mutual Funds Division of State Street Corporation.
Eduardo A. Borges Principal, SSgA and SSgA FM Portfolio Manager, SSgA U.S. Global Asset Allocation team Began investment career in 1998 Joined SSgA in 2000 Mr. Borges manages active and passive portfolios for domestic and international strategies. He was previously an Operations Associate supporting the Investor Solutions Group and the Global Fundamental Strategies Group. Prior to joining SSgA, Mr. Borges worked for Putnam Investments, holding positions as Senior Cash Specialist and Portfolio Accountant. For the portfolio management team of the underlying funds, see the funds Statement of Additional Information.
Payments for distribution and services

Each fund pays a distribution and shareholder services fee to ALPS Distributors, Inc., which is not affiliated with AARP Funds, AARP Financial, or SSgA FM. This fee covers the sale and distribution of a funds shares and servicing activities for shareholders. This so-called 12b-1 fee (named after Rule 12b-1 under the Investment Company Act of 1940) may be as much as 0.20% annually of a funds average daily net assets. Of this amount, ALPS Distributors, Inc. in turn pays out approximately: 0.14% of a funds net assets to AARP Financial (under a Services Agreement) for helping ALPS Distributors, Inc. with distribution and shareholder servicing activities, including creating advertising and marketing materials, educating call center personnel, and providing services to investors. 0.05% of a funds net assets to AARP (under a Trademark Licensing Agreement) for the right to use the AARP name in the funds names and for access to AARPs membership list. These fees will increase the cost of your investment because they are paid out of fund assets on an ongoing basis. Over time, they may cost you more than if you paid an up-front sales charge. While AARP has licensed the use of its name to AARP Funds and endorses the services provided by AARP Financial, AARP cannot recommend that you or any specific individual should purchase shares of a particular fund. AARP is not a registered investment adviser or broker-dealer.
20
The Funds
Financial Highlights
These tables are intended to help you understand the financial performance of the funds. Certain information reflects financial results for a single fund share. Total return represents the rate that an investor would have earned or lost on an investment in each fund, assuming reinvestment of all dividends and capital gains. The information in these tables has been audited by KPMG LLP, the independent registered public accounting firm for AARP Funds. KPMG LLPs report, along with the financial statements for these funds, is included in the funds annual report, and is incorporated by reference into (is legally considered part of) the Statement of Additional Information.
Financial highlights For a share outstanding throughout each period indicated

AARP AARP AARP
Aggressive Fund
Year ended 6/30/07 Period ended 6/30/061
Moderate Fund
Conservative Fund
Net asset value, beginning of period Income from investment operations:
$10.17
$10.00
$10.04
$10.00
$9.86
$10.00
Net investment income Net realized and unrealized gain (loss) on affiliated investments Total from investment operations
Less distributions:
0.24 1.52 1.76

(0.25)
0.09 0.17 0.26

(0.09)
0.31 1.02 1.33

(0.31)
0.10 0.04 0.14

(0.10)
0.39 0.53 0.92

(0.40)
0.16 (0.14) 0.02

(0.16)
From net investment income From net realized gains on investments Total distributions
Net asset value, end of period Total return
5
(0.00)4
(0.25) $11.68 17.41% 0.24% 6 2.55%
9
(0.09) $10.17 2.60% 0.24%6, 7 3.36% 7 (11.22)%

7
(0.00)4
(0.31) $11.06 13.32% 0.24% 6 3.27% (1.11)%
(0.10) $10.04 1.44% 0.24%6, 7 4.58% 7 (6.82)%

7
(0.00)4
(0.40) $10.38 9.40% 0.25% 6 4.01% (2.16)%
(0.16) $9.86 0.24% 0.24%6, 7 5.31% 7 (11.00)% 7
Ratios to average net assets: Net expenses
Net investment income

Expense waiver/reimbursement Supplemental data:
(2.00)%
Net assets, at end of period (000 omitted) Portfolio turnover
$20,222
12%
$6,454
7%
$31,925
13%
$13,133
5%
$11,622
17%
$6,581
7%
For the period from January 1, 2006 (commencement of operations) to June 30, 2006. For the period from September 29, 2006 (commencement of operations) to June 30, 2007. The per share amounts and percentages include the funds proportionate share of income, expenses and net realized and unrealized gains or losses of the State Street Money Market Portfolio. Represents less than $0.01.
Total returns for periods of less than one year are not annualized. In addition to the fees and expenses which the funds bear directly, the funds indirectly bear a pro-rata share of the fees and expenses of the underlying portfolios in which the funds invest. The net expense ratio shown does not include these indirect expenses. If included, the net expense ratio for each fund would be 0.50%. Computed on an annualized basis. Footnotes continue on the following page.
The Funds
21
Financial highlights For a share outstanding throughout each period indicated

AARP AARP
Income Fund
Period ended 6/30/072
Money Market Fund

Period ended 6/30/073
Net asset value, beginning of period Income from investment operations:
$10.00
$1.00
Net investment income Net realized and unrealized gain (loss) on affiliated investments Total from investment operations
Less distributions:
0.36 (0.18) (0.18) (0.36) (0.36)

$9.82 1.78% 0.25%6,7
0.05 0.05 (0.05) (0.05)

$1.00 5.11% 0.33% 8
From net investment income From net realized gains on investments Total distributions
Net asset value, end of period Total return
5
Ratios to average net assets: Net expenses
Net investment income

Expense waiver/reimbursement Supplemental data:
8
5.36%7
(21.21)% 7
5.06%
(3.91)%
Net assets, at end of period (000 omitted) Portfolio turnover
$2,338 30%
$35,742
Financial Highlights footnotes continued.

8
Effective March 1, 2007, AARP Financial has agreed contractually to waive fees and reimburse expenses to keep the net total operating expenses of the AARP Money Market Fund, including its pro-rata allocation of expenses from the State Street Money Market Portfolio, at 0.30% of average daily net assets through November 1, 2009. This expense decrease is reflected in both the net expense and net investment income (loss) ratios shown above.
22
Your Account
Buying and Selling Shares
How to Open a New Account
Key Considerations
To open an account, you need to If opening an account with a single
fill out a New Account Application (available on www.aarpfunds.com by choosing the Forms and Documents tab or by calling 1-800-958-6457, option 1, AARP Financial Center representative).
investment, the minimum investment is $100. If opening an account with an Automatic Investment Program, the minimum is just $25. When you invest in the Money Market Fund, you will begin accruing dividends on the busi-
ness day following the business day your purchase request is received in good order. You cannot open a new account by wire. See Policies about buying shares on page 27.
Online Confirm that your bank or credit union is a member of the Automated Clearing House (ACH) system. Go to www.aarpfunds.com and select the Open New Account button. Follow the instructions for creating a new account. By mail Get a New Account Application (see Key Considerations above). Be sure to choose the right application for the type of account you want to open. Complete a separate application for each type of account. All account owners must sign the application. Enclose a check made out to AARP Funds for your initial investment. Send by regular mail or overnight delivery to the appropriate address listed on page 23.
By Automatic Investment Program Direct from Your Bank Account Confirm that your bank or credit union is a member of the Automated Clearing House (ACH) system. Get a New Account Application (see Key Considerations above). Be sure to choose the right application for the type of account you want to open. Complete the application, including the Automatic Investment Program sections, and send it by regular mail or overnight delivery to the appropriate address listed on page 23.
Your Account
23
By Payroll Deduction Direct from Your Paycheck Confirm that your employer offers this service. Get a New Account Application (see Key Considerations above). Be sure to choose the right application for the type of account you want to open. Download a Payroll Deduction Form by going to www.aarpfunds.com, selecting the Forms and Documents tab, and choosing the Account Maintenance and Service Forms link.
Alternatively, request a Payroll Deduction Form by calling 1-800-958-6457 and selecting option 2, service representative. Complete the application and the Payroll Deduction Form, and send them by regular mail or overnight delivery to the appropriate address listed below. Provide your employer with a copy of the Payroll Deduction Form.
Types of Accounts Available

Individual or Joint Ownership Individual accounts
must be registered to one person. Joint accounts can have two or more owners and provide for rights of survivorship. On individual or joint accounts, filling out a Transfer on Death (TOD) form, in addition to your account application, will allow your accounts assets to pass directly to a beneficiary and avoid probate. Forms are available from Shareholder Services and online.
Retirement A qualified retirement account allows you
Gift or Transfer to a Minor (UGMA, UTMA) Gift or transfer accounts let you give money to a minor for any purpose. The gift is irrevocable and the minor gains control of the account once he or she reaches the age of majority. Coverdell Education Savings Account Formerly
to defer taxes on investment income and capital gains. Your contributions may also be tax-deductible. Please consult your tax advisor for details about tax advantages or consequences. Types of retirement accounts available at AARP include: Traditional IRA Roth IRA Rollover IRA Simplified Employee Pension IRA (SEP-IRA)
called an Education IRA, this account allows you to earn tax-deferred investment income and capital gains that may be withdrawn tax-free for qualified education expenses.
Trust For assets held in a trust. Business Entity Allows an authorized person of a
corporation, partnership, or other entity to establish a business account.
Contact Information for Placing Orders

By regular mail By overnight mail By phone
AARP Funds P.O. Box 8035 Boston, MA 02266-8035
AARP Funds c/o BFDS 30 Dan Road Canton, MA 02021
1-800-958-6457, option 2, service representative

Online
www.aarpfunds.com
24
Your Account
How to Add Money to an Account

Key Considerations
Subsequent investments must be Before investing online, by
for at least $25. This includes electronic transfer payments for orders placed online or by phone.
phone, or through the Automatic Investment Program, you need to have already established this service. To establish this service, fill out the appropriate sections
of the Shareholder Services Form (available on www.aarpfunds.com by choosing the Forms and Documents tab or by calling 1-800-958-6457, option 2, service representative).
Online Set up your account for investing online (see Key Considerations above). Go to www.aarpfunds.com and select the Log in to Your Account button. Access your account and follow the instructions for buying additional shares. Investments will be debited from your bank account and sent via electronic transfer. By phone Set up your account for investing by phone (see Key Considerations above). To place your order using our 24-hour Automated Response System, call 1-800-958-6457 and select option 3, then follow the instructions for accessing your account and entering your order. To place your order through a service representative during business hours, call 1-800-958-6457 and select option 2, then provide the service representative with your order information. By mail Use the Additional Investments slip that comes with your quarterly statement, or write a letter of instruction with the account owner name(s), account number, and fund name, signed exactly as shown in the account registration. Enclose a check made out to AARP Funds for the amount you want to add to your account. Send by regular mail or overnight delivery to the appropriate address listed on page 23.
By wire Instruct your bank to wire your investment to: State Street Bank & Trust Co. 225 Franklin Street Boston, MA 02120 ABA # 011000028 DDA# 9905-684-8 FBO: AARP Funds Also include the following information: - Your account number - The name(s) of account owner(s) - The tax ID number - The fund name - The name and address of the financial institution wiring the money By Automatic Investment Program Direct from Your Bank Account Confirm that your bank or credit union is a member of the Automated Clearing House (ACH) system. Set up your account for investing through the Automatic Investment Program (see Key Considerations above). By Payroll Deduction Direct from Your Paycheck Confirm that your employer offers this service. Download a Payroll Deduction Form by going to www.aarpfunds.com, selecting the Forms and Documents tab, and choosing the Account Maintenance and Service Forms link. Alternatively, request a Payroll Deduction Form by calling 1-800-958-6457 and selecting option 2, service representative. Complete the form and send it by regular mail or overnight delivery to the appropriate address listed on page 23. Provide your employer with a copy of the form.
Your Account
25
How to Exchange Between Funds

Key Considerations You may exchange shares of any fund for shares of any other fund at no charge. For any order to sell shares, you will need to give us the following information: - account owner(s) - tax ID number - account number - the dollar amount or the number of shares
Because an exchange is treated as For IRA accounts, an exchange
a sale for tax purposes, be aware before you place your order that there may be a capital gain or loss that affects your taxes (does not apply to IRAs). Note that the name of the account owner(s) and tax identification number must be the same on the two accounts involved in the exchange.
will result in the annual IRA custodial fee being charged to both the old and new accounts. See Policies about exchanging and selling shares on page 27.
Online Go to www.aarpfunds.com and select the Log in to Your Account button. Access your account and follow the instructions for exchanging shares. By phone To place your order using our 24-hour Automated Response System, call 1-800-958-6457 and select option 3, then follow the instructions for accessing your account and entering your order. To place your order through a service representative during business hours, call 1-800-958-6457 and select option 2, then provide the representative with your order information.
By mail Write a letter of instruction that includes all required information (see Key Considerations above). Make sure all registered owners sign the letter exactly as shown in the account registration. Send by regular mail or overnight delivery to the appropriate address listed on page 23.
26
Your Account
How to Take Money Out of an Account

Key Considerations
For any order to sell shares, you
will need to give us the following information: - account owner(s) - tax ID number - account number - the dollar amount or the number of shares Phone orders to sell shares are limited to $50,000 worth of shares per fund per account per day.
In certain cases, such as orders to sell more than $50,000 worth of shares, you will need to place your order by mail and it will need to have a Medallion signature guarantee (see page 28). Before placing orders to sell online or through the Systematic Withdrawal Plan, or any phone orders that you want redeemed via wire or electronic transfer,
you must already have established this service. To establish this service, fill out the appropriate sections of the Shareholder Services Form (available on www.aarpfunds.com by choosing the Forms and Documents tab or by calling 1-800-958-6457, option 2, service representative). See Policies about exchanging and selling shares on page 27.
Online Set up your account for placing orders to sell online (see Key Considerations above). Go to www.aarpfunds.com and select the Log in to Your Account button. Access your account and follow the instructions for selling shares. Investments will be sent to your bank account via electronic transfer. By phone If you want to receive proceeds by wire or electronic transfer, set up your account for this feature (see Key Considerations above). If you do not have this feature in place, we will send a check to the address of record on the account. Wire transfers can only be requested through a service representative. To place your order using our 24-hour Automated Response System, call 1-800-958-6457 and select option 3, then follow the instructions for accessing your account and entering your order. To place your order through a service representative during business hours, call 1-800-958-6457 and select option 2, then provide the representative with your order information. By mail Write a letter of instruction that includes all required information (see Key Considerations above). Make sure all registered owners sign the letter exactly as shown in the account registration.
Send by regular mail or overnight delivery to the appropriate address listed on page 23. We will send a check to the address of record on the account. By Systematic Withdrawal Program Confirm that your bank or credit union is a member of the Automated Clearing House (ACH) system. Set up your account for Systematic Withdrawal Plan (see Key Considerations above). At the time of each requested withdrawal, we will either send a check to the address of record or an electronic transfer to your bank account, depending on how you have set up the service. By checkwriting (Money Market Fund only) Download a Checkwriting Authorization Form by going to www.aarpfunds.com, selecting the Forms and Documents tab, and choosing the Account Maintenance and Service Forms link. Alternatively, request a Checkwriting Authorization Form by calling 1-800-958-6457, option 2, service representative. Complete the form and send it by regular mail or overnight delivery to the appropriate address listed on page 23. Note that if you are adding this service to an existing account, you must obtain a Medallion signature guarantee. See page 28. You may begin writing checks as soon as your checks arrive in the mail. There is currently no fee for checking and no limit on the number of checks you may write, but each check must be for at least $250. Note that you may not close your Money Market Fund account by writing a check.
Your Account
27
Account and Transaction Policies

Transaction Policies
Charges and fees The only costs associated with the funds are those described earlier in the Fund Expenses section, and certain incidental fees associated with specific services or accounts. These fees include: A $10 annual maintenance fee (per fund) for each IRA and Coverdell Education Savings Account. A $5 fee for each wire we send for you. We do not charge you to receive a wire, although your bank may charge you to receive a wire from us. General policies about transactions Any order to buy, exchange, or sell shares must be complete and received in good order by the servicing agent for a fund to act on it. If your account has more than one account owner or person authorized to make transactions for the account, we will accept telephone or online instructions from any of them. Any order request received after a funds close of business is considered to have been received on the next business day. We do not accept requests to hold a transaction for a future date. If you invest in a fund through an intermediary (such as a personal financial adviser), the intermediary may have different policies and fees. We suggest you read all materials from the intermediary carefully to understand the policies and fees that may apply. We do not pay interest on uncashed checks. You should cash distribution checks promptly. Wires cannot be sent on days when the Federal Reserve is closed (even if the funds are open for business). This includes Columbus Day and Veterans Day. Wire orders to buy or sell shares that are placed on such days will be processed on the next day that both the funds and the Federal Reserve are open.
If you have difficulty contacting us by phone or online, we suggest that you send your signed transaction request by regular mail or overnight delivery. Use the appropriate address found on page 23.
Policies about buying shares When opening new accounts, we accept ONLY electronic transfers and checks (including bank drafts and cashiers checks) in U.S. dollars, drawn on U.S. banks. Sorry, but we DO NOT accept: - starter checks - cash - travelers checks - money orders - credit or debit cards - third-party checks except IRA rollover checks You cannot use a business check to buy shares for a non-business account. If you buy shares by check or electronic transfer, we may delay the payment of redemption proceeds for up to 15 days, while these transactions clear through the banking system. We reserve the right to reject any offer to buy shares if we believe that doing so is in the best interests of a funds shareholders. Policies about exchanging and selling shares By signing up for electronic transactions, you have a choice as to how your money is sent to your bank account, either as an electronic transfer or wire transfer. With a wire transfer, the money is received by your bank as good funds, but you may incur additional charges. With an electronic transfer, there may be a delay in the accessibility of your funds, but there are no additional charges. To receive proceeds by wire transfer or electronic transfer, you must have established this feature on your account before initiating the redemption.
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Your Account
Wire proceeds are normally sent the next business day after we receive your order in good form, and are available for immediate use. Although by law we may take up to seven days to send out your sale proceeds, with a check or an electronic transfer, proceeds are normally sent on the next business day after we accept your order. Note that there may be a delay of up to seven days between when the receiving bank posts the money to your account and when you are able to draw on the money. Checks for proceeds are normally sent by regular mail. If you like, you can request overnight delivery; the delivery charges will be deducted from the redemption proceeds. Standard charges will apply. With regard to checkwriting, the Money Market Fund reserves the right to charge for, or to terminate, this service at any time. When a check is written on a Money Market Fund account, dividends and distributions will continue to be paid up to the day the check is presented for payment.
You can get a Medallion signature guarantee from a financial institution, broker, dealer or clearing agency that is a participant in any of these programs: Securities Transfer Agents Medallion Program Stock Exchanges Medallion Program New York Stock Exchange Medallion Signature Program You cannot get a Medallion signature guarantee from a notary public nor can a notarization substitute for one.
Restrictions on excessive trading

All funds except the Money Market Fund The funds
do not accommodate excessive trading. Whether motivated by so-called market timing techniques or by other purposes, excessive trading is inconsistent with the funds investment goals and has the potential to interfere with efficient fund management and to raise costs for shareholders. Consistent with policies approved by the Board of Trustees, we monitor large trades in fund shares as well as round trip trades (purchases followed by redemptions or exchanges). If we find any behavior that, in our view, constitutes inappropriate or excessive trading, we may take any of the following steps with the shareholders we believe are responsible: issue a warning restrict the use of convenient methods to submit redemption or exchange orders (such as by internet or phone) accept only orders to sell shares We may take these steps at any time, without any obligation to provide prior notice (although we will, when it is reasonable to do so, attempt to give prior notice), and without any liability for any consequences that may arise, such as an uncompleted exchange. With omnibus accounts (accounts held by an intermediary on behalf of many individual clients), we may take any of the following steps: treat the omnibus account as a single investor and limit its trades accordingly
Transactions that require a Medallion signature guarantee A Medallion signature guarantee provides you and the funds with an additional level of protection against the possibility of fraud on your account. We require a Medallion signature guarantee in the following circumstances: Orders to sell more than $50,000 worth of shares. When you want the sale proceeds sent to an address or bank that is not the address or bank of record for the account, or that has been the address or bank of record for less than 30 days. When you want the sale proceeds made payable to someone other than the registered account owners. When you want to receive the sale proceeds by wire transfer or electronic transfer, but this account privilege has not been activated in advance of your sell order. When you want to receive the sale proceeds by wire transfer or electronic transfer to an account that is not listed as the account of record for transfers.
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29
require the intermediary to provide information about trading orders on accounts within the omnibus account instruct the intermediary to take appropriate action against individual clients While the funds intend to be vigorous in their efforts, excessive trading can sometimes be difficult to detect. The funds therefore cannot guarantee that their efforts will be successful in eliminating such activities and their detrimental effects.
Money Market Fund Because the fund is intended to serve as a liquid, short-term investment, it has no specific limits on trading frequency. However, trading activity in Money Market Fund shares will be monitored as part of detection and enforcement efforts associated with the other funds excessive trading policies.
In order to help it meet its goal of maintaining a steady $1.00 NAV, the Underlying Money Market uses the amortized cost valuation method to value its portfolio instruments. In this method, an instrument is initially valued at its actual cost, and over time its value is assumed to move in a straight line toward its value at maturity, regardless of actual market value.
Share Price Policies

How a funds share price is calculated The price at which you buy or sell shares is the net asset value per share (NAV). Each funds NAV is calculated every business day as of the close of regular trading on the New York Stock Exchange (NYSE) normally 4:00 PM Eastern time, but sometimes earlier. Each funds NAV is calculated this way:
Net assets (total assets minus liabilities)
Fair-value pricing If the market price for a given security is not readily available, or if there is reason to believe that the most recent market price does not accurately reflect current value, the underlying fund will determine a fair value for it, using a method approved by the Board of Trustees of the underlying fund. For example, an underlying fund might need to determine the fair value of a security if an event that would affect market pricing occurs after trading in that security is closed for the day, but before 4:00 PM Eastern time, when NAV is calculated. This occurs most frequently with international stocks that are traded on exchanges that close many hours earlier.
Because fair-value pricing involves judgment, a fairvalue price will generally differ from the last market price or quote, and potentially also from the next market price or quote to become available. Because of this, a NAV calculated using fair-value prices may be higher or lower than what it would have been if the last reported or next-available market price or quote been used.
Number of shares outstanding
NAV
The share price for your transaction

All funds except the Money Market Fund On any
T o the extent that a funds assets consist of investments in underlying funds, the fund will calculate its share price using the NAV of each applicable underlying fund in calculating its own NAV. The underlying funds (other than the Underlying Money Market Fund) calculate their share price using the same formula as the funds. Bonds in an underlying fund generally are valued using quotes from bond dealers or bond pricing services. Stocks in an underlying fund generally are valued at their market price on the primary exchange where they are traded.
business day, if a fund receives your request to buy, exchange, or sell shares before closing time on the NYSE, it will use that days NAV as the price for your transaction. If a fund receives your request after closing time, it will use the next business days NAV for your transaction. Any time that we need more information before we can complete a transaction you requested, we will use the NAV as of the business day we receive all the required information for your transaction.
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Money Market Fund Investments must be made in
Federal Funds (i.e., monies credited to the account of the funds custodian bank by a Federal Reserve Bank). The Federal Reserve is closed on certain holidays on which the NYSE is open. These holidays are Columbus Day and Veterans Day. On these holidays, you will not be able to purchase shares of the fund because the Federal Funds wiring does not occur on these holidays. You will begin accruing dividends on the business day following the business day your purchase request is received in good order. (As with the other funds, investments received after the close of business are treated as having arrived on the next business day.) Dividends will accrue through the day of the redemption. Policies for selling shares are the same as for the other funds.
chases or transferring shares, or your account may be closed and the proceeds (which are calculated using the next available NAV) will be sent to you. In such a case, your proceeds may be more or less than the amount you paid for your shares, and the sale may be a taxable transaction.
Automatic Investment Program This program lets you set up regular, automatic investments in the fund(s) of your choice. It can be used on any type of fund account. The money for the investments can come from your bank account or your paycheck.
Note that if two scheduled investments in a row are denied because of insufficient funds, we may cancel your Automatic Investment Program.
General Business Policies

Eligible investors In general, shares of the funds are available for sale only in the U.S. and its territories, and only to U.S. residents who have a Social Security Number. However, there are some exceptions for example, shares can be sold to members of the U.S. military based outside the United States. Verifying your identity In accordance with the USA PATRIOT Act and related regulations, when you apply to open a new account in any fund, we will ask for your name, address, date of birth, tax identification number, and other information that will allow us to identify you. If you do not provide the required information, and we cannot contact you to obtain it, we have the option of declining your application and returning your initial investment.
After your account is established, a fund is required to take steps to verify your identity, such as checking your information against various databases. If a fund is unable to verify your identity from the information you provide, you may be restricted from making pur-
The funds business days Each fund is open for business every day the New York Stock Exchange (NYSE) is open for business. This is normally Monday through Friday, except when the following holidays are observed: New Years Day, Martin Luther King, Jr. Day, Presidents Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. A fund may suspend redemptions or postpone payment dates on any other day when the NYSE is closed or when its trading is restricted, or as otherwise permitted by the SEC. Reporting of fund turnover rates All mutual funds (except money market funds) are required to report their turnover rate, which is simply the portion of a funds investments that were traded for new ones in one year.
To the extent that a fund invests primarily in underlying funds rather than directly in securities, its turnover rate is not really meaningful (since most of the active trading of securities occurs within the underlying fund). Therefore, AARP Financial anticipates that each fund will have a turnover rate of less than 100% (generally significantly less). A higher turnover rate (over 100%) usually means higher costs due to brokerage expenses and taxes on capital gains.
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At the underlying fund level, turnover also is expected to be low because of the indexing strategy: the underlying funds (other than the Underlying Money Market Fund) are designed to invest for the long term, and generally buy and sell investments only to adjust to changes in the target indexes.
Our right to change policies Except as noted in this prospectus and the Statement of Additional Information, each fund has the right to change any of its investment objectives, investment strategies, or restrictions (as well as any other policies) without shareholder approval or prior notice.
AARP Funds may also change account requirements as follows, without prior notice to shareholders, when it believes it is in the best interest of a fund: add, change, or discontinue conditions for account service, account privileges, or buying shares accept initial investment by telephone freeze an account when there is a dispute between account owners, or when a fund believes a transaction is fraudulent redeem an account (sell all its shares) without the owners permission when a fund believes there has been fraudulent or illegal activity change and introduce any fees These changes may affect all investors of a fund, or only certain groups.
Reporting of fund holdings All mutual funds (including the underlying funds) must report their holdings within 60 days of the end of each calendar quarter. The holdings of each fund are available at www.aarpfunds.com after the funds have filed the required information with the SEC.
For more information on how we handle the disclosure of portfolio holdings, consult the funds Statement of Additional Information.
Precautions against fraud For your security, the funds take precautions to help ensure that all orders received are authentic, whether those orders are placed in writing, by telephone, online, or through the Automated Response System. For instance, callers must verify personal identification information, and calls may be recorded.
Its important to understand that so long as a fund has taken reasonable precautions, it is not responsible if any fraud does occur. If you want to be certain you are protecting your account from fraudulent telephone orders, the only way is to decline telephone privileges on your account application. If you make transactions online, be sure to safeguard your user name and password, and use security programs to protect your computer.
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Distributions and Taxes

About mutual fund distributions Mutual funds earn income, in the form of dividends and interest from securities they hold. They may also realize capital gains if they sell securities for more than they paid for them. Each fund will distribute its income and net capital gains to investors who, in turn, are responsible for paying any required taxes on the distributions they receive. Timing of distributions Each fund generally pays capital gains distributions (if any) in December. Even with normal investment activity, the amount may vary considerably from year to year.
Each fund generally pays income distributions (if any) as follows: AARP Aggressive Fund and AARP Moderate Fund: June and December AARP Conservative Fund: March, June, September, and December AARP Income Fund: monthly AARP Money Market Fund: declared daily, paid as of the last business day of each month Your tax consequences will depend on whether you have invested through a regular account or a tax-deferred account such as an IRA. Depending on how long a fund holds securities before selling them, its distributions will be classified as either short-term or long-term capital gains or losses. Distributions from net short-term capital gains will generally be taxed as ordinary income. Because different tax rates apply, the funds will supply information on whether distributions are treated as ordinary income or long-term capital gains for tax purposes. No matter how long you have held shares in a fund, you will receive distributions when they are paid and you will be liable for taxes on them. For shares that are not in an IRA or other taxdeferred account, it is generally wise not to buy shares shortly before a distribution is paid. By waiting until just after the distribution is paid, you will reduce your tax burden for that year.
Options for receiving distributions You may tell us to pay your distributions in cash or to invest them automatically in more shares of the same fund (known as dividend reinvestment). Either way, you are liable for tax on them. If you do not tell us how you want your distributions paid, your distributions will be reinvested.
If we mail a distribution check to your address of record and it is returned to us because of an invalid address, we will automatically reinvest all future distributions until you provide us with the correct address.
Tax consequences of exchanging or selling shares Just as a fund realizes capital gains when securities are sold at a higher price than originally paid, you may realize a capital gain on your own transactions. That is, if you sell or exchange shares of a fund at a higher price than you paid, you will likely owe taxes on the resulting capital gain. Of course, the reverse is true as well: if you sell or exchange shares at a loss, you might be able to deduct the loss on your tax return, subject to certain limitations under the tax laws. You should be aware that state and local taxes may apply, as well as federal income tax. Backup withholding You must certify that you have provided the funds with your correct Social Security or tax identification number, and that you are not subject to backup withholding. If you do not provide this information and certify that it is correct, we are required by law to withhold 28% of all taxable distributions, sales, and exchanges from your account.
Tax consequences of distributions Please consult your tax advisor for detailed information on the tax consequences of investing in a mutual fund, including the following issues:
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Glossary
General Investment Terms
asset-backed security A security that pools loans, emerging market A country whose stock and bond markets are still developing, such as many countries in Asia, Latin America, Eastern Europe, and Africa. fair value A reasonable price for a security that
such as credit card, auto, or home equity loans. Principal and interest payments are collected and passed through to investors.
blue sky A state law that regulates the offering and
buyers and sellers would accept in the market where the security usually trades.
good order A purchase, exchange or redemption
sale of securities.
bonds Investments that pay interest (often a fixed
amount) to investors. Typical issuers include corporations, federal or state governments, and entities sponsored by or associated with governments. A bond is essentially an IOU. It represents a debt owed by the issuer (as opposed to stocks, which represent shares of ownership in the issuer). In the event that an issuer goes bankrupt or otherwise encounters financial difficulties, its bondholders generally have priority over stockholders.
commercial paper A debt instrument issued by a corporation (typically to meet short-term financial needs) that normally must be paid back within 270 days. current income Money paid out to investors, such
order is in good order when a fund, or its agent, receives all required information, including properly completed and signed documents.
growth of capital With mutual funds, the growth
in value of an investment through an increase in a funds share price, which is based in turn on a net increase in the value of the funds holdings.
interest Money paid by a bond issuer to investors
who, in effect, have loaned the issuer money by buying its bonds.
market price The last reported price of a security
on a market where that security is bought and sold.

Medallion signature guarantee A stamp or seal from
as bond interest.
derivative In general, a financial contract whose
value is based on a traditional security (such as a stock or bond), on an index, or on the difference between two or more securities or indexes.
dividends Money paid by a mutual fund or by a
an approved financial institution that participates in one of the three recognized Medallion programs. The stamp or seal guarantees that your signature is authentic. See also page 28.
money market instruments Short-term, liquid
stock-issuing company to the investors who own shares of the fund or of the companys stock. Stock dividends are generated by the issuing companys business operations. Mutual fund dividends are generated by interest or dividends the fund receives from investments it owns.
dividend reinvestment Using dividends to buy additional shares of the investment paying the dividend, instead of taking the money as a cash payment.
investments that usually mature within 13 months. Examples of money market instruments are U.S. Treasury bills, bank certificates of deposit, repurchase agreements, commercial paper, and bankers acceptances.
mortgage-backed security A security of an issuer that pools mortgages. Principal and interest payments on the mortgages are collected and passed through to investors. net asset value per share (NAV) The price of a
single share of a mutual fund.

omnibus account A single account held by an
investment professional on behalf of many investors.
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preservation of capital The preservation of the value of an investors investment. real estate investment trust (REIT) A security that
Prospectus-Specific Terms
fund, funds One, some, or all five of the mutual
is issued by a company that invests in real estate (either by owning property directly or through mortgages) and that trades on a stock exchange.
rebalance To maintain a target mix of stocks,
funds offered in this prospectus.

SSgA FM SSgA Funds Management, Inc. Underlying Bond Fund The U.S. Bond Market
Portfolio.
underlying funds Currently the U.S. Bond Market
bonds, and other assets.

SEC The Securities and Exchange Commission
has primary responsibility for enforcing the federal securities laws and regulating the U.S. securities industry and markets.
share price See net asset value per share. small company stock Generally, stock of a company whose total market value is between $250 million and $1 billion. stocks Investments that represent a share of owner-
Portfolio, the U.S. Stock Market Portfolio, and the International Stock Market Portfolio, each a series of AARP Portfolios, and the State Street Money Market Portfolio, a series of the State Street Master Funds. Other funds may be used as underlying funds in the future.
Underlying International Fund The International
Stock Market Portfolio.

Underlying Money Market Fund The State Street
ship in a company. Stocks are traded on markets or exchanges where their prices can go up or down in response to supply and demand. Some stocks also pay dividends.
total return The total gain or loss of a mutual fund,
Money Market Portfolio.

Underlying Stock Market Fund The U.S. Stock
Market Portfolio.
including all dividends, interest, and capital gains. It is expressed as a percentage of the original investment, and reflects the reinvestment of dividends and interest.
yield The amount of income (meaning interest or
dividends) earned by an investment, expressed as a percentage of the investments price.
Notes
Notes
Notes
For More Information

Annual and semi-annual reports Each report includes financial statements and the annual report discusses the market conditions and investment strategies that significantly affected each funds performance (other than the Money Market Fund). Statement of Additional Information (SAI) The SAI provides more detailed information about the funds, such as the portfolio managers compensation, other accounts managed by the portfolio managers, and the portfolio managers ownership of securities of the funds, as well as more information on how we handle the disclosure of portfolio holdings. The funds annual and semi-annual reports and the SAI are incorporated by reference into (are legally a part of) this prospectus.
To request a free copy of the latest annual or semiannual report to shareholders, the SAI, or other information about the funds or your account, please contact us: You can also review and copy information about the funds (including the SAI) at the SECs Public Reference Room in Washington, DC. (call the SEC at 202-551-8090 for more information). Reports and other information about the funds are also available in the SECs EDGAR Database at www.sec.gov, or you can receive copies of this information, for a fee, by electronic request at the following:
By email publicinfo@sec.gov By regular or overnight mail
Public Reference Section Securities and Exchange Commission Washington, DC 20549-0102
By phone 1-800-958-6457
Monday Friday, 8:00 AM to 6:00 PM Eastern time

By email info@aarpfunds.com Online www.aarpfunds.com By regular mail

By overnight mail
AARP Funds c/o BFDS 30 Dan Road Canton, MA 02021
Investment Company File No. 811-21825 ARP-PR-007-1007
Privacy Policy Notice

This privacy policy notice summarizes how AARP Financial Incorporated (AFI) and AARP Funds (funds and collectively with AFI, we, our, or us) plan to protect our customers (your) nonpublic personal information (Information).
well as financial service providers who do not assist us in maintaining or servicing your accounts, such as companies engaged in banking, credit cards, consumer finance, securities, and insurance with whom we or our affiliates have agreements to provide endorsed products or services; Nonfinancial companies, such as service providers who fulfill information requests, as well as nonfinancial companies engaged in direct marketing and the selling of consumer products and services with whom we or our affiliates have agreements to provide member benefits or discounts; and Others with whom you have consented to our sharing your Information, or joint account holders. We may also disclose all of the Information we collect to companies who perform marketing services on our behalf or to other institutions with whom we or our affiliates have joint marketing agreements, except as otherwise prohibited by federal or state law.
Our commitment to safeguarding your privacy We value your trust and continue to recognize the importance of holding your Information as confidential. We will do our best to use your Information responsibly in order to protect you from fraud, and comply with legal obligations. We will require companies with which we do business to use any Information we provide appropriately and to safeguard the confidentiality of such Information. We collect the following categories of Information about you We collect Information about you from the following sources: Information we receive from you on applications or other forms, on our web site or through other means; Information we receive from your transactions, correspondence and other communications with us; and Information we receive from you in connection with providing you a financial product or service. We disclose the following categories of Information about you We do not disclose any Information about you or any former shareholder to anyone, except as permitted or required by law. All Information may be shared among the funds or between a fund and AFI, including its affiliates, AARP and AARP Services, Inc. to provide products or services to you or to make a solicitation for marketing purposes related to financial products or nonfinancial products such as membership in AARP. We may disclose all Information about you or any former customer to the following types of affiliated and nonaffiliated third parties: Financial service providers who assist us in maintaining or servicing your accounts, such as securities broker/dealers, the distributor of any funds for which AFI provides investment advisory services, transfer agent, printers and those who assist with mailing and other services that are typically provided to funds as
Protecting the security and confidentiality of your Information We restrict access to Information about you to those employees who need to know that information to provide products or services to you. We maintain physical, electronic, and procedural safeguards that comply with federal standards to guard your Information. We will protect against anticipated threats or hazards to the security of the Information we receive from a consumer reporting agency, as well as against unauthorized use of this Information. When disposing of any Information, we will take reasonable measures to protect against unauthorized access or use of the Information. Your privacy choices If you do not want us to share your Information with nonaffiliated third parties who do not provide services to us (we may still provide your Information as permitted by law and as necessary to process and service your accounts) or if you want us to limit the personal Information that we share about you with our affiliates (unless otherwise permitted by law), you can opt-out of the disclosure of your Information by contacting us at 1-800-958-6457. Please allow 30 days from our receipt of your privacy choices for them to become effective. Investors purchasing or owning interests of the funds through their bank, broker, or other financial institution should consult that institutions privacy policies.
Shareholder Services
How we communicate with you
We send out several types of regular communications to keep you informed about your investment: Transaction confirmations to verify your purchases or sales. Quarterly and annual account statements that recap all activity for the period, so you can monitor your investments. Annual and semi-annual reports. Note that if you have more than one account with the same address, or share an address with other investors that have an account, we will send one copy of a prospectus, annual report, and other similar documents to that address. If at any time in the future you decide you would prefer to receive duplicate documents for each account you own, simply call us and speak with a service representative. You will begin receiving individual copies within 30 days of the date that we receive your instructions.
How you can communicate with us

Were available in whatever way you find most convenient: online, by phone, and mail. Service is available 24 hours, 7 days a week, at our internet site and through our telephone Automated Response System. Both can provide a wealth of information and can process most routine requests. If you want to talk with someone who can help you decide if a fund is right for you, you can speak with a courteous, knowledgeable representative from 8:00 AM to 6:00 PM Eastern time. For help with transactions or account-related inquiries, speak with a Shareholder Services representative.
How to reach us
By regular mail

By overnight mail
Online www.aarpfunds.com Open an account Get a prospectus or fund report Buy, sell or exchange shares View your account balance and
AARP Financial Center representatives Speak with representatives who
AARP Funds c/o BFDS 30 Dan Road Canton, MA 02021 Buy, sell or exchange shares Change the name on your account Add a seasonal mailing address Add bank information to your account Add or change an Automatic Investment Program Add or change payroll deduction
share price Change your mailing address Order duplicate statements or receive tax form information Download account service forms Change Automatic and Systematic Investment Programs
By email
can help you identify your goals, determine if youre on track, and decide if a fund is right for you.
Shareholder Services representatives or our 24-hour Automated Response System Receive account information and
info@aarpfunds.com
By phone
1-800-958-6457
service (representatives only) Change your address of record (representatives only) Exchange shares Buy or sell shares by electronic transfer Order duplicate statements Check your account balance
ARP-PR-0071007
2007 AARP Financial
IRA Application and Adoption Agreement

Make checks payable to: AARP Funds Mail to: AARP Funds, P.O. Box 8035, Boston, MA 02266-8035 Overnight address: AARP Funds c/o BFDS, 30 Dan Road, Canton, MA 02021 Phone: 1-800- 958-6457
The funds will not accept third-party or starter checks.
1. Account Registration (Please print; preferably in capital letters and black ink.)
Owners name (rst, middle, last)
Birthdate (mm/dd / yyyy )
Social Security number/Tax Identication number
Street address (street address required to open an account; to add an alternate mailing address, such as a P.O. box, see below)
City
State
Zip
Daytime telephone number
Email address
Alternate telephone number
Mailing address (if different than street address) P.O. box is acceptable
City
State
Zip
2. IRA Election
Please complete only one section section A for Traditional IRA, section B for Roth IRA or section C for Simplied Employee Pension (SEP) IRA. If you would like more than one type of IRA, you are required to ll out an additional application. Please note the following: Transfer of Assets refers to moving assets from your existing IRA Custodian directly to an AARP IRA. Direct Rollover refers to moving assets directly from a qualied retirement plan (such as a 401(k), 403(b), or 457 plan) to an AARP Traditional IRA only. Rollover refers to receiving qualifying distribution assets from another IRA or qualied retirement plan and investing those assets in an AARP IRA within 60 days. If you are age 7012 or older, you are required to take your required minimum distribution before transferring or converting your Traditional IRA assets (for more information, please consult IRS Publication 590).
A. Traditional IRA (Choose one)

Annual Contribution(s) for tax year 20_____. (If left blank, current year is assumed.) Go to section 4 if utilizing automatic investment plan. Transfer of Assets. Complete the AARP IRA Transfer/Direct Rollover of Assets Form. Go to section 4 if utilizing automatic investment plan. IRA Election continues next page
Direct Rollover. Complete the AARP IRA Transfer/Direct Rollover of Assets Form. Go to section 4 if utilizing automatic investment plan. Rollover. Check enclosed for $_______________. Go to section 4 if utilizing automatic investment plan. Recharacterization of Roth IRA. Existing AARP Roth IRA account number_____________________________ Amount recharacterized $_______________ If IRA is held with another custodian or trustee, complete the AARP IRA Transfer/Direct Rollover of Assets Form.
B. Roth IRA (Choose one)

Annual Contribution(s) for tax year 20_____. (If left blank, current year is assumed.) Transfer of Assets. Complete the AARP IRA Transfer/Direct Rollover of Assets Form. Go to section 4 if utilizing automatic investment plan. Rollover. Check enclosed for $_______________. Go to section 4 if utilizing automatic investment plan. Conversion of Traditional IRA. Existing AARP Traditional IRA account number_____________________________ Amount converted $_______________ If IRA is held with another custodian or trustee, complete the AARP IRA Transfer/Direct Rollover of Assets Form. Recharacterization of Traditional IRA. Existing AARP Traditional IRA account number_____________________________ Amount recharacterized $_______________ If IRA is held with another custodian or trustee, complete the AARP IRA Transfer/Direct Rollover of Assets Form.
C. Simplied Employee Pension (SEP) IRA (Choose one)

Annual Contribution(s) for tax year 20_____. (If left blank, current year is assumed.) Transfer of Assets. Complete the AARP IRA Transfer/Direct Rollover of Assets Form. Go to section 4 if utilizing automatic investment plan. Rollover. Check enclosed for $_______________. Go to section 4 if utilizing automatic investment plan.
3. Investment - Options and Minimums

Fees
Initial minimum: $100 per fund; $25 if Automatic Investment or Payroll Deduction elected Minimum subsequent purchases: $25 per fund We accept ONLY checks (including bank drafts and cashiers checks) in U.S. dollars, drawn on U.S. banks.We cannot accept third party checks, starter checks, or certain cash equivalents.
Mid-to-Long Term Investment
$10 annual fee (per fund account) enclosed OR deduct If no box is checked, fees will automatically be deducted.
These Funds are designed to be a complete investment program in itself; therefore, diversifying among the Funds is generally not necessary.
Fund name Fund number Initial investment Must total 100%
AARP Aggressive Fund AARP Moderate Fund AARP Conservative Fund Short Term Investment AARP Money Market Fund
1 7 0 0 1 7 0 1 1 7 0 2
$ $ $
, , ,
. . .
or or or
. . .
% % %
1 7 0 3
or
This Fund seeks to maintain a constant $1.00 share price.
AARP Income Fund
1 7 0 4
or
This Fund is designed to generate current monthly income.
Total investment amount
1 0 0 . 0 0 %
4. Automatic Investment Plan

Check the box to add this option and complete this section and section 6. You may purchase shares monthly or quarterly into your existing account(s) automatically by electronic transfer from your checking or savings account. Transactions will occur on the 15th of the month or the next business day, unless otherwise specied below. The minimum investment is $25 per fund. Please allow 15 business days before the rst draft. Shares purchased may not be available for 15 days. Please consult a tax advisor regarding contribution limits. I authorize AARP Funds to draw on my bank account according to the following instructions: (Please indicate which type of account: checking or savings.)
AARP Aggressive Fund

Beginning month
. Transactions should occur on the
Monthly
Quarterly day of the month.
Amount ($25 minimum per fund)
AARP Moderate Fund

Beginning month
Monthly

Beginning month
Monthly

Beginning month
Monthly
AARP Income Fund

Beginning month
Monthly
5. Electronic Transactions
Check the box to add this option and complete section 6. You may purchase or redeem shares anytime by calling 1-800-958-6457. Funds for share purchases are taken directly from your bank account and redemption proceeds are sent to your bank account.
6. Bank Information
Complete this section if you have selected the Automatic Investment Plan from section 4. You must use the same checking or savings account for these sections. FOR CHECKING ACCOUNTS, A VOIDED CHECK MUST BE ATTACHED. FOR SAVINGS ACCOUNTS, PLEASE HAVE YOUR BANK ISSUE A LETTER CONFIRMING ALL OF THE INFORMATION REQUESTED BELOW.
Name of bank
Address of bank
City
State
Zip
Name(s) on bank account
Bank account number
Bank ABA number (Routing Number)
7. Designation of Beneciary
I hereby make the following designation of beneciary in accordance with State Street Bank & Trust Companys Traditional or Roth Individual Retirement Account Custodial Agreement: Make payment in the proportions specied below. If you list more than one primary beneciary, the percentages must total 100%. If any primary beneciary predeceases me, his/her share is to be divided among the primary beneciaries who survive me in the relative proportions assigned to each such surviving primary beneciary. PRIMARY BENEFICIARY(IES):
Name
Relationship
Name
Relationship
If none of the primary beneciaries survives me, pay any interest I may have under my Account(s) to the following contingent beneciary(ies) who survive me. If you list more than one contingent beneciary, the percentages must total 100%. Make payment in the proportions specied on the next page.
7. Designation of Beneciary (continued)

CONTINGENT BENEFICIARY(IES):
Name
Relationship
Name
Relationship
If there is no designated beneciary living at the time any such payment becomes due, the payment shall be made to my estate. Important: This Designation of Beneciary(ies) may have important tax or estate planning effects. Also, if you are married and reside in a community property or marital property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington or Wisconsin), you may need to obtain your spouses consent if you have not designated your spouse as primary beneciary for at least half of your Account(s). Consult your lawyer or other tax professional for additional information and advice.
8. Signature
I hereby authorize AARP Funds to establish an IRA for my benet with State Street Bank & Trust Company, pursuant to the terms of AARP Funds Individual Retirement Account Custodial Documents. By signing this form I certify that: All information and certications on this application are true. I have received and read a current prospectus for AARP Funds and the IRA Disclosure Statement and Custodial Agreement. I agree to be bound by the terms as governed by Massachusetts law. I have full authority and legal capacity to purchase fund shares and establish and use any related privileges. If I am establishing a Simplied Employee Pension IRA (SEP- IRA), I certify that my employer has established a valid SEP Plan to which I am contributing. I understand that a $10.00 annual maintenance fee may be collected by redeeming sufcient shares from each fund account balance, if not prepaid by December 1. The custodian may change the fee schedule from time to time. I consent to the delivery of a single shared copy of each prospectus and report to shareholders to me and all other shareholders who share my address. I understand that I may revoke my consent by calling AARP Funds at 1-800-958-6457 or by writing to the address on this application. I understand that the telephone transaction privileges and Internet transaction privileges will apply to my account. If I have telephone/Internet transaction privileges, I agree that neither the funds nor their transfer agent, their agents, ofcers, trustees, directors or employees will be liable for any loss, liability or expense for acting, or refusing to act on instructions given under the telephone and Internet transaction privileges that are reasonably believed to be genuine, placing the risk of loss on me. See the discussion of these privileges in the prospectus. Under penalty of perjury, I hereby certify that the Social Security or other Tax Identication number (TIN) in section 1 is correct, that I am a U.S. person (U.S. person includes a resident alien) and that I am NOT currently subject to IRS backup withholding (cross out NOT if you are currently subject to withholding). The Internal Revenue Service does not require your consent to any provision of this document other than the certications required to avoid backup withholding. Receipt by the investor of AARP Funds conrmation statement shall indicate State Street Bank & Trust Companys acceptance to act as custodian. Signature continued back page
8. Signature (continued)
X
Your signature Date
X
Signature of spouse (Only required in community property states, when designated beneciary is not your spouse.) Date
X
Witness to signature* *Testamentary dispositions required to be witnessed in some jurisdictions. Date
If the applicant is a minor under the laws of the applicants state of residence, a parent or guardian must also sign the Agreement here. Until the applicant reaches the age of majority, the parent or guardian will exercise the powers and duties of the applicant.
Name of parent or guardian (rst, middle, last)
Street Address if different from applicant.
City
State
Zip
X
Signature of parent or guardian Date
IMPORTANT NOTICE THE USA PATRIOT ACT To help the government ght the funding of terrorism and money laundering activities, Federal Law requires all nancial institutions to obtain, verify and record information that identies each person who opens an account. What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. This information will be veried to ensure identity of all individuals opening a mutual fund account.
RETAIN A PHOTOCOPY OF THE COMPLETED FORM FOR YOUR RECORDS.
2007 AARP Funds
ARP-AP-003-0707
IRA Transfer/Direct Rollover of Assets Form
TOA
Use this form if 1) you are transferring IRA assets from another IRA custodian into an AARP Funds IRA or 2) you are directly rolling over retirement plan assets into an AARP Funds IRA. An AARP IRA Application and Adoption Agreement are required to establish a new AARP Funds IRA.
Mail to: AARP Funds, P.O. Box 8035, Boston, MA 02266-8035 Overnight address: AARP Funds c/o BFDS, 30 Dan Road, Canton, MA 02021 Phone: 1-800- 958-6457
1. Investor Information
(Please print, preferably in capital letters and black ink.)
Full Name (first, middle, last)
Social Security number /Tax Identification number
Email address
Alternate telephone number
Address
City
State
Zip
2. Transfer Assets From Current IRA Custodian or Retirement Plan Account(s)

Name of Current Custodian/Trustee or Company/Plan Administrator for direct rollovers Attn: Mr/Ms.
Street address
City
State
Zip
Fund Name/Fund Number (if applicable)*
Account Number at Current Custodian
*To list additional accounts to be transferred, please attach a letter of instruction.
3. Instructions to Current IRA Custodian or Retirement Plan Administrator

AARP Funds will forward this information on your behalf
You must complete sections A, B, & C below Current IRA Custodian/Plan Administrator, please transfer/rollover assets from the above account(s) in cash according to the following instructions: A. Liquidate (Check one box below and fill in any necessary information): The Total Amount in My Current Account _______________% and Retain the Balance $______________ and Retain the Balance C. Make Check Payable to: AARP Funds Mail to: AARP Funds, P.O. Box 8035, Boston, MA 02266-8035 FBO______________________________________________________________________________(client name) Important information for the Investor from The AARP Funds 1. Contact your current custodian or plan administrator to: confirm that this form along with AARPs Letter of Acceptance is sufficient. determine if a signature guarantee is required on this form. verify that you have completed all necessary paperwork to ensure the timely transfer of assets. satisfy this years Required Minimum Distribution (RMD) before the transfer is made if you are 7012 or older. 2. Attach a copy of your most recent account statement from your current custodian or plan administrator to this form. B. Transfer/Direct Rollover ( Check one box below): Transfer from a Traditional IRA or SEP IRA Transfer from a Roth IRA Direct rollover from a qualified retirement plan
4. Transfer Assets To this Account (Check one box)

Traditional IRA* Roth IRA** Simplified Employee Pension (SEP) IRA * You may transfer to a Traditional IRA from a SIMPLE IRA but not until at least 2 years after the first contribution to the SIMPLE IRA account. A qualified retirement plan can only be moved to a Traditional IRA, and through a direct rollover. You may NOT transfer to a Traditional IRA from a Roth IRA. **Transfers to a Roth IRA are possible from another Roth IRA, or, if the Roth IRA owner meets eligibility requirements, they may convert from a Traditional IRA, from a SEP IRA, or from a SIMPLE IRA (but not until at least 2 years after the first contribution to a SIMPLE IRA account). A transfer from a non-Roth IRA will trigger federal income tax on the taxable amount transferred.
5. Investment Instructions to the AARP Funds

New IRA Account: Invest the transferred amount in accordance with the investment instructions on the attached IRA Application & Adoption Agreement (skip ahead to section 6). Existing IRA Account: Invest the transferred amount as indicated below: (Fill in necessary information. If you are adding any new AARP Funds to your existing IRA, please specify the allocation amount below.
Fund name Dollar Amount Must total 100% Account Number
AARP Aggressive Fund AARP Moderate Fund AARP Conservative Fund AARP Money Market Fund AARP Income Fund Total investment amount $
$ $ $ $ $ ,
, , , , , ,
. . . . . .
or or or or or
. . . . .
% % % % %
1 0 0 . 0 0%
6. Signature of Investor (Required)

I acknowledge that I have sole responsibility for my investment choices and that I have received a current prospectus and IRA Disclosure Statement and Custodial Agreement which I have been advised to read carefully before investing. I understand that the requirements for a valid transfer to a Traditional IRA, or Roth IRA are complex and that I have the responsibility for complying with all requirements and for the tax results of any such transfer. I certify to the current IRA custodian or trustee that I have established (or will establish) a successor Individual Retirement Custodial Account meeting the requirements of Internal Revenue Code Section 408(a), 408(p) or 408A (as the case may be) to which assets will be transferred, and certify to The AARP Funds IRA Custodian that the IRA from which assets are being transferred meets the requirements of Internal Revenue Code Section 408(a), 408(p) or 408A as the case may be.
X
Signature of Investor Date
Signature Guarantee Check with your institution to see if they require a signature guarantee.
Affix Guarantee Here* *Usually the signature(s) must be guaranteed by an eligible bank, broker, dealer, credit union, national securities exchange registered securities association, clearing agency, or savings association. Notarization by a Notary Public is not acceptable in lieu of a signature guarantee provided by one of the eligible guarantor institutions listed above. Check with your institution to confirm their specific requirements.
7. Acceptance by New Custodian (Completed by State Street Bank and Trust Company)
State Street Bank and Trust Company agrees to accept transfer of the above amount for deposit to the Investors Individual Retirement Custodial Account, and requests the liquidation and transfer of assets as indicated above.
X
By Date
RETAIN A PHOTOCOPY OF THE COMPLETED FORM FOR YOUR RECORDS
2007 AARP Funds
ARP-AP-014-0707
Traditional/Roth IRA Custodial Agreement & Disclosure Statement

Sponsored by State Street Bank and Trust Company
State Street Bank and Trust Company Universal IRA Information Kit
Introduction
Whats New In The World Of IRAs? An Individual Retirement Account (IRA) has always provided an attractive means to save money for the future on a tax-advantaged basis. In 1998, the Federal laws were revised to permit individuals to open and maintain Roth Individual Retirement Accounts (Roth IRAs). Under a Roth IRA, the earnings and interest on an individuals nondeductible contributions grow without being taxed, and distributions may be tax-free under certain circumstances. Most taxpayers (except for those with income levels above certain limits) are eligible to contribute to a Roth IRA. A Roth IRA can be used instead of a Traditional IRA, to replace an existing Traditional IRA, or complement a Traditional IRA you wish to continue maintaining. Taxpayers, single or married filing jointly, with adjusted gross income of up to $100,000 are eligible to convert existing Traditional IRAs into Roth IRAs. If you convert early in a year and later turn out to be ineligible because your gross income exceeds $100,000 (or for other reasons you wish to reverse the conversion), you can recharacterize the conversion by transferring the amount in the converted Roth IRA back to a Traditional IRA. The details on conversion (and recharacterization) are found later in this booklet. Changes made by the 2001 tax law have improved Traditional and Roth IRAs as investment and savings vehicles. The most significant change is an increase to the amount of money an individual may contribute in a year. Effective January 1, 2005, individuals may contribute up to $4,000 annually. This amount increases to $5,000 in 2008. After 2008, cost of living adjustments will be made to the contribution limit, in $500 increments.
1
In addition, individuals who are age 50 and over by the end of any year may make special catch-up contributions to Traditional IRAs or Roth IRAs. For 2005 the catch-up contribution limit will be $500. Beginning in 2006, the catch-up contribution limit will increase to $1,000 annually. The 2001 tax law also made some important changes to the Traditional IRA rollover rules. Individuals may roll their Traditional IRA account balances over to an employer sponsored qualified plan, regardless of whether the amount in the Traditional IRA is attributable to distributions that had previously come from another qualified plan. After-tax contributions to a Traditional IRA, however, may not be rolled over to an employer sponsored qualified plan. Under the old rules, only distributions from a qualified plan could be rolled over to another qualified plan. Individuals wishing to park their distribution from one employers qualified plan in a Traditional IRA before rolling it over to another qualified plan had to establish a conduit IRA, in which only qualified plan distributions would be held. Under the revised rules, conduit IRAs are, in most cases, unnecessary, as it is now possible to roll over amounts attributable to Traditional IRA contributions as well as amounts in the Traditional IRA that came from the rollover of a distribution from an employer plan.Because of the different tax rules for distributions from a Roth IRA, rollovers from an employer plan to a Roth IRA, or vice versa, should not be made. Also, the IRS has issued revised regulations relating to the required minimum distribution (RMD) rules, which are used to determine RMDs from Traditional IRAs after reaching age 7012 and from Roth IRAs after the account owners death. In general, under the revised rules the amount of a minimum distribution will usually be determined, using a uniform IRS life expectancy table, which is based on the life expectancy of an individual and a beneficiary who is ten years younger than that individual. The RMD rules also abolish the
requirement for IRA owners to elect recalculation or non-recalculation. Recalculation on a yearly basis is actually built into the uniform IRS life expectancy table. The RMD rules do not apply to Roth IRAs while the Roth IRA owner is alive. Roth IRA owners may withdraw however much they wish whenever they wish, with no minimums at age 7012. However, the new RMD rules do apply to Roth IRAs after a Roth IRA owners death. The new RMD rules generally require payments to the designated beneficiary to start by the end of the year after the year of the Roth IRA owners death. Minimum payments over the beneficiarys life expectancy are required. These revised rules are reflected in this Kit. Note: The rules governing required minimum distributions have been evolving for years and are always subject to change. In addition, the uniform table and other tables have been revised to reflect longer life expectancies. Different RMD rules apply to inherited IRA assets. Always check with your accountant, lawyer or other tax adviser, or with a qualified financial planner, for the latest RMD rule developments. Whats in This Kit? In this Kit you will find detailed information about Traditional IRAs and Roth IRAs, as updated by the revised tax law and revised RMD rules. You will also find everything you need to establish and maintain either a Traditional or Roth IRA, or to convert all or part of an existing Traditional IRA to a Roth IRA. This Kit contains our Universal IRA Disclosure Statement. The Disclosure Statement is divided into three parts:
Part
Part
Two contains provisions specifically applicable to Roth IRAs. Three contains provisions applicable to all IRAs (Traditional and Roth).
Part
This Universal Individual Retirement Custodial Account Kit contains information and forms for both Traditional IRAs and Roth IRAs. However, you may use the Adoption Agreement in this Kit to establish only one Traditional IRA or one Roth IRA; separate Adoption Agreements must be completed if you want to establish multiple (Roth or Traditional) IRA accounts. Whats the Difference Between a Traditional IRA and a Roth IRA? With a Traditional IRA, an individual may be able to deduct the contribution from taxable income (up to the annual contribution limit for the year), reducing current income taxes. Taxes on investment growth and dividends are deferred until the money is withdrawn. Withdrawals are taxed as additional ordinary income when received. Nondeductible contributions, if any, are withdrawn tax-free. Withdrawals before age 5912 are assessed a 10% penalty in addition to income tax, unless an exception applies. With a Roth IRA, the contribution limits are essentially the same as Traditional IRAs, but there is no tax deduction for contributions. All dividends and investment growth in the account are tax-free. Most important with a Roth IRA: there is no income tax on qualified withdrawals from your Roth IRA. Additionally, unlike a Traditional IRA, there is no rule against making contributions to Roth IRAs after turning age 7012, and theres no requirement that you begin making minimum withdrawals at that age. The following chart highlights some of the major differences between a Traditional IRA and a Roth IRA:
One describes the basic rules and benefits which are specifically applicable to your Traditional IRA. Two describes the basic rules and benefits which are specifically applicable to your Roth IRA. Three describes important rules and information applicable to all IRAs.
Part
Part
The third section of this Kit contains the Universal IRA Custodial Agreement. The Custodial Agreement is also divided into three parts:
Part
One contains provisions specifically applicable to Traditional IRAs.
Characteristics
Traditional IRA
Roth IRA
Eligibility
Individuals
(and their spouses) who receive compensation age 70 12 and over may not contribute to limitations, contributions are deductible
Individuals
(and their spouses) who receive compensation age 7012 and over may
Individuals
Individuals
contribute
No
Tax Treatment of Contributions
Subject
deduction permitted for amounts contributed
Contribution Limits
Individuals
may contribute up to the tax law limit.* depends on income level for individuals who are active participants in an employer-sponsored retirement plan
Individuals
may generally contribute up to the tax law limit.* to contribute phases out at income levels of $95,000 to $110,000 (individual taxpayer) and $150,000 to $160,000 (married taxpayers) tax law limit* applies to combined contributions to Traditional and Roth IRAs (but not including SEP or SIMPLE IRAs). and interest are not taxed when received by your IRA from other IRAs only
Deductibility
Ability
The
Earnings
Earnings
and interest are not taxed when received by your IRA
Earnings
Rollover/Conversions
Individual
may rollover amounts held in employer-sponsored retirement arrangements (401(k), SEP IRA, etc.) tax free to Traditional IRA may rollover amounts held in Traditional IRA to employer-sponsored qualified plan.
Rollovers Amounts
rolled over (or converted) from another Traditional IRA are subject to income tax in the year rolled over or converted held in Roth IRAs may not be rolled over into employersponsored qualified plans.
Individuals
Amounts
Withdrawals
Total
(principal + earnings) taxable as income in year withdrawn (except for any prior non-deductible contributions) withdrawals must begin after age 7012
Not
Minimum
taxable as long as the withdrawal is a qualified distribution generally, account has been open for 5 years, and the individual is age 5912 or above withdrawals not required after age 7012
Minimum
* The tax law limit is $4,000 for 2005-2007; and $5,000 for 2008 (with cost-of-living adjustments thereafter). For individuals age 50 or above, at the end of a year, additional contributions of $500 for 2005, and $1000 for 2006 and future years, are allowed. The limit is 100% of compensation, if less.
3
Is a Roth or a Traditional IRA Right For Me? We cannot act as your legal or tax adviser and so we cannot tell you which kind of IRA is right for you. The information contained in this Kit is intended to provide you with the basic information and material you will need if you decide whether a Traditional or Roth IRA is better for you, or if you want to convert an existing Traditional IRA to a Roth IRA. We suggest that you consult with your accountant, lawyer or other tax adviser, or with a qualified financial planner, to determine whether you should open a Traditional or Roth IRA or convert any or all of an existing Traditional IRA to a Roth IRA. Your tax adviser can also advise you as to the state tax consequences that may affect whether a Traditional or Roth IRA is right for you. Other Points to Note. The Disclosure Statement in this Kit provides you with the basic information that you should know about State Street Bank and Trust Company Traditional IRAs and Roth IRAs. The Disclosure Statement provides general information about the governing rules for these IRAs and their benefits and features. However, the State Street Bank and Trust Company Adoption Agreement and the Custodial Agreement, are the primary documents controlling the terms and conditions of your personal State Street Bank and Trust Company Traditional or Roth IRA, and these shall govern in the case of any difference with the Disclosure Statement. You or your when used throughout this Kit refer to the person for whom the State Street Bank and Trust Company Traditional or Roth IRA is established. A Roth IRA is either a State Street Bank and Trust Company Roth IRA or any Roth IRA established with any other financial institution. A Traditional IRA is any non-Roth IRA offered by State Street Bank and Trust Company or any other financial institution.
State Street Bank and Trust Company Universal Individual Retirement Account Disclosure Statement
Part One: Description of Traditional IRAs
SPECIAL NOTE Part One of the Disclosure Statement describes the rules applicable to Traditional IRAs as revised by the 2001 tax law, effective January 1, 2002. IRAs described in these pages are called Traditional IRAs to distinguish them from the Roth IRAs that first became available in 1998. Roth IRAs are described in Part Two of this Disclosure Statement. Contributions to a Roth IRA are not deductible (regardless of your AGI), but withdrawals that meet certain requirements are not subject to federal income tax, so that dividends and investment growth on amounts held in the Roth IRA can escape federal income tax. Please see Part Two of this Disclosure Statement if you are interested in learning more about Roth IRAs. Traditional IRAs described in this Disclosure Statement may be used as part of a simplified employee pension (SEP) plan maintained by your employer. Under a SEP your employer may make contributions to your Traditional IRA, and these contributions may exceed the normal limits on Traditional IRA contributions. This Disclosure Statement does not describe IRAs established in connection with a SIMPLE IRA program maintained by your employer. Employers provide special explanatory materials for accounts established as part of a SIMPLE IRA program. Traditional IRAs may be used in connection with a SIMPLE IRA program, but for the first two years of participation a special SIMPLE IRA (not a Traditional IRA) is required.
Your Traditional IRA

This Part One contains information about your Traditional Individual Retirement Custodial Account with State Street Bank and Trust Company as Custodian. A Traditional IRA gives you several tax benefits. Earnings on the assets held in your Traditional IRA are not subject to federal income tax until withdrawn by you. You may be able to deduct all or part of your Traditional IRA contribution on your federal income tax return. State income tax treatment of your Traditional IRA may differ from federal treatment; ask your state tax department or your personal tax adviser for details.
4
Be sure to read Part Three of this Disclosure Statement for important additional information, including information on how to revoke your Traditional IRA, investments and prohibited transactions, fees and expenses, and certain tax requirements.
IRA Contribution Limit

YEAR 2005-2007 2008 LIMIT $4,000 $5,000 $5,000 increased by cost-of-living adjustments (in $500 increments)
Eligibility
What are the eligibility requirements for a Traditional IRA?
You
2009 and future years
are eligible to establish and contribute to a Traditional IRA for a year if: received compensation (or earned income if you are self employed) during the year for personal services you rendered. If you received taxable alimony, this is treated like compensation for IRA purposes. did not reach age 7012 during the year. Individuals age 50 or over may make special catch up contributions to their Traditional IRAs. (See What are the Special Catch-Up Contribution Rules? below for details.) If you and your spouse have spousal Traditional IRAs, each spouse may contribute up to the IRA Contribution Limit to his or her IRA for a year as long as the combined compensation of both spouses for the year (as shown on your joint income tax return) is at least two times the IRA Contribution Limit. If the combined compensation of both spouses is less than two times the IRA Contribution Limit, the spouse with the higher amount of compensation may contribute up to that spouses compensation amount, or the IRA Contribution Limit, if less. The spouse with the lower compensation amount may contribute any amount up to that spouses compensation plus any excess of the other spouses compensation over the other spouses IRA contribution. However, the maximum contribution to either spouses Traditional IRA is the individual IRA Contribution Limit for the year. If you (or your spouse) establish a new Roth IRA and make contributions to both your Traditional IRA and a Roth IRA, the combined limit on contributions to both your (or your spouses) Traditional IRA and Roth IRA for a single calendar year is the IRA Contribution Limit. (Note: the Traditional IRA Contribution Limit is not reduced by employer contributions made on your behalf to either a SEP IRA or a SIMPLE IRA; salary reduction contributions by you are considered employer contributions for this purpose.) What are the Special Catch-Up Contribution Rules? Individuals who are age 50 and over by the end of any year may make special catch-up contributions to a Traditional IRA for that year. For 2005, the special catch-up contribution is $500 per year. From 2006 on, the special catch-up contribution will be $1,000 per year. If you are over 50 by the end of a year, your
5
You
You
Can I Contribute to a Traditional IRA for my Spouse? For each year before the year when your spouse attains age 7012, you can contribute to a separate Traditional IRA for your spouse, regardless of whether your spouse had any compensation or earned income in that year. This is called a spousal IRA. To make a contribution to a Traditional IRA for your spouse, you must file a joint tax return for the year with your spouse. For a spousal IRA, your spouse must set up a different Traditional IRA, separate from yours, to which you contribute.
Contributions
When Can I Make Contributions to a Traditional IRA? You may make a contribution to your existing Traditional IRA or establish a new Traditional IRA for a taxable year by the due date (not including any extensions) for your federal income tax return for the year. Usually this is April 15 of the following year. How Much Can I Contribute to my Traditional IRA? For each year when you are eligible (see above), you can contribute up to the lesser of your IRA Contribution Limit (see the following table) or 100% of your compensation (or earned income, if you are self-employed). However, under the tax laws, all or a portion of your contribution may not be deductible.
catch-up limit is added to your normal IRA Contribution Limit for that year. Congress intended these catch-up contributions specifically for older individuals who may have been absent from the workforce for a number of years and so may have lost out on the ability to contribute to an IRA. However, the catch-up contribution is available to anyone age 50 or over, whether or not they have consistently contributed to a Traditional IRA over the years. Note that the rules for determining whether a contribution is tax-deductible (see below) also apply to special catch-up contributions. How Do I Know if my Contribution is Tax Deductible? The deductibility of your contribution depends upon whether you are an active participant in any employersponsored retirement plan. If you are not an active participant, the entire contribution to your Traditional IRA is deductible. If you are an active participant in an employersponsored plan, your Traditional IRA contribution may still be completely or partly deductible on your tax return. This depends on the amount of your income (see below). Similarly, the deductibility of a contribution to a Traditional IRA for your spouse depends upon whether your spouse is an active participant in any employersponsored retirement plan. If your spouse is not an active participant, the contribution to your spouses Traditional IRA will be deductible. If your spouse is an active participant, the Traditional IRA contribution will be completely, partly or not deductible depending upon your combined income. An exception to the preceding rules applies to highincome married taxpayers, where one spouse is an active participant in an employer-sponsored retirement plan and the other spouse is not. A contribution to the non-active participant spouses Traditional IRA will be only partly deductible starting at an adjusted gross income level on the joint tax return of $150,000, and the deductibility will be phased out as described below over the next $10,000 so that there will be no deduction at all with an adjusted gross income level of $160,000 or higher.
How do I Determine My or My Spouses Active Participant status? Your (or your spouses) Form W-2 should indicate if you (or your spouse) were an active participant in an employer-sponsored retirement plan for a year. If you have a question, you should ask your employer or the plan administrator. In addition, regardless of income level, your spouses active participant status will not affect the deductibility of your contributions to your Traditional IRA if you and your spouse file separate tax returns for the taxable year and you lived apart at all times during the taxable year. What are the Deduction Restrictions for Active Participants? If you (or your spouse) are an active participant in an employer plan during a year, the contribution to your Traditional IRA (or your spouses Traditional IRA) may be completely, partly or not deductible depending upon your filing status and your amount of adjusted gross income (AGI). If AGI is any amount up to the lower limit, the contribution is deductible. If your AGI is at least the lower limit but less than the upper limit, the contribution is partly deductible. If your AGI is equal to or exceeds the upper limit, the contribution is not deductible. The Lower Limit and the Upper Limit are adjusted each year. The Lower Limits and Upper Limits for each year are set out on the table below. Use the correct Lower Limit and Upper Limit from the table to determine deductibility in any particular year. (Note: if you are married but filing separate returns, your Lower Limit is always zero and your Upper Limit is always $10,000.)
Table of Lower And Upper Limits

Year Single
Lower Limit Upper Limit
Married Filing Jointly

Lower Limit Upper Limit
2005 2006 2007 and later
$50,000 $50,000 $50,000
$60,000 $60,000 $60,000
$70,000 $75,000 $80,000
$80,000 $85,000 $100,000
How do I Calculate my Deduction if I Fall in the Partly Deductible Range? If your AGI falls in the partly deductible range, you must calculate the portion of your contribution that is deductible. To do this, multiply the IRA Contribution Limit for the year by a fraction. The numerator is the amount by which your AGI exceeds the lower limit (for 2005: $50,000 if single, or $70,000 if married filing jointly). The denominator is $10,000 (note that the denominator for married joint filers is $20,000 starting in 2007). Round this down to the nearest $10 then subtract from the IRA Contribution Limit. When you fall in the partly deductible range, your contribution is deductible up to the greater of the amount calculated or $200. For example, assume that in 2005 you make a $4,000 contribution (which is the IRA Contribution Limit if you are not age 50) to your Traditional IRA, a year in which you are an active participant in your employers retirement plan. Also assume that your AGI is $76,555 and you are married, filing jointly. You would calculate the deductible portion of your contribution this way: 1. The amount by which your AGI exceeds the lower limit of the partly deductible range: ($76,555-$70,000)= $6,555 2. Divide this by $10,000: $6,555 = 0.6555 $10,000
How Do I Determine My AGI? AGI is your gross income minus those deductions which are available to all taxpayers even if they dont itemize (not including the deduction for your IRA contribution and certain other items). Instructions to calculate your AGI are provided with your income tax Form 1040 or 1040A. What Happens if I Contribute more than Allowed to my Traditional IRA? The maximum contribution you can make to a Traditional IRA generally is the IRA Contribution Limit (or the IRA Contribution Limit plus a catch-up contribution if you are 50 or over) or 100% of compensation or earned income, whichever is less. Any amount contributed to the IRA above the maximum is considered an excess contribution. The excess is calculated using your contribution limit, not the deductible limit. An excess contribution is subject to excise tax of 6% for each year it remains in the IRA. How can I Correct an Excess Contribution? Excess contributions may be corrected without paying a 6% penalty. To do so, you must withdraw the excess and any earnings on the excess before the due date (including extensions) for filing your federal income tax return for the year for which you made the excess contribution. The IRS automatically grants to taxpayers who file their taxes by the April 15th deadline a sixmonth extension of time (until October 15) to remove an excess contribution for the tax year covered by that filing. A deduction should not be taken for any excess contribution. Earnings on the amount withdrawn must also be withdrawn. (Refer to IRS Publication 590 to see how the amount you must withdraw to correct an excess contribution may be adjusted to reflect gain or loss.) Earnings that are a gain must be included in your income for the tax year for which the contribution was made and may be subject to a 10% premature withdrawal tax if you have not reached age 5912. What Happens if I Dont Correct the Excess Contribution by the Tax Return Due Date? Any excess contribution withdrawn after the tax return due date (including any extensions) for the year for which the contribution was made will be subject to the 6% excise tax. The IRS automatically grants to taxpayers who file their taxes by the April 15th deadline a sixmonth extension of time (until October 15) to recharacterize a contribution or remove an excess contribution for the tax year covered by that filing. There will be an additional 6% excise tax for each year the excess
3. Multiply this by the IRA Contribution Limit: 0.6555x $4,000 = $2,622 4. Round this down to the nearest $10 = $2,620. 5. Subtract this from the IRA Contribution Limit: $4,000- $2,620 = $1,380. 6. Your deductible contribution is the greater of this amount or $200. In this case, you may deduct $1,380 on your tax return. Even though part or all of your contribution is not deductible, you may still contribute to your Traditional IRA (and your spouse may contribute to your spouses Traditional IRA) up to the IRA Contribution Limit for the year. When you file your tax return for the year, you must designate the amount of non-deductible contributions to your Traditional IRA for the year. See IRS Form 8606.
remains in your account. Any such excess contributions must be reported to the IRS (see What Tax Information Must I Report to the IRS? in Part Three of this Disclosure Statement. Under limited circumstances, you may correct an excess contribution after the deadline for the tax year by withdrawing the excess contribution (leaving the earnings in the account). This withdrawal will not be includible in income nor will it be subject to any premature withdrawal penalty if (1) your contributions to all Traditional IRAs do not exceed the IRA Contribution Limit (plus the catch-up contribution, if eligible) and (2) you did not take a deduction for the excess amount (or you file an amended return (Form 1040X) which removes the excess deduction). How are Excess Contributions Treated if None of the Preceding Rules Apply? Unless an excess contribution qualifies for the special treatment outlined above, the excess contribution and any earnings on it withdrawn after tax filing time will be includible in taxable income and may be subject to a 10% premature withdrawal penalty. No deduction will be allowed for the excess contribution for the year in which it is made. Excess contributions may be corrected in a subsequent year to the extent that you contribute less than your maximum contribution amount. As the prior excess contribution is reduced or eliminated, the 6% excise tax will become correspondingly reduced or eliminated for subsequent tax years. Also, you may be able to take an income tax deduction for the amount of excess that was reduced or eliminated, depending on whether you would be able to take a deduction if you had instead contributed the same amount.
Company as custodian to a Roth IRA, you may give us directions to convert; we will convert your existing account when the paperwork to establish your new Roth IRA is complete. You are eligible to convert a Traditional IRA to a Roth IRA if, for the year of the conversion, your AGI is $100,000 or less. There is a special rule for applying this limit: amounts included in your AGI as a result of converting to a Roth IRA, or as a result of receiving amounts under the age 7012 required minimum distribution (RMD) rules (see page 25) during the year of the conversion are not counted toward the $100,000 limit. The same $100,000 limit applies to married and single taxpayers, and the limit is not indexed to cost-of-living increases. Married taxpayers are eligible to convert a Traditional IRA to a Roth IRA only if they file a joint income tax return; married taxpayers filing separately are not eligible to convert. However, if you file separately and have lived apart from your spouse for the entire taxable year, you are considered not married, and the fact that you are filing separately will not prevent you from converting. If you accomplish a conversion by withdrawing from your Traditional IRA and rolling over to a Roth IRA within 60 days, the conversion eligibility requirements in the preceding paragraph apply to the year of the withdrawal (even though the rollover contribution occurs in the following calendar year). Caution: If you have reached age 7012 by the year when you convert another non-Roth IRA you own to a Roth IRA, be careful not to convert any amount that would be a required minimum distribution under the applicable age 7012 rules. Under current IRS regulations, required minimum distributions may not be converted. What Happens if I change my Mind about Converting?
Conversion of Traditional IRA

Can I convert an Existing Traditional IRA into a Roth IRA? Yes, you can convert an existing Traditional IRA into a Roth IRA if you meet the eligibility requirements described below. Conversion may be accomplished in any of three ways: First, you can withdraw the amount you want to convert from your Traditional IRA and roll it over to a Roth IRA within 60 days. Second, you can establish a Roth IRA and then direct the custodian of your Traditional IRA to transfer the amount in your Traditional IRA you wish to convert to the new Roth IRA. Third, if you want to convert an existing Traditional IRA with State Street Bank and Trust
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You can undo a conversion by notifying the custodian or trustee of each IRA (the custodian of the first IRA the Traditional IRA you convertedand the custodian of the second IRAthe Roth IRA that received the conversion). The amount you want to unconvert by transferring back to the first custodian is treated for income tax purposes as if it had never been converted (however, the transfers involved in the original conversion and in the transfer back are reportable to the IRS by the Custodian). This is called recharacterization. If you want to recharacterize a converted amount, you must do so before the due date (including any extensions you receive) for your federal income tax return for the year of the conversion. Any net income
(whether gain or loss) on the amount recharacterized must accompany it back to the Traditional IRA. You can recharacterize for any reason. For example, you would recharacterize if you converted early in a year and then turned out to be ineligible because your income was over the $100,000 limit. Also, if you convert and then recharacterize during a year, you can then convert to a Roth IRA a second time if you wish, but you must wait until the later of the next tax year after your original conversion or until 30 days after your recharacterization. You are limited to one conversion of an account per year. If you convert an amount more than once in a year, any additional conversion transactions will be considered invalid and subject to rules for excess contributions. NOTE: Conversions from a Traditional IRA to a Roth IRA that failed because you did not meet the eligibility requirements (more than $100,000 of AGI or married but not filing jointly) must be recharacterized before your tax filing deadline (with extensions) in order to avoid possible taxes and penalties. The IRS automatically grants to taxpayers who file their taxes by the April 15th deadline a six-month extension of time (until October 15) to recharacterize for the tax year covered by that filing. (Caution: As you can see, these rules are very complex; be sure to consult a competent tax professional for assistance. Always check with your tax adviser for the latest developments.) Under current IRS rules, recharacterization is not restricted to amounts you converted from a Traditional IRA to a Roth IRA. You can, for example, make an annual contribution to a Traditional IRA and recharacterize it as a contribution to a Roth IRA, or vice versa. You must make the election to recharacterize by the due date for your tax return for the year (with extensions, including the automatic 6-month extension to October 15 the IRS grants to on-time tax filers) and follow the procedures summarized above.
payments
over the lifetime or life expectancy of the participant (or participant and a designated beneficiary), payments for a period of 10 years or more,
installment required
distributions (generally the rules require distributions starting at age 7012 or for certain employees starting at retirement, if later), and withdrawals from a 401(k) plan or a 403(b) arrangement.
hardship
If you are eligible to receive a distribution from a tax qualified retirement plan as a result of, for example, termination of employment, plan discontinuance, or retirement, all or part of the distribution may be transferred directly into your Traditional IRA. This is a called a direct rollover. Or, you may receive the distribution and make rollover to your Traditional IRA within 60 days. By making a direct rollover or a regular rollover, you can defer income taxes on the amount rolled over until you subsequently make withdrawals from your Traditional IRA. If you are over age 7012 and are required to take minimum distributions under the tax laws, you may not roll over any amount required to be distributed to you under the minimum distribution rules. You also may not roll over a hardship distribution from a 401(k) or 403 (b) plan. Also, if you are receiving periodic payments over your or your and your designated beneficiarys life expectancy or for a period of at least 10 years, you may not roll over these payments. A rollover to a Traditional IRA must be completed within 60 days after the distribution from the employer retirement plan to be valid. NOTE: A qualified plan administrator or 403(b) sponsor MUST WITHHOLD 20% OF YOUR DISTRIBUTION for federal income taxes UNLESS you elect a direct rollover. Your plan or 403(b) sponsor is required to provide you with information about direct and regular rollovers and withholding taxes before you receive your distribution and must comply with your directions to make a direct rollover. The rules governing rollovers are complicated. Be sure to consult your tax adviser or the IRS if you have a question about rollovers. Once I Have Rolled Over a Plan Distribution into a Traditional IRA, Can I Subsequently Roll Over into another Employers Plan? Yes. Part or all of an eligible distribution received from a qualified plan may be withdrawn from the Traditional
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Transfers/Rollovers
Can I Transfer or Roll Over a Distribution I Receive from my Employers Retirement Plan into a Traditional IRA? Most distributions from employer plans or 403(b) arrangements (for employees of tax-exempt employers) or eligible 457 plans (for employees of certain governmental plans employers) are eligible for rollover to a Traditional IRA. The main exceptions are
IRA and rolled over to another qualified plan, within 60 days of the date of withdrawal. Can any Amount Held in My Traditional IRA be Rolled Over into an Employer Plan? Yes, generally speaking, withdrawals from your traditional IRA may be rolled over to an employers qualified plan or 403(b) arrangement. NOTE: Before 2002, the rules governing such rollovers were more restrictive. A Traditional IRA must have held no assets other than those which were previously distributed to you from a qualified plan. Specifically, under the old rules a Traditional IRA could not contain any annual contributions by you (or your spouse). Starting in 2002, assets held in a Traditional IRA, whether originally rolled over from an employer plan or attributable to annual contributions, may be rolled over into an employers plan. Such a rollover must be completed within 60 days after the withdrawal from your IRA. Thus, except in some very limited cases, there is no reason to establish a conduit IRA to keep track of amounts distributed from an employer plan. Note that the employer plan may or may not accept rollovers, according to its provisions. Only amounts that would, absent the rollover, otherwise be taxable may be rolled over to a qualified plan. In general, this means that after-tax contributions to a Traditional IRA may not be rolled over to an employer plan. However, to determine the amount an individual may roll over to plan, all Traditional IRAs are taken into account. If the amount being rolled over from one Traditional IRA is less than or equal to the otherwise taxable amount held in all of the individuals Traditional IRAs, then the total amount can be rolled over into an employer plan, even if some of the funds in the Traditional IRA being rolled over are after-tax contributions. The following example illustrates this rule: Assume Gail has two IRAs: IRA(1) with a $100,000 balance, all of which is attributable to deductible contributions and earnings and thus would be taxable if distributed directly to Gail; and IRA(2), with a balance of $150,000, $50,000 of which consists of after-tax contributions (and thus would be non-taxable if distributed directly to Gail) and $100,000 of which consists of deductible contributions and earnings. Between the two IRAs, $200,000 would be taxable if distributed to Gail and $50,000 would not be taxable because it was contributed on an after-tax basis. Gail may rollover the full $150,000 from IRA(2), even
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though $50,000 is non-taxable, because the total amount of taxable funds in all of her IRAs exceeds $150,000. Can I Make a Rollover from my Traditional IRA to another Traditional IRA? You may make a rollover from one Traditional IRA to another Traditional IRA you already have or to one you establish to receive the rollover. Such a rollover must be completed within 60 days after the withdrawal from your first Traditional IRA. In limited circumstances, when an IRA rollover could not be completed within 60 days due to circumstances beyond your control or not your fault, you can apply to the IRS for approval of a rollover after 60 days. However, IRS approval may not be needed if the financial institution receiving the rollover did not deposit the rollover amount in an IRA. Consult your tax adviser for more information. Similar exceptions to the 60-day requirement for a valid rollover apply to plan-to-IRA and IRA-to-plan rollovers (see above). After making a rollover from one Traditional IRA, you must wait a full year (365 days) before you can make another such rollover from the same Traditional IRA. In addition, after Traditional IRA assets are rolled over from one IRA to another, a second rollover of the same assets cannot be made for a full year. (However, you can instruct a Traditional IRA custodian to transfer amounts directly to another Traditional IRA custodian; such a direct transfer does not count as a rollover.) May a Rollover or Transfer include After-Tax or Nondeductible Contributions? Yes. Before January 1, 2002, after-tax contributions could not be rolled over from a qualified employer plan or a 403(b) arrangement to a Traditional IRA. Now such rollovers or transfers, as well as rollovers or transfers of nondeductible contributions from another Traditional IRA, may include after-tax or nondeductible contributions. [If a rollover or transfer includes after-tax or nondeductible amounts, such amounts may be held under a separate account number by the recordkeeping system. In this event, if you want to make an investment change, remember that you may have to deal with multiple accounts.] How Do Rollovers Affect my Contribution or Deduction Limits? Rollover contributions, if properly made, do not count toward the maximum contribution. Also, rollovers are
not deductible and they do not affect your deduction limits as described above.
Withdrawals
When can I make withdrawals from my Traditional IRA? You may withdraw from your Traditional IRA at any time. However, withdrawals before age 5912 may be subject to a 10% penalty tax in addition to regular income taxes (see below). When must I start making withdrawals? If you have not withdrawn the total amount held in your Traditional IRA by the April 1 following the year in which you reach 7012 , you must make minimum withdrawals in order to avoid penalty taxes. The rule allowing certain employees to postpone distributions from an employer qualified plan until actual retirement (even if this is after age 7012 ) does not apply to Traditional IRAs. Recent IRS rules make it easier for you to calculate your required minimum distribution. Under these rules a uniform table is used to determine required minimum distributions. The distribution period under the uniform table is the equivalent of the joint life expectancy of you and a beneficiary 10 years younger than you. (An IRS joint life expectancy table may be used if your spouse is the sole beneficiary and is more than 10 years younger than you.) The minimum withdrawal amount is determined by dividing the balance in your Traditional IRA (or IRAs) by your life expectancy as shown on the uniform table. You are not required to recalculate because recalculation is built right in to the uniform table. Although the required minimum distribution rules have been simplified in some ways, they are still, in general, complex. Consult your tax adviser for assistance. The penalty tax is 50% of the difference between the minimum withdrawal amount and your actual withdrawals during a year. The IRS may waive or reduce the penalty tax if you can show that your failure to make the required minimum withdrawals was due to reasonable cause and you are taking reasonable steps to remedy the problem. How Are Withdrawals From My Traditional IRA Taxed? Amounts withdrawn by you are includible in your gross income in the taxable year that you receive them, and
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are taxable as ordinary income. Amounts withdrawn may be subject to income tax withholding by the custodian unless you elect not to have withholding. See Part Three below for additional information on withholding. Lump sum withdrawals from a Traditional IRA are not eligible for averaging treatment currently available to certain lump sum distributions from qualified employer retirement plans. Since the purpose of a Traditional IRA is to accumulate funds for retirement, your receipt or use of any portion of your Traditional IRA before you attain age 5912 generally will be considered as an early withdrawal and subject to a 10% penalty tax. The 10% penalty tax for early withdrawal will not apply if:
The
distribution was a result of your death or disability. purpose of the withdrawal is to pay certain higher education expenses for yourself or your spouse, child, or grandchild. Qualifying expenses include tuition, fees, books, supplies and equipment required for attendance at a post-secondary educational institution. Room and board expenses may qualify if the student is attending at least half-time. withdrawal is used to pay eligible first-time homebuyer expenses. These are the costs of purchasing, building or rebuilding a principal residence (including customary settlement, financing or closing costs). The purchaser may be you, your spouse, or a child, grandchild, parent or grandparent of you or your spouse. An individual is considered a first-time homebuyer if the individual did not have (or, if married, neither spouse had) an ownership interest in a principal residence during the two-year period immediately preceding the acquisition in question. The withdrawal must be used for eligible expenses within 120 days after the withdrawal. (If there is an unexpected delay, or cancellation of the home acquisition, a withdrawal may be redeposited as a rollover). is a lifetime limit on eligible first-time homebuyer expenses of $10,000 per individual. distribution is one of a scheduled series of substantially equal periodic payments for your life or life expectancy (or the joint lives or life expectancies of you and your beneficiary). there is an adjustment to the scheduled series of payments, the 10% penalty tax may apply. The 10% penalty will not apply if you make no change in the series of payments until the end of five years or until
The
The
There
The
If
you reach age 5912, whichever is later. If you make a change before then, the penalty will apply. For example, if you begin receiving payments at age 50 under a withdrawal program providing for substantially equal payments over your life expectancy, and at age 58 you elect to receive the remaining amount in your Traditional IRA in a lump-sum, the 10% penalty tax will apply to the lump sum and to the amounts previously paid to you before age 5912.
The
For example, assume that you made the following Traditional IRA contributions: Year One Two Three Four $5,000 Deductible $2,000 $2,000 $1,000 $1,000 $1,000 $2,000 Nondeductible
distribution does not exceed the amount of your deductible medical expenses for the year (generally speaking, medical expenses paid during a year are deductible if they are greater than 712% of your adjusted gross income for that year). distribution does not exceed the amount you paid for health insurance coverage for yourself, your spouse and dependents. This exception applies only if you have been unemployed and received federal or state unemployment compensation payments for at least 12 weeks; this exception applies to distributions during the year in which you received the unemployment compensation and during the following year, but not to any distributions received after you have been reemployed for at least 60 days. distribution is made pursuant to an IRS levy to pay overdue taxes.
The
In addition assume that your Traditional IRA has total investment earnings through Year Four of $1,000. During Year Four you withdraw $500. Your total account balance as of the end of Year Four is $7,500 as shown below. Deductible Contributions Nondeductible Contributions Earnings On IRA Less Year Four Withdrawal Total Account Balance at the end of Year Four $5,000 $2,000 $1,000 $ 500 $7,500
How are Nondeductible Contributions Taxed When They are Withdrawn? A withdrawal of nondeductible contributions (not including earnings) will be tax-free. However, if you made both deductible and nondeductible contributions to your Traditional IRA, then each distribution will be treated as partly a return of your nondeductible contributions (not taxable) and partly a distribution of deductible contributions and earnings (taxable). The nontaxable amount is the portion of the amount withdrawn which bears the same ratio as your total nondeductible Traditional IRA contributions bear to the total balance of all your Traditional IRAs (including rollover IRAs and SEPs, but not including Roth IRAs).
To determine the nontaxable portion of your Year Four withdrawal, the total Year Four withdrawal ($500) must be multiplied by a fraction. The numerator of the fraction is the total of all nondeductible contributions remaining in the account before the Year Four withdrawal ($2,000). The denominator is the total account balance as of the end of Year Four ($7,500) plus the Year Four withdrawal ($500) or $8,000. The calculation is: Total Remaining Nondeductible Contributions Total Account Balance $2,000 x $500 = $125 $8,000
Thus, $125 of the $500 withdrawal in Year Four will not be included in your taxable income. The remaining $375 will be taxable for Year Four. In addition, for future calculations the remaining nondeductible contribution total will be $2,000 minus $125, or $1,875. A loss in your Traditional IRA investment may be deductible. You should consult your tax adviser for further details on the appropriate calculation for this deduction if applicable. See TAX MATTERS (below) for more information.
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Important: Please see Part Three below which contains important information applicable to all State Street Bank and Trust Company IRAs.
information on how to revoke your Roth IRA, investments and prohibited transactions, fees and expenses and certain tax requirements.
Part Two: Description of Roth IRAs

SPECIAL NOTE
Part Two of the Disclosure Statement describes the rules generally applicable to Roth IRAs. Roth IRAs were first made available in 1998. Contributions to a Roth IRA are not tax-deductible, but withdrawals that meet certain requirements are not subject to federal income taxes. This makes the dividends on and growth of the investments held in your Roth IRA tax-free for federal income tax purposes if the requirements are met. Traditional IRAs, which have existed since 1975, are still available. Contributions to a Traditional IRA may be tax-deductible. Earnings and gains on amounts while held in a Traditional IRA are tax-deferred. Withdrawals are subject to federal income tax (except for prior aftertax contributions which may be recovered without additional federal income tax). This Part Two does not describe Traditional IRAs. If you wish to review information about Traditional IRAs, please see Part One of this Disclosure Statement. If you want information about the pre-2002 rules for Roth IRAs, call the 800 number or write the address listed at the end of this Disclosure Statement. This Disclosure Statement also does not describe IRAs established in connection with a SIMPLE IRA program or a Simplified Employee Pension (SEP) plan maintained by your employer. Roth IRAs may not be used in connection with a SIMPLE IRA program or a SEP plan.
Eligibility
What are the eligibility requirements for a Roth IRA? You are eligible to establish and contribute to a Roth IRA for a year if you received compensation (or earned income if you are self employed) during the year for personal services you rendered. If you received taxable alimony, this is treated like compensation for Roth IRA purposes. In contrast to a Traditional IRA, with a Roth IRA you may continue making contributions after you reach age 7012. Can I Contribute to Roth IRA for my Spouse? If you meet the eligibility requirements you can not only contribute to your own Roth IRA, but also to a separate Roth IRA for your spouse out of your compensation or earned income, regardless of whether your spouse had any compensation or earned income in that year. This is called a spousal Roth IRA. To make a contribution to a Roth IRA for your spouse, you must file a joint tax return for the year with your spouse. For a spousal Roth IRA, your spouse must set up a different Roth IRA, separate from yours, to which you contribute. Of course, if your spouse has compensation or earned income, your spouse can establish his or her own Roth IRA and make contributions to it in accordance with the rules and limits described in this Part Two of the Disclosure Statement.
Contributions
When Can I Make Contributions to a Roth IRA? You may make a contribution to your Roth IRA or establish a new Roth IRA for a taxable year by the due date (not including any extensions) for your federal income tax return for the year. Usually this is April 15 of the following year. For example, you will have until April 15, 2006 to establish and make a contribution to a Roth IRA for 2005. How Much Can I Contribute to my Roth IRA? For each year when you are eligible (see above), you can contribute up to the lesser of the IRA Contribution
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Your Roth IRA

Your Roth IRA gives you several tax benefits. While contributions to a Roth IRA are not deductible, dividends on and growth of the assets held in your Roth IRA are not subject to federal income tax. Withdrawals by you from your Roth IRA are excluded from your income for federal income tax purposes if certain requirements (described below) are met. State income tax treatment of your Roth IRA may differ from federal treatment; ask your state tax department or your personal tax adviser for details. Be sure to read Part Three of this Disclosure Statement for important additional information, including
Limit (see the following table) or 100% of your compensation (or earned income, if you are self-employed).
What are the Special Catch-Up Contribution Rules? Individuals who are age 50 and over by the end of any year may make special catch-up contributions to a Roth IRA for that year. Through the end of 2005, the special catch-up contribution is $500 per year. From 2006 on the special catch-up contribution will be $1,000 per year. If you are over 50 by the end of a year, your catch-up limit is added to your normal IRA Contribution Limit for that year. Congress intended these catch-up contributions specifically for older individuals who may have been absent from the workforce for a number of years and so may have lost out on the ability to contribute to an IRA. However, the catch-up contribution is available to anyone age 50 or over, whether or not they have previously contributed to a Roth IRA. Note that the rules on contribution limits for Roth IRAs (see below) apply to special catch-up contributions. Are Contributions to a Roth IRA Tax Deductible? Contributions to a Roth IRA are not deductible. This is a major difference between Roth IRAs and Traditional IRAs. Contributions to a Traditional IRA may be deductible on your federal income tax return depending on whether or not you are an active participant in an employer-sponsored plan and on your income level. Are the Earnings on my Roth IRA Funds Taxed? Any dividends on or growth of investments held in your Roth IRA are generally exempt from federal income taxes and will not be taxed until withdrawn by you, unless the tax exempt status of your Roth IRA is revoked. If the withdrawal qualifies as a tax-free withdrawal (see below), amounts reflecting earnings or growth of assets in your Roth IRA will not be subject to federal income tax. Which is Better, a Roth IRA or a Traditional IRA? This will depend upon your individual situation. A Roth IRA may be better if you are an active participant in an employer-sponsored plan and your adjusted gross income is too high to make a deductible IRA contribution (but not too high to make a Roth IRA contribution). Also, the benefits of a Roth IRA vs. a Traditional IRA may depend upon a number of other factors including: your current income tax bracket vs. your expected income tax bracket when you make withdrawals from your IRA, whether you expect to be able to make nontaxable withdrawals from your Roth
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IRA Contribution Limit

YEAR 2005-2007 2008 2009 and future years LIMIT $4,000 $5,000 $5,000 increased by cost-of-living adjustments (in $500 increments)
Individuals age 50 and over may make special catchup contributions to their Roth IRAs. (See What are the Special Catch-Up Contribution Rules? below for details.) Your Roth IRA limit is reduced by any contributions for the same year to a Traditional IRA. For example, assuming you have at least $4,000 in compensation or earned income, if you contribute $500 to your Traditional IRA for 2005, your maximum Roth IRA contribution for that year will be $3,500. (Note: the Roth IRA contribution limit is not reduced by contributions made to either a SEP IRA or a SIMPLE IRA; salary reduction contributions by you are considered employer contributions for this purpose.) If you and your spouse have spousal Roth IRAs, each spouse may contribute up to the IRA Contribution Limit to his or her Roth IRA for a year as long as the combined compensation of both spouses for the year (as shown on your joint income tax return) is at least two times the IRA Contribution Limit. If the combined compensation of both spouses is less than two times the IRA Contribution Limit, the spouse with the higher amount of compensation may contribute up to that spouses compensation amount, or the IRA Contribution Limit if less. The spouse with the lower compensation amount may contribute any amount up to that spouses compensation plus any excess of the other spouses compensation over the other spouses Roth IRA contribution. However, the maximum contribution to either spouses Roth IRA is the IRA Contribution Limit for the year. As noted above, the Roth IRA limits are reduced by any contributions for the same calendar year to a Traditional IRA maintained by you or your spouse. For taxpayers with high income levels, the contribution limits may be reduced (see below).
IRA (see below), how long you expect to leave your contributions in the IRA, how much you expect the IRA to earn in the meantime, and possible future tax law changes. Consult a qualified tax or financial adviser for assistance on this question. Are there Any Restrictions on Contributions to my Roth IRA? Taxpayers with very high income levels may not be able to contribute to a Roth IRA at all, or their contribution may be limited to an amount less than the IRA Contribution Limit. This depends upon your filing status and the amount of your adjusted gross income (AGI). The following table shows how the contribution limits are restricted:
Contribution Limit is the greater of the amount calculated or $200. For example, assume that your AGI for the year is $157,555 and you are married, filing jointly. You would calculate your Roth IRA Contribution Limit this way: 1. The amount by which your AGI exceeds the lower limit of the reduced contribution range: ($157,555-$150,000) = $7,555 2. Divide this by $10,000: $7,000 $10,000 = 0.7555
3. Multiply this by the Roth IRA Contribution for the year- for example, $4,000 (for2005-2007) (or your compensation for the year, if less): 0.7555 x $4,000 = $3,022 4. Round this down to the nearest $10 and subtract this from your $4,000 limit: ($4,000 - $3,020) = $980 5. Your contribution limit is the greater of this amount or $200. Remember, your Roth IRA Contribution Limit is reduced by any contributions for the same year to a Traditional IRA. If you fall in the reduced contribution range, the reduction formula applies to the Roth IRA contribution limit left after subtracting your contribution for the year to a Traditional IRA. (If you are 50 or older at the end of a year, the reduction formula described above applies to your increased annual IRA Contribution Limit.) How Do I Determine My AGI? AGI is your gross income minus those deductions which are available to all taxpayers even if they dont itemize. Instructions to calculate your AGI are provided with your income tax Form 1040 or 1040A. There are two three additional rules when calculating AGI for purposes of Roth IRA contribution limits. First, if you are making a deductible contribution for the year to a Traditional IRA, your AGI is not reduced by the amount of the deduction. Second, if you are converting a Traditional IRA to a Roth IRA in a year (see below), the amount includible in your income as a result of the conversion is not considered AGI when computing your Roth IRA contribution limit for the year. Third, amounts you receive during the year under the age 7012 required minimum distribution (RMD) rules are not considered part of your AGI for the year.
Roth IRA Contribution Limits

If You Are Single Taxpayer If You Are Married Filing Jointly Then You May Make
Up to $95,000 More than $95,000 but less than $110,000
Up to $150,000 More than $150,000 but less than $160,000
Full IRA Contribution Limit Reduced IRA Contribution Limit (see explanation below) Zero (No Contribution)
$110,000 and up
$160,000 and up
Adjusted Gross Income (AGI) Level
Note: If you are a married taxpayer filing separately, your maximum Roth IRA Contribution Limit phases out over the first $10,000 of adjusted gross income. If your AGI is $10,000 or more you may not contribute to a Roth IRA for the year. How do I Calculate my Limit if I Fall in the Reduced Contribution Range? If your AGI falls in the reduced contribution range, you must calculate your contribution limit. To do this, multiply your normal IRA Contribution Limit (or your compensation if less) by a fraction. The numerator is the amount by which your AGI exceeds the lower limit of the reduced contribution range ($95,000 if single, or $150,000 if married filing jointly). The denominator is $15,000 (single taxpayers) or $10,000 (married filing jointly). Round this down to the nearest $10 then subtract from your normal limit. If you have AGI in the reduced contribution range, your Roth IRA
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What Happens if I Contribute more than Allowed to my Roth IRA? The maximum contribution you can make to a Roth IRA generally is the IRA Contribution Limit (plus the amount of any catch-up contribution, if you are eligible) or 100% of compensation or earned income, whichever is less. As noted above, your maximum is reduced by the amount of any contribution to a Traditional IRA for the same year and may be further reduced as described above if you have high AGI. Any amount contributed to the Roth IRA above the maximum is considered an excess contribution. An excess contribution is subject to excise tax of 6% for each year it remains in the Roth IRA. How can I Correct an Excess Contribution? Excess contributions may be corrected without paying a 6% penalty. To do so, you must withdraw the excess and any earnings on the excess before the due date (including extensions) for filing your federal income tax return for the year for which you made the excess contribution. The IRS automatically grants to taxpayers who file their taxes by the April 15th deadline a sixmonth extension of time (until October 15) to remove an excess contribution for the tax year covered by that filing. A deduction should not be taken for any excess contribution. Earnings on the amount withdrawn must also be withdrawn. (Refer to IRS Publication 590 to see how the amount you must withdraw to correct an excess contribution may be adjusted to reflect earnings as a gain or loss.) Earnings that are a gain must be included in your income for the tax year for which the contribution was made and may be subject to a 10% premature withdrawal tax if you have not reached age 5912 (unless an exception to the 10% penalty tax applies). What Happens if I Dont Correct the Excess Contribution by the Tax Return Due Date? Any excess contribution not withdrawn by the tax return due date (including extensions) for the year for which the contribution was made will be subject to the 6% excise tax. There will be an additional 6% excise tax for each subsequent year the excess remains in your account. You may reduce the excess contributions by making a withdrawal equal to the excess. Earnings need not be withdrawn. To the extent that no earnings are withdrawn, the withdrawal will not be subject to income taxes or possible penalties for premature withdrawals before age 5912. Excess contributions
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may also be corrected in a subsequent year to the extent that you contribute less than your Roth IRA Contribution Limit for the subsequent year. As the prior excess contribution is reduced or eliminated, the 6% excise tax will become correspondingly reduced or eliminated for subsequent tax years.
Conversion of Existing Traditional IRA

Can I convert an Existing Traditional IRA into a Roth IRA? Yes, you can convert an existing Traditional IRA into a Roth IRA if you meet the eligibility requirements described below. Conversion may be accomplished in any of three ways: First, you can withdraw the amount you want to convert from your Traditional IRA and roll it over to a Roth IRA within 60 days. Second, you can establish a Roth IRA and then direct the custodian of your Traditional IRA to transfer the amount in your Traditional IRA you wish to convert to the new Roth IRA. Third, if you want to convert an existing Traditional IRA with State Street Bank and Trust Company as custodian to a Roth IRA, you may give us directions to convert; we will convert your existing account when the paperwork to establish your new Roth IRA is complete. You are eligible to convert a Traditional IRA to a Roth IRA if, for the year of the conversion, your AGI is $100,000 or less. There is a special rule for applying this limit: amounts included in your AGI as a result of converting to a Roth IRA, or as a result of receiving amounts under the age 7012 required minimum distribution (RMD) rules (see page 25) during the year of the conversion are not counted toward the $100,000 limit. The same $100,000 limit applies to married and single taxpayers, and the limit is not indexed to cost-ofliving increases. Married taxpayers are eligible to convert a Traditional IRA to a Roth IRA only if they file a joint income tax return; married taxpayers filing separately are not eligible to convert. However, if you file separately and have lived apart from your spouse for the entire taxable year, you are considered not married, and the fact that you are filing separately will not prevent you from converting. If you accomplish a conversion by withdrawing from your Traditional IRA and rolling over to a Roth IRA within 60 days, the conversion eligibility requirements in the preceding sentence apply to the year of the withdrawal (even though the rollover contribution occurs in the following calendar year).
Caution; If you have reached age 7012 by the year when you convert another non-Roth IRA you own to a Roth IRA, be careful not to convert any amount that would be a required minimum distribution under the applicable age 7012 rules. Under current IRS regulations, required minimum distributions may not be converted. What Happens if I change my Mind about Converting? You can undo a conversion by notifying the custodian or trustee of each IRA (the custodian of the first IRA the Traditional IRA you convertedand the custodian of the second IRAthe Roth IRA that received the conversion). The amount you want to unconvert by transferring back to the first custodian is treated for income tax purposes as if it had not been converted (however the transfers involved in the original conversion and in the transfer back are reportable to the IRS by the Custodian). This is called recharacterization. If you want to recharacterize a converted amount, you must do so before the due date (including any extensions you receive) for your federal income tax return for the year of the conversion. Any net income (whether gain or loss) on the amount recharacterized must accompany it back to the Traditional IRA. Under current IRS rules, you can recharacterize for any reason. For example, you would recharacterize if you converted early in a year and then turned out to be ineligible because your income was over the $100,000 limit. Also, if you convert and then recharacterize during a year, you can then convert to a Roth IRA a second time if you wish, but you must wait until the later of the next tax year after your original conversion or until 30 days after your recharacterization. Under the current IRS rules, you are limited to one conversion of an account per year. If you convert an amount more than once in a year, any additional conversion transactions will be considered invalid and subject to the rules for excess contributions. Note: Conversions from a Traditional IRA to a Roth IRA that failed because you did not meet the eligibility requirements (more than $100,000 of AGI or married but not filing jointly) must be recharacterized before your tax filing deadline (with extensions) in order to avoid possible taxes and penalties. The IRS automatically grants to taxpayers who file their taxes by the April 15th deadline a six-month extension of time (until October 15) to recharacterize for the tax year covered by that filing. (Caution: As you can see, these rules are very complex; be sure to consult a competent tax professional for
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assistance. The IRS may change the rules for conversions described above. Always check with your tax adviser for the latest developments.) Under current IRS rules, recharacterization is not restricted to amounts you converted from a Traditional IRA to a Roth IRA. You can, for example, make an annual contribution to a Traditional IRA and recharacterize it as a contribution to a Roth IRA, or vice versa. You must make the election to recharacterize by the due date for your tax return for the year (plus the automatic 6-month extension to October 15 the IRS grants to on-time tax filers) and follow the procedures summarized above. What are the Tax Results from Converting? The taxable amount in your Traditional IRA you convert to a Roth IRA will be considered taxable income on your federal income tax return for the year of the conversion. All amounts in a Traditional IRA are taxable except for your prior non-deductible contributions to the Traditional IRA. If you convert a Traditional IRA (or a SEP IRA or SIMPLE IRA - - see below) to a Roth IRA, under IRS rules income tax withholding will apply unless you elect not to have withholding. The Adoption Agreement or the Universal IRA Transfer of Assets Form has more information about withholding. However, withholding income taxes from the amount converted (instead of paying applicable income taxes from another source) may adversely affect the anticipated financial benefits of converting. Consult your financial adviser for more information. Can I Convert a SEP IRA or SIMPLE IRA Account to a Roth IRA? If you have a SEP IRA as part of an employer simplified employee pension (SEP) program, or a SIMPLE IRA as part of an employer SIMPLE IRA program, you can convert the IRA to a Roth IRA. However, with a SIMPLE IRA account, this can be done only after the SIMPLE IRA account has been in existence for at least two years. You must meet the eligibility rules summarized above to convert. Should I convert my Traditional IRA to a Roth IRA? Only you can answer this question, in consultation with your tax or financial advisers. A number of factors, including the following, may be relevant. Conversion may be advantageous if you expect to leave the converted funds on deposit in your Roth IRA for at least five years
and to be able to withdraw the funds under circumstances that will not be taxable (see below). The benefits of converting will also depend on whether you expect to be in the same tax bracket when you withdraw from your Roth IRA as you are now. Also, conversion is based upon an assumption that Congress will not change the tax rules for withdrawals from Roth IRAs in the future, but this cannot be guaranteed.
How Do Rollovers Affect my Roth IRA Contribution Limits? Rollover contributions, if properly made, do not count toward the IRA Contribution Limit. Also, you may make a rollover from one Roth IRA to another even during a year when you are not eligible to contribute to a Roth IRA (for example, because your AGI for that year is too high).
Transfers/Rollovers
Can I Transfer or Roll Over a Distribution I Receive from my Employers Retirement Plan into a Roth IRA? Distributions from qualified employer-sponsored retirement plans or 403(b) arrangements (for employees of tax-exempt employers) or eligible 457 plans (for employees of certain governmental employers) are not eligible for rollover or direct transfer to a Roth IRA. However, in certain circumstances it may be possible to make a direct rollover of an eligible distribution to a Traditional IRA and then to convert the Traditional IRA to Roth IRA (see above). Consult your tax or financial adviser for further information on this possibility. Can I Make a Rollover from my Roth IRA to another Roth IRA? You may make a rollover from one Roth IRA to another Roth IRA you already have or to one you establish to receive the rollover. Such a rollover must be completed within 60 days after the withdrawal from your first Roth IRA. In limited circumstances, when an IRA rollover could not be completed within 60 days due to circumstances beyond your control or not your fault, you can apply to the IRS for approval of a rollover after 60 days. However, IRS approval may not be needed if the financial institution receiving the rollover did not deposit the rollover amount in an IRA. Consult your tax adviser for more information. After making a rollover from one Roth IRA to another, you must wait a full year (365 days) before you can make another such rollover from the same Roth IRA. In addition, after Roth IRA assets are rolled over from one IRA to another, a second rollover of the same assets cannot be made for a full year. (However, you can instruct a Roth IRA custodian to transfer amounts directly to another Roth IRA custodian; such a direct transfer does not count as a rollover.)
Withdrawals
When can I make withdrawals from my Roth IRA? You may withdraw from your Roth IRA at any time. If the withdrawal meets the requirements discussed below, it is tax-free. This means that you pay no federal income tax even though the withdrawal includes earnings or gains on your contributions while they were held in your Roth IRA. When must I start making withdrawals? There are no rules on when you must start making withdrawals from your Roth IRA or on minimum required withdrawal amounts for any particular year during your lifetime. Unlike Traditional IRAs, you are not required to start making withdrawals from a Roth IRA by the April 1 following the year in which you reach age 7012. After your death, there are IRS rules on the timing and amount of distributions. In general, the amount in your Roth IRA must be distributed by the end of the fifth year after your death. However, distributions to a designated beneficiary that begin by the end of the year following the year of your death and that are paid over the life expectancy of the beneficiary satisfy the rules. Also, if your surviving spouse is your designated beneficiary, the spouse may defer the start of distributions until you would have reached age 7012 had you lived. What are the requirements for a tax-free withdrawal? To be tax-free, a withdrawal from your Roth IRA must meet two requirements. First, the Roth IRA must have been open for 5 or more years before the withdrawal. Second, at least one of the following conditions must be satisfied:
You
are age 5912 or older when you make the withdrawal. withdrawal is made by your beneficiary after you die.
The
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You
are disabled (as defined in IRS rules) when you make the withdrawal. are using the withdrawal to cover eligible first time homebuyer expenses. These are the costs of purchasing, building or rebuilding a principal residence (including customary settlement, financing or closing costs). The purchaser may be you, your spouse or a child, grandchild, parent or grandparent of you or your spouse. An individual is considered a first-time homebuyer if the individual did not have (or, if married, neither spouse had) an ownership interest in a principal residence during the two-year period immediately preceding the acquisition in question. The withdrawal must be used for eligible expenses within 120 days after the withdrawal (if there is an unexpected delay, or cancellation of the home acquisition, a withdrawal may be redeposited as a rollover).
You
of previously taxed conversion amounts also is not considered taxable income in the year of the withdrawal, but may be subject to the 10% premature withdrawal penalty. To the extent that the nonqualified withdrawal consists of dividends or gains while your contributions were held in your Roth IRA, the withdrawal is includible in your gross income in the taxable year you receive it, and may be subject to the 10% withdrawal penalty. As mentioned, for purposes of determining what portion of any withdrawal is includible in income, all of your Roth IRA accounts are considered as one single account. Therefore, withdrawals from Roth IRA accounts are not considered to be from earnings or interest until an amount equal to all prior annual contributions and, if applicable, all conversion amounts, made to all of an individuals Roth IRA accounts has been withdrawn. The following example illustrates this: A single individual contributes $1,000 a year to his State Street Bank and Trust Company Roth IRA account and $1,000 a year to the Brand X Roth IRA account over a period of ten years. At the end of 10 years his account balances are as follows:
Principal Contributions State Street Bank Roth IRA Brand X Roth IRA Total $10,000 Earnings
There is a lifetime limit on eligible first-time homebuyer expenses of $10,000 per individual. For purposes of the 5-year rule, all your Roth IRAs are considered. As soon as the 5-year rule is satisfied for any Roth IRA, it is considered satisfied for all your Roth IRAs. For a Roth IRA that you started with annual contribution, the 5 year period starts with the year for which you make the initial annual contribution. For a Roth IRA that you set up with amounts rolled over or converted from a non-Roth IRA, the 5 year period begins with the year in which the conversion or rollover was made. How Are Withdrawals From My Roth IRA Taxed if the Tax-Free Requirements are not Met? If the qualified withdrawal requirements are not met, the tax treatment of a withdrawal depends on the character of the amounts withdrawn. To determine this, all your Roth IRAs (if you have more than one) are treated as one, including any Roth IRA you may have established with another Roth IRA custodian. Amounts withdrawn are considered to come out in the following order:
First,
$10,000
$10,000 $20,000
$7,000 $17,000
all annual contributions.
Second,
all conversion amounts (on a first-in, firstout basis). earnings (including dividends and gains).
Third,
At the end of 10 years, this person has $37,000 in both Roth IRA accounts, of which $20,000 represents his contributions (aggregated) and $17,000 represents his earnings (aggregated). This individual, who is 40, withdraws the entire $17,000 from his Brand X Roth IRA (not a qualified withdrawal). We look to the aggregate amount of all principal contributions in this case $20,000 to determine if the withdrawal is from contributions, and thus non-taxable. In this example, there is no ($0) taxable income as a result of this withdrawal because the $17,000 withdrawal is less than the total amount of aggregated contributions ($20,000). If this individual then withdrew $15,000 from his State Street Bank and Trust Company Roth IRA, $3,000 would not be taxable (the remaining aggregate contributions) and $12,000 would be treated as taxable income for the year of the withdrawal, subject to normal income taxes and the 10% premature withdrawal penalty (unless an exception applies). Taxable withdrawals of dividends and gains from a Roth IRA are treated as ordinary income. Withdrawals of taxable amounts from a Roth IRA are not eligible for
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A withdrawal treated as your own prior annual contribution amounts to your Roth IRA will not be considered taxable income in the year you receive it, nor will the 10% penalty apply. A withdrawal consisting
averaging treatment currently available to certain lump sum distributions from qualified employer-sponsored retirement plans, nor are such withdrawals eligible for capital gains tax treatment. Your receipt of any taxable withdrawal from your Roth IRA before you attain age 5912 generally will be considered as an early withdrawal and subject to a 10% penalty tax. The 10% penalty tax for early withdrawal will not apply if any of the following exceptions applies:
The
weeks; this exception applies to distributions during the year in which you received the unemployment compensation and during the following year, but not to any distributions received after you have been reemployed for at least 60 days.
A
distribution is made pursuant to an IRS levy to pay overdue taxes.
withdrawal was a result of your death or disability. withdrawal is one of a scheduled series of substantially equal periodic payments for your life or life expectancy (or the joint lives or life expectancies of you and your beneficiary).
The
There is one additional time when the 10% penalty tax may apply. If you convert an amount from a nonRoth IRA to a Roth IRA, and then make a withdrawal that is treated as coming from that converted amount within five years after the conversion, the 10% penalty applies (unless there is an exception). This rule is the one exception to the usual Roth IRA rule that, once the five year requirement is satisfied for one of your Roth IRAs, it is satisfied for all your Roth IRAs. See the Table at the end of this Part for a summary of the rules on when withdrawals from your Roth IRA will be subject to income taxes or the 10% penalty tax. Two Important Points: First, the Custodian will report withdrawals from your Roth IRA to the IRS on Form 1099-R as required and will complete Form 1099-R based on your Roth IRA account with the Custodian. However, since all Roth IRAs are considered together when determining the tax treatment of withdrawals, and since you may have other Roth IRAs with other custodians (about which we have no information) you have sole responsibility for correctly reporting withdrawals on your tax return. It is essential that you keep proper records and report the income taxes properly if you have multiple Roth IRAs. Second, the discussion of the tax rules for Roth IRAs in this Disclosure Statement is based upon the best available information. However, there may be changes in IRS regulations or further legislation on the requirements for and tax treatment of Roth IRA accounts. Therefore, you should consult your tax adviser for the latest developments or for advice about how maintaining a Roth IRA will affect your personal tax or financial situation. Note: In order to facilitate proper recordkeeping and tax reporting for your Roth IRA, the service company maintaining certain account records may require you to set up separate Roth IRAs to hold annual contributions and conversion amounts. In addition, the service company may require separate Roth IRAs for conversion amounts from different calendar years. Any such requirement will be noted in the Adoption Agreement for your Roth IRA or in the instructions for opening your Roth IRA.
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If
there is an adjustment to the scheduled series of payments, the 10% penalty tax will apply. For example, if you begin receiving payments at age 50 under a withdrawal program providing for substantially equal payments over your life expectancy, and at age 58 you elect to withdraw the remaining amount in your Roth IRA in a lump-sum, the 10% penalty tax will apply to the lump sum and to the amounts previously paid to you before age 5912 to the extent they were includible in your taxable income. withdrawal is used to pay eligible higher education expenses. These are expenses for tuition, fees, books, and supplies required to attend an institution for post-secondary education. Room and board expenses are also eligible for a student attending at least half-time. The student may be you, your spouse, or your child or grandchild. However, expenses that are paid for with a scholarship or other educational assistance payment are not eligible expenses. withdrawal is used to cover eligible first time homebuyer expenses (as described above in the discussion of tax-free withdrawals).
The
The
The
withdrawal does not exceed the amount of your deductible medical expenses for the year (generally speaking, medical expenses paid during a year are deductible if they are greater than 712 of your adjusted gross income for that year). withdrawal does not exceed the amount you paid for health insurance coverage for yourself, your spouse and dependents. This exception applies only if you have been unemployed and received federal or state unemployment compensation payments for at least 12
The
Also, please see Part Three below which contains important information applicable to all State Street Bank and Trust Company IRAs.
Summary of Tax Rules for Withdrawals

The following table summarizes when income taxes or the 10% premature withdrawal penalty tax will apply to a withdrawal from your Roth IRA. Remember, income taxes or penalties apply or not depending on the type of contribution withdrawn. This is determined under the IRS rules described above, considering all of your Roth IRAs together (including any you may maintain with another trustee or custodian). Therefore, if you have multiple Roth IRAs, the tax treatment of a withdrawal will not necessarily follow from the type of contributions held in the particular Roth Qualified Withdrawal (the requirements for a qualified withdrawal are outlined above) Not a Qualified Withdrawal Exception to 10% tax applies (exceptions are listed above Exception to 10% tax does not apply
Type of Contribution Withdrawn
Annual Contribution Amounts Amounts Converted from Another Form of IRA
No income or penalty tax on withdrawal No income or penalty tax on withdrawal. No income or penalty tax on withdrawal. No income tax on withdrawal. Penalty tax applies to taxable amounts included in the conversion if the withdrawal occurs within 5 years of conversion. Income and penalty tax apply.
Earnings, Gains or Growth of Account
No income or penalty tax on withdrawal.
Income tax applies. No penalty tax.
IRA account you withdrew from. Also, the income and penalty tax rules for Roth IRA withdrawals are extremely complex; the following table is only a summary and may not cover every possible situation. Consult the IRS or your personal tax adviser if you have a question about your individual situation. The table summarizes the tax rules that may apply if you withdraw from your Roth IRA. What happens if you die and your beneficiary wants to make withdrawals from the account? The following is a summary of the rules.
First,
if your beneficiary is not your surviving spouse, withdrawals by the beneficiary will be subject to income taxes depending on the type of contribution withdrawn as summarized in the table. However, in determining what type of contribution the beneficiary is withdrawing, any Roth IRAs the beneficiaries owns in his or her own right are not considered (this is an exception to the normal rule that all Roth IRAs are considered together). A beneficiary will not be subject to the 10% premature withdrawal penalty because withdrawals following the original owners death are an exception to the 10% penalty tax. if your surviving spouse is the beneficiary, the spouse can elect either to receive withdrawals as beneficiary, or to treat your Roth IRA as the spouses Roth IRA. If the spouse receives withdrawals as a beneficiary, the rules in the preceding paragraph generally apply to the spouse just as to any other beneficiary. If the spouse treats the Roth IRA as the spouses own, there are a couple of special rules. First, the spouse will be treated as having had a Roth IRA for five years (one of the requirements for tax-free withdrawals) if either your Roth IRA or any of the spouses Roth IRAs has been in effect for at least five years. Second, withdrawals will be subject to the 10% penalty tax unless an exception applies. Since the spouse has elected to treat your Roth IRA as the spouses own Roth IRA, the exception for payments following your death will not apply.
Second,
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Part Three: Rules for All IRAs (Traditional and Roth)

General Information
IRA Requirements All IRAs must meet certain requirements. Contributions generally must be made in cash. The IRA trustee or custodian must be a bank or other person who has been approved by the Secretary of the Treasury. Your contributions may not be invested in life insurance or collectibles or be commingled with other property except in a common trust or investment fund. Your interest in the account must be nonforfeitable at all times. You may obtain further information on IRAs from any district office of the Internal Revenue Service. May I Revoke My IRA? You may revoke a newly established Traditional or Roth IRA at any time within seven days after the date on which you receive this Disclosure Statement. A Traditional or Roth IRA established more than seven days after the date of your receipt of this Disclosure Statement may not be revoked. To revoke your Traditional or Roth IRA, mail or deliver a written notice of revocation to the Custodian at the address which appears at the end of this Disclosure Statement. Mailed notice will be deemed given on the date that it is postmarked (or, if sent by certified or registered mail, on the date of certification or registration). If you revoke your Traditional or Roth IRA within the seven-day period, you are entitled to a return of the entire amount you originally contributed into your Traditional or Roth IRA, without adjustment for such items as sales charges, administrative expenses or fluctuations in market value. Voter Rights We shall forward the Depositor any notices, prospectuses, reports to shareholders, financial statements, proxies and proxy soliciting materials, relating to the fund shares in the Depositor's account. The Custodian shall vote any such shares held in the account in accordance with the timely written instructions of the Depositor if received. If no timely written instructions are received from the Depositor, the Trustee may vote such shares in such a manner as it deems appropriate (including "present" or in accordance with the recommendations of the Fund's Board of Trustees.
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Investments
How Are My IRA Contributions Invested? You control the investment and reinvestment of contributions to your Traditional or Roth IRA. Investments must be in one or more of the Fund(s) available from time to time as listed in the Adoption Agreement for your Traditional or Roth IRA or in an investment selection form provided with your Adoption Agreement or from the Fund Distributor or Service Company. You direct the investment of your IRA by giving your investment instructions to the Distributor or Service Company for the Fund(s). Since you control the investment of your Traditional or Roth IRA, you are responsible for any losses; neither the Custodian, the Distributor nor the Service Company has any responsibility for any loss or diminution in value occasioned by your exercise of investment control. Transactions for your Traditional or Roth IRA will generally be at the applicable public offering price or net asset value for shares of the Fund(s) involved next established after the Distributor or the Service Company (whichever may apply) receives proper and timely investment instructions from you; consult the current prospectus for the Fund(s) involved for additional information. Before making any investment, read carefully the current prospectus for any Fund you are considering as an investment for your Traditional IRA or Roth IRA. The prospectus will contain information about the Funds investment objectives and policies, as well as any minimum initial investment or minimum balance requirements, any restrictions or limitations on transferring into or out of the Fund, and any sales, redemption or other charges. Because you control the selection of investments for your Traditional or Roth IRA and because mutual fund shares fluctuate in value, the growth in value of your Traditional or Roth IRA cannot be guaranteed or projected. Are There Any Restrictions on the Use of my IRA Assets? The tax-exempt status of your Traditional or Roth IRA will be revoked if you engage in any of the prohibited transactions listed in Section 4975 of the tax code. Upon such revocation, your Traditional or Roth IRA is treated as distributing its assets to you. The taxable portion of the amount in your IRA will be subject to income tax (unless, in the case of a Roth IRA, the requirements for a tax-free withdrawal are satisfied).
Also, you may be subject to a 10% penalty tax on the taxable amount as a premature withdrawal if you have not yet reached the age of 5912. There may also be prohibited transaction penalty taxes. Any investment in a collectible (for example, rare stamps) by your Traditional or Roth IRA is treated as a withdrawal; the only exception involves certain types of government-sponsored coins or certain types of precious metal bullion. What Is A Prohibited Transaction? Generally, a prohibited transaction is any improper use of the assets in your Traditional or Roth IRA. Some examples of prohibited transactions are: - Direct or indirect sale or exchange of property between you and your Traditional or Roth IRA. - Transfer of any property from your Traditional or Roth IRA to yourself or from yourself to your Traditional or Roth IRA. Your Traditional or Roth IRA could lose its tax exempt status if you use all or part of your interest in your Traditional or Roth IRA as security for a loan or borrow any money from your Traditional or Roth IRA. Any portion of your Traditional or Roth IRA used as security for a loan will be treated as a distribution in the year in which the money is borrowed. This amount may be taxable and you may also be subject to the 10% premature withdrawal penalty on the taxable amount.
If
provided for in this Disclosure Statement or the Adoption Agreement, termination fees are charged when your account is closed whether the funds are distributed to you or transferred to a successor custodian or trustee. Custodian may charge you for its reasonable expenses for services not covered by its fee schedule.
The
Other Charges
There
may be sales or other charges associated with the purchase or redemption of shares of a Fund in which your Traditional IRA or Roth IRA is invested. Before investing, be sure to read carefully the current prospectus of any Fund you are considering as an investment for your Traditional IRA or Roth IRA for a description of applicable charges.
Tax Matters
What IRA Reports does the Custodian Issue? The Custodian will report all withdrawals to the IRS and the recipientusing Form 1099-R. For reporting purposes, a direct transfer of assets to a successor custodian or trustee is not considered a withdrawal (except for such a transfer that effects a conversion of a Traditional IRA to a Roth IRA, or a recharacterization of a Roth IRA back to a Traditional IRA). The Custodian will report to the IRS the year-end value of your account and the amount of any rollover (including conversions of a Traditional IRA to a Roth IRA) or a regular annual contribution made during a calendar year, as well as the tax year for which a contribution is made. Unless the Custodian receives an indication from you to the contrary, it will treat any amount as a contribution for the tax year in which it is received. It is most important that a contribution between January and April 15th for the prior year be clearly designated as such. What Tax Information Must I Report to the IRS?
Fees and Expenses

Custodians Fees The following is the fee charged by the Custodian for maintaining either a Traditional IRA or a Roth IRA. Annual Maintenance Fee per mutual fund account: $10.00 General Fee Policies
Fees
may be paid by you directly, or the Custodian may deduct them from your Traditional or Roth IRA. may be changed upon 30 days written notice to you. full annual maintenance fee will be charged for any calendar year during which you have a Traditional or Roth IRA with us. This fee is not prorated for periods of less than one full year.
Fees
The
You must file Form 5329 with the IRS for each taxable year for which you made an excess contribution or you take a premature withdrawal that is subject to the 10% penalty tax, or you withdraw less than the minimum amount required from your Traditional IRA. If your beneficiary fails to make required minimum withdrawals from your Traditional or Roth IRA after your death, your beneficiary may be subject to an excise tax and be required to file Form 5329. NOTE: If you are under age 5912 at the time of a 23 withdrawal from your IRA, the IRS requires the
Custodian to indicate on Form 1099-R that the withdrawal is subject to the 10% premature withdrawal penalty (see above). The only exceptions the IRS allows for purposes of Form 1099-R are for death or disability, a series of substantially equal periodic payments, or a distribution under an IRS levy. If another exception actually applies to you, you may have to file Form 5329 to claim the exception. For Traditional IRAs, you must also report each nondeductible contribution to the IRS by designating it a nondeductible contribution on your tax return. Use Form 8606. In addition, for any year in which you make a nondeductible contribution or take a withdrawal, you must include additional information on your tax return. The information required includes: (1) the amount of your nondeductible contributions for that year; (2) the amount of withdrawals from Traditional IRAs in that year; (3) the amount by which your total nondeductible contributions for all the years exceed the total amount of your distributions previously excluded from gross income; and (4) the total value of all your Traditional IRAs as of the end of the year. If you fail to report any of this information, the IRS will assume that all your contributions were deductible. This will result in the taxation of the portion of your withdrawals that should be treated as a nontaxable return of your nondeductible contributions. Which Withdrawals Are Subject to Withholding? Roth IRA Withdrawals from a Roth IRA are not subject the 10% flat rate of withholding that applies to Traditional IRAs or to the mandatory 20% income tax withholding that applies to most distributions from qualified plans or 403(b) accounts that are not directly rolled over to another plan or IRA. Traditional IRA Federal income tax will be withheld at a flat rate of 10% from any withdrawal from your Traditional IRA, unless you elect not to have tax withheld. Withdrawals from a Traditional IRA are not subject to the mandatory 20% income tax withholding that applies to most distributions from employer plans that are not directly rolled over to another plan or IRA.
instructions in a form acceptable to the Custodian), or a transfer authorization form, to: AARP Funds P.O. Box 8035 Boston, MA 02266-8035 Your Traditional IRA or Roth IRA with State Street Bank and Trust Company will terminate upon the first to occur of the following:
The
date your properly executed withdrawal form or instructions (as described above) withdrawing your total Traditional IRA or Roth IRA balance is received and accepted by the Custodian or, if later, the termination date specified in the withdrawal form. date the Traditional IRA or Roth IRA ceases to qualify under the tax code. This will be deemed a termination. transfer of the Traditional IRA or Roth IRA to another custodian/trustee.
The
The
Any outstanding fees must be received prior to such a termination of your account. The amount you receive from your IRA upon termination of the account will be treated as a withdrawal, and thus the rules relating to Traditional IRA or Roth IRA withdrawals will apply. For example, if the IRA is terminated before you reach age 5912, the 10% early withdrawal penalty may apply to the taxable amount you receive.
IRA Documents
Traditional IRA The terms contained in Articles I to VII of Part One of the State Street Bank and Trust Company Universal Individual Retirement Custodial Account document have been promulgated by the IRS in Form 5305-A for use in establishing a Traditional IRA Custodial Account that meets the requirements of Code Section 408(a) for a valid Traditional IRA. This IRS approval relates only to the form of Articles I to VII and is not an approval of the merits of the Traditional IRA or of any investment permitted by the Traditional IRA. Roth IRA The terms contained in Articles I to VII of Part Two of the State Street Bank and Trust Company Universal Individual Retirement Account Custodial Agreement have been promulgated by the IRS in Form 5305-RA for use in establishing a Roth IRA Custodial Account that meets the requirements of Code Section 408A for
Account Termination
You may terminate your Traditional IRA or Roth IRA at any time after its establishment by sending a completed withdrawal form (or other withdrawal
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a valid Roth IRA. This IRS approval relates only to the form of Articles I to VII and is not an approval of the merits of the Roth IRA or of any investment permitted by the Roth IRA. Traditional IRA and Roth IRA The terms contained in Article VIII of Part Three of the State Street Bank and Trust Company Universal Individual Retirement Account document are additional provisions (not promulgated by the IRS) for both Traditional IRAs and Roth IRAs.
permitted by law. For example, we may disclose Customer Information in order to process a transaction or service an account, or to comply with legal requirements. Information Security We restrict access to Customer Information to employees and service providers who are involved in providing products and services to our customers. In addition, we maintain physical, electronic, and procedural safeguards that comply with federal standards in order to protect Customer Information.
Additional Information
For additional information you may write to the following address or call the following telephone number. AARP Funds P.O. Box 8035 Boston, MA 02266-8035 1-800-958-6457 PRIVACY NOTICE An Important Notice Concerning Customer Privacy From State Street Bank and Trust Company: State Street Bank and Trust Company is pleased to be the custodian for your retirement account. The trust and confidence of our customers is important to us. For this reason, we are careful in the way we handle nonpublic personal information about our customers (Customer Information). This Privacy Notice describes our policies and practices concerning Customer Information and how they are designed to preserve the trust of our customers. Information We Collect We may collect Customer Information from the following sources:
Information
State Street Bank and Trust Company Universal Individual Retirement Account Custodial Agreement
Part One: Provisions applicable to Traditional IRAs
The following provisions of Articles I to VII are in the form promulgated by the Internal Revenue Service in Form 5305-A (Rev. March 2002) for use in establishing a Traditional Individual Retirement custodial account. References are to sections of the Internal Revenue Code of 1986, as amended (Code). Article I. Except in the case of a rollover contribution described in section 402(c), 403(a)(4), 403(b)(8), 408(d)(3), or 457(e)(16), an employer contribution to a simplified employee pension plan as described in section 408(k), or a recharacterized contribution described in section 408A(d)(6), the custodian will accept only cash contributions up to $3,000 per year for tax years 2002 through 2004. That contribution limit is increased to$4,000 for tax years 2005 through 2007 and $5,000 for 2008 and thereafter. For individuals who have reached the age of 50 before the close of the tax year, the contribution limit is increased to $3,500 per year for tax years 2002 through 2004, $4,500 for 2005, $5,000 for 2006 and 2007,and $6,000 for 2008 and thereafter. For tax years after 2008, the above limits will be increased to reflect a cost-of-living adjustment, if any. Article II. The Depositors interest in the balance in the Custodial Account is nonforfeitable. Article III. 1. No part of the Custodial Account funds may be invested in life insurance contracts, nor may the assets of the custodial account be commingled with other property except in a common trust fund or common
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we receive on applications or other forms, such as name, address, date of birth, and social security number relating to transactions with us, our affiliates and others, such as the purchase and sale of securities and account balances we receive from third parties such as credit reporting agencies.
Information
Information
Information We Disclose We do not disclose Customer Information about our present or former customers to third parties except as
investment fund (within the meaning of section 408(a)(5)). 2. No part of the Custodial Account funds may be invested in collectibles (within the meaning of section 408(m) except as otherwise permitted by section 408(m)(3) which provides an exception for certain gold, silver and platinum coins, coins issued under the laws of any state, and certain bullion. Article IV. 1. Notwithstanding any provisions of this agreement to the contrary, the distribution of the Depositors interest in the custodial account shall be made in accordance with the following requirements and shall otherwise comply with section 408(a)(6) and the regulations thereunder, the provisions of which are herein incorporated by reference. 2. The Depositors entire interest in the custodial account must be, or begin to be, distributed by the Depositors required beginning date, April 1 following the calendar year end in which the Depositor reaches age 7012. By that date, the Depositor may elect, in a manner acceptable to the Custodian, to have the balance in the custodial account distributed in: (a) A single-sum payment or (b) Payments over a period not longer than the life of the Depositor or the joint lives of the Depositor and his or her designated Beneficiary. 3. If the Depositor dies before his or her entire interest is distributed to him or her, the remaining interest will be distributed as follows: (a) If the Depositor dies on or after the required beginning date and: (i) the designated Beneficiary is the Depositors surviving spouse, the remaining interest will be distributed over the surviving spouses life expectancy as determined each year until such spouses death, or over the period in paragraph (a)(iii) below if longer. Any interest remaining after the spouses death will be distributed over such spouses remaining life expectancy as determined in the year of the spouses death and reduced by 1 for each subsequent year, or, if distributions are being made over the period in paragraph (a)(iii) below, over such period. (ii) the designated Beneficiary is not the Depositors surviving spouse, the remaining interest will be distributed over the beneficiarys remaining life expectancy as determined in the year following the death of the
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Depositor and reduced by 1 for each subsequent year, or over the period in paragraph (a)(iii) below if longer. (iii) there is no designated Beneficiary, the remaining interest will be distributed over the remaining life expectancy of the Depositor as determined in the year of the Depositors death and reduced by 1 for each subsequent year. (b) If the Depositor dies before the required beginning date, the remaining interest will be distributed in accordance with (i) below or, if elected or there is no designated Beneficiary, in accordance with (ii) below: (i)The remaining interest will be distributed in accordance with paragraphs (a)(i) and (a)(ii) above (but not over the period in paragraph (a)(iii),even if longer), starting by the end of the calendar year following the year of the Depositors death. If, however, the designated Beneficiary is the Depositors surviving spouse, then this distribution is not required to begin before the end of the calendar year in which the Depositor would have reached age 7012. But, in such case, if the Depositors surviving spouse dies before distributions are required to begin, then the remaining interest will be distributed in accordance with (a)(ii) above (but not over the period in paragraph (a)(iii), even if longer), over such spouses designated Beneficiarys life expectancy, or in accordance with (ii) below if there is no such designated Beneficiary. (ii)The remaining interest will be distributed by the end of the calendar year containing the fifth anniversary of the Depositors death. 4. If the Depositor dies before his or her entire interest has been distributed and if the designated Beneficiary is not the Depositors surviving spouse, no additional contributions may be accepted in the account. The minimum amount that must be distributed each year, beginning with the year containing the Depositors required beginning date, is known as the required minimum distribution and is determined as follows: (a) The required minimum distribution under paragraph 2(b) for any year, beginning with the year the Depositor reaches age 7012 , is the Depositors account value at the close of business on December 31 of the preceding year divided by the distribution period in the uniform lifetime table in Regulations section 1.401(a)(9)-9. However, if the Depositors designated Beneficiary is his or her surviving spouse, the required minimum distribution for a year shall not be more than the Depositors account value at the close of business on December 31 of the preceding year divided by the number in the joint and last survivor table
in Regulations section 1.401(a)(9)-9. The required minimum distribution for a year under this paragraph (a) is determined using the Depositors (or, if applicable, the Depositor and spouses) attained age (or ages) in the year. (b) The required minimum distribution under paragraphs 3(a) and 3(b)(i) for a year, beginning with the year following the year of the Depositors death (or the year the Depositor would have reached age 7012 , if applicable under paragraph 3(b)(i)) is the account value at the close of business on December 31 of the preceding year divided by the life expectancy (in the single life table in Regulations section 1.401(a)(9)-9) of the individual specified in such paragraphs 3(a) and 3(b)(i). (c) The required minimum distribution for the year the Depositor reaches age 7012 can be made as late as April 1 of the following year. The required minimum distribution for any other year must be made by the end of such year. 3. The owner of two or more individual retirement accounts may satisfy the minimum distribution requirements described above by taking from one traditional IRA the amount required to satisfy the requirement for another in accordance with the regulations under section 408(a)(6). Article V. 1. The Depositor agrees to provide the Custodian with all information necessary to prepare any reports required by section 408(i) and Regulations sections 1.408-5 and 1.408-6. 2. The Custodian agrees to submit to the Internal Revenue Service (IRS) and the Depositor the reports prescribed by the IRS. Article VI. Notwithstanding any other articles which may be added or incorporated, the provisions of Articles I through III and this sentence will be controlling. Any additional articles inconsistent with section 408(a) and the related regulations will be invalid. Article VII. This agreement will be amended as necessary to comply with the provisions of the Code and the related regulations. Other amendments may be made with the consent of the persons whose signatures appear on the Adoption Agreement.
Part Two: Provisions applicable to Roth IRAs

The following provisions of Articles I to VII are in the form promulgated by the Internal Revenue Service in Form 5305-RA (revised March 2002) for use in establishing a Roth Individual Retirement Custodial Account. References are to sections of the Internal Revenue Code of 1986, as amended (Code). Article I Except in the case of a rollover contribution described in section 408A(e), a recharacterized contribution described in section 408A(d)(6), or an IRA Conversion Contribution, the custodian will accept only cash contributions up to $3,000 per year for tax years 2002 through 2004. That contribution limit is increased to $4,000 for tax years 2005 through 2007 and $5,000 for 2008 and thereafter. For individuals who have reached the age of 50 before the close of the tax year, the contribution limit is increased to $3,500 per year for tax years 2002 through 2004, $4,500 for 2005, $5,000 for 2006 and 2007, and $6,000 for 2008 and thereafter. For tax years after 2008, the above limits will be increased to reflect a cost-of-living adjustment, if any. Article IA The annual contribution limit described in Article I is gradually reduced to $0for higher income levels. For a single Depositor, the annual contribution is phased out between adjusted gross income (AGI) of $95,000 and $110,000; for a married Depositor filing jointly, between AGI of $150,000 and $160,000; and for a married Depositor filing separately, between AGI of $0 and $10,000. In the case of a conversion, the Custodian will not accept IRA Conversion Contributions in a tax year if the Depositors AGI for the tax year the funds were distributed from the other IRA exceeds $100,000 or if the Depositor is married and files a separate return. Adjusted gross income is defined in section 408A(c)(3) and does not include IRA Conversion Contributions. In the case of a joint return, the AGI limits in the preceding paragraph apply to the combined AGI of the Depositor and his or her spouse. Article II The Depositors interest in the balance in the custodial account is nonforfeitable. Article III 1. No part of the Custodial Account funds may be invested in life insurance contracts, nor may the assets of the custodial account be commingled with other
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property except in a common trust fund or common investment fund (within the meaning of section 408(a)(5)). 2. No part of the Custodial Account funds may be invested in collectibles (within the meaning of section 408(m)) except as otherwise permitted by section 408(m)(3), which provides an exception for certain gold, silver, and platinum coins, coins issued under the laws of any state, and certain bullion. Article IV 1. If the Depositor dies before his or her entire interest is distributed to him or her and the Depositors surviving spouse is not the designated Beneficiary, the entire remaining interest will be distributed in accordance with (a) below or, if elected or there is no designated Beneficiary, in accordance with (b) below: (a) The remaining interest will be distributed, starting by the end of the calendar year following the year of the Depositors death, over the designated Beneficiarys remaining life expectancy as determined in the year following the death of the Depositor. (b) The remaining interest will be distributed by the end of the calendar year containing the fifth anniversary of the Depositors death. 2. The minimum amount that must be distributed each year under paragraph 1(a) above is the account value at the close of business on December 31 of the preceding year divided by the life expectancy (in the single life table in Regulations section 1.401(a)(9)-9) of the designated Beneficiary using the attained age of the beneficiary in the year following the year of the Depositors death and subtracting 1 from the divisor for each subsequent year. 3. If the Depositors spouse is the designated Beneficiary, such spouse will then be treated as the Depositor. Article V 1. The Depositor agrees to provide the Custodian with all information necessary to prepare any reports required by sections 408(i) and 408A(d)(3)(E), and Regulations section 1.408-5 and 1.408-6, or other guidance published by the Internal Revenue Service (IRS). 2. The Custodian agrees to submit to the IRS and Depositor the reports prescribed by the IRS. Article VI Notwithstanding any other articles which may be added or incorporated, the provisions of Articles I through IV
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and this sentence will be controlling. Any additional articles that are not consistent with section 408A, the related regulations, and other published guidance will be invalid. Article VII This agreement will be amended as necessary to comply with the provisions of the Code, the related regulations, and other published guidance. Other amendments may be made with the consent of the persons whose signatures appear in the Adoption Agreement.
Part Three: Provisions applicable to both Traditional IRAs and Roth IRAs
Article VIII 1. As used in this Article VIII the following terms have the following meanings: Depositor means the person signing the Adoption Agreement accompanying this Custodial Agreement. Account or Custodial Account means the individual retirement account established using the terms of either Part One or Part Two and, in either event, Part Three of this State Street Bank and Trust Company Universal Individual Retirement Account Custodial Agreement and the Adoption Agreement signed by the Depositor. The Account may be a Traditional Individual Retirement Account or a Roth Individual Retirement Account, as specified by the Depositor. See Section 24 below. Custodian means State Street Bank and Trust Company. Fund means any registered investment company which is advised, sponsored or distributed by Sponsor; provided, however, that such a mutual fund or registered investment company must be legally offered for sale in the state of the Depositors residence. Distributor means the entity which has a contract with the Fund(s) to serve as distributor of the shares of such Fund(s). In any case where there is no Distributor, the duties assigned hereunder to the Distributor may be performed by the Fund(s) or by an entity that has a contract to perform management or investment advisory services for the Fund(s). Service Company means any entity employed by the Custodian or the Distributor, including the transfer agent for the Fund(s), to perform various administrative duties of either the Custodian or the Distributor.
In any case where there is no Service Company, the duties assigned hereunder to the Service Company will be performed by the Distributor (if any) or by an entity specified in the second preceding paragraph. Sponsor means [insert fund management company or other fund entity that is making Fund(s) available under this Agreement and has the power to appoint a successor Custodian.] 2. The Depositor may revoke the Custodial Account established hereunder by mailing or delivering a written notice of revocation to the Custodian within seven days after the Depositor receives the Disclosure Statement related to the Custodial Account. Mailed notice is treated as given to the Custodian on date of the postmark (or on the date of Post Office certification or registration in the case of notice sent by certified or registered mail). Upon timely revocation, the Depositors initial contribution will be returned, without adjustment for administrative expenses, commissions or sales charges, fluctuations in market value or other changes. The Depositor may certify in the Adoption Agreement that the Depositor received the Disclosure Statement related to the Custodial Account at least seven days before the Depositor signed the Adoption Agreement to establish the Custodial Account, and the Custodian may rely upon such certification. 3. All contributions to the Custodial Account shall be invested and reinvested in full and fractional shares of one or more Funds. All such shares shall be issued and accounted for as book entry shares, and no physical shares or share certificate will be issued. Such investments shall be made in such proportions and/or in such amounts as Depositor from time to time in the Adoption Agreement or by other written notice to the Service Company (in such form as may be acceptable to the Service Company) may direct. The Service Company shall be responsible for promptly transmitting all investment directions by the Depositor for the purchase or sale of shares of one or more Funds hereunder to the Funds transfer agent for execution. However, if investment directions with respect to the investment of any contribution hereunder are not received from the Depositor as required or, if received, are unclear or incomplete in the opinion of the Service Company, the contribution will be returned to the Depositor, or will be held uninvested (or invested in a money market fund if available) pending clarification or completion by the Depositor, in either case without liability for interest or for loss of income or appreciation. If any other directions or other orders by the Depositor with respect to the sale or purchase of shares of one or
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more Funds for the Custodial Account are unclear or incomplete in the opinion of the Service Company, the Service Company will refrain from carrying out such investment directions or from executing any such sale or purchase, without liability for loss of income or for appreciation or depreciation of any asset, pending receipt of clarification or completion from the Depositor. All investment directions by Depositor will be subject to any minimum initial or additional investment or minimum balance rules or other rules (by way of example and not by way of limitation, rules relating to the timing of investment directions or limiting the number of purchases or sales or imposing sales charges on shares sold within a specified period after purchase) applicable to a Fund as described in its prospectus. All dividends and capital gains or other distributions received on the shares of any Fund held in the Depositors Account shall be (unless received in additional shares) reinvested in full and fractional shares of such Fund (or of any other Fund offered by the Sponsor, if so directed). In the event that any Fund held in the Custodial Account is liquidated or is otherwise made unavailable by the Sponsor as a permissible investment for a Custodial Account hereunder, the liquidation or other proceeds of such Fund shall be invested in accordance with the instructions of the Depositor; if the Depositor does not give such instructions, or if such instructions are unclear or incomplete in the opinion of the Service Company, the Service Company may invest such liquidation or other proceeds in such other Fund (including a money market fund if available) as the Sponsor designates, and neither the Service Company nor the Custodian will have any responsibility for such investment. 4. Subject to the minimum initial or additional investment, minimum balance and other exchange rules applicable to a Fund, the Depositor may at any time direct the Service Company to exchange all or a specified portion of the shares of a Fund in the Depositors Account for shares and fractional shares of one or more other Funds. The Depositor shall give such directions by written or telephonic notice acceptable to the Service Company, and the Service Company will process such directions as soon as practicable after receipt thereof (subject to the second paragraph of Section 3 of this Article VIII). 5. Any purchase or redemption of shares of a Fund for or from the Depositors Account will be effected at the public offering price or net asset value of such Fund
(as described in the then effective prospectus for such Fund) next established after the Service Company has transmitted the Depositors investment directions to the transfer agent for the Fund(s). Any purchase, exchange, transfer or redemption of shares of a Fund for or from the Depositors Account will be subject to any applicable sales, redemption or other charge as described in the then effective prospectus for such Fund. 6. The Service Company shall maintain adequate records of all purchases or sales of shares of one or more Funds for the Depositors Custodial Account. Any account maintained in connection herewith shall be in the name of the Custodian for the benefit of the Depositor. All assets of the Custodial Account shall be registered in the name of the Custodian or of a suitable nominee. The books and records of the Custodian shall show that all such investments are part of the Custodial Account. The Custodian shall maintain or cause to be maintained adequate records reflecting transactions of the Custodial Account. In the discretion of the Custodian, records maintained by the Service Company with respect to the Account hereunder will be deemed to satisfy the Custodians recordkeeping responsibilities therefor. The Service Company agrees to furnish the Custodian with any information the Custodian requires to carry out the Custodians recordkeeping responsibilities. 7. Neither the Custodian nor any other party providing services to the Custodial Account will have any responsibility for rendering advice with respect to the investment and reinvestment of Depositors Custodial Account, nor shall such parties be liable for any loss or diminution in value which results from Depositors exercise of investment control over his Custodial Account. Depositor shall have and exercise exclusive responsibility for and control over the investment of the assets of his Custodial Account, and neither Custodian nor any other such party shall have any duty to question his directions in that regard or to advise him regarding the purchase, retention or sale of shares of one or more Funds for the Custodial Account. 8. The Depositor may in writing appoint an investment adviser with respect to the Custodial Account on a form acceptable to the Custodian and the Service Company. The investment advisers appointment will be in effect until written notice to the contrary is received by the Custodian and the Service Company. While an investment advisers appointment is in effect, the investment adviser may issue investment directions or may issue orders for the sale or purchase of shares of one or
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more Funds to the Service Company, and the Service Company will be fully protected in carrying out such investment directions or orders to the same extent as if they had been given by the Depositor. The Depositors appointment of any investment adviser will also be deemed to be instructions to the Custodian and the Service Company to pay such investment advisers fees to the investment adviser from the Custodial Account hereunder without additional authorization by the Depositor or the Custodian. 9. (a) Distribution of the assets of the Custodial Account shall be made at such time and in such form as Depositor (or the Beneficiary if Depositor is deceased) shall elect by written order to the Custodian. Depositor acknowledges that any distribution of a taxable amount from the Custodial Account (except for distribution on account of Depositors disability or death, return of an excess contribution referred to in Code Section 4973, or a rollover from this Custodial Account) made earlier than age 5912 may subject Depositor to an additional tax on early distributions under Code Section 72(t) unless an exception to such additional tax is applicable. For that purpose, Depositor will be considered disabled if Depositor can prove, as provided in Code Section 72(m)(7), that Depositor is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or be of long-continued and indefinite duration. It is the responsibility of the Depositor (or the Beneficiary) by appropriate distribution instructions to the Custodian to insure that any applicable distribution requirements of Code Section 401(a)(9) and Article IV above are met. If the Depositor (or Beneficiary) does not direct the Custodian to make distributions from the Custodial Account by the time that such distributions are required to commence in accordance with such distribution requirements, the Custodian (and Service Company) shall assume that the Depositor (or Beneficiary) is meeting any applicable minimum distribution requirements from another individual retirement arrangement maintained by the Depositor (or Beneficiary) and the Custodian and Service Company shall be fully protected in so doing. (b) The Depositor acknowledges (i) that any withdrawal from the Custodial Account will be reported by the Custodian in accordance with applicable IRS requirements (currently, on Form 1099-R), (ii) that the information reported by the Custodian will be based on the amounts in the Custodial Account and will not reflect any other individual retirement accounts the
Depositor may own and that, consequently, the tax treatment of the withdrawal may be different than if the Depositor had no other individual retirement accounts, and (iii) that, accordingly, it is the responsibility of the Depositor to maintain appropriate records so that the Depositor (or other person ordering the distribution) can correctly compute all taxes due. Neither the Custodian nor any other party providing services to the Custodial Account assumes any responsibility for the tax treatment of any distribution from the Custodial Account; such responsibility rests solely with the person ordering the distribution. 10. The Custodian assumes (and shall have) no responsibility to make any distribution except upon the written order of Depositor (or Beneficiary if Depositor is deceased) containing such information as the Custodian may reasonably request. Also, before making any distribution from or honoring any assignment of the Custodial Account, Custodian shall be furnished with any and all applications, certificates, tax waivers, signature guarantees, releases, indemnification agreements, and other documents (including proof of any legal representatives authority) deemed necessary or advisable by Custodian, but Custodian shall not be responsible for complying with any order or instruction which appears on its face to be genuine, or for refusing to comply if not satisfied it is genuine, and Custodian has no duty of further inquiry. Any distributions from the Account may be mailed, first-class postage prepaid, to the last known address of the person who is to receive such distribution, as shown on the Custodians records, and such distribution shall to the extent thereof completely discharge the Custodians liability for such payment. 11. (a) The term Beneficiary means the person or persons designated as such by the designating person (as defined below) on a form acceptable to the Custodian for use in connection with the Custodial Account, signed by the designating person, and filed with the Custodian. If, in the opinion of the Custodian or Service Company, any designation of beneficiary is unclear or incomplete, in addition to any documents or assurances the Custodian may request under Section 10, the Custodian or Service Company shall be entitled to request and receive such clarification or additional instructions as the Custodian in its discretion deems necessary to determine the correct Beneficiary(ies) following the Depositors death. The form designating the Beneficiary(ies) may name individuals, trusts, estates, or other entities as either primary or contingent beneficiaries. However, if the designation does not effectively dispose of the entire Custodial Account as of the time distribution is to commence, the term
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Beneficiary shall then mean the designating persons estate with respect to the assets of the Custodial Account not disposed of by the designation form. The form last accepted by the Custodian before such distribution is to commence, provided it was received by the Custodian (or deposited in the U.S. Mail or with a reputable delivery service) during the designating persons lifetime, shall be controlling and, whether or not fully dispositive of the Custodial Account, thereupon shall revoke all such forms previously filed by that person. The term designating person means Depositor during his/her lifetime; only after Depositors death, it also means Depositors spouse if the spouse is a Beneficiary and elects to transfer assets from the Custodial Account to the spouses own Custodial Account in accordance with applicable provisions of the Code. (Note: Married Depositors who reside in a community property or marital property state (Arizona, California, Idaho, Louisiana, Nevada, new Mexico, Texas, Washington or Wisconsin), may need to obtain spousal consent if they have not designated their spouse as the primary Beneficiary for at least half of their Account. Consult a lawyer or other tax professional for additional information and advice.) (b) Notwithstanding any provisions in this Agreement to the contrary, when and after the distribution from the Custodial Account to Depositors Beneficiary commence, all rights and obligations assigned to Depositor hereunder shall inure to, and be enjoyed and exercised by, Beneficiary instead of Depositor. (c) Notwithstanding Section 3 of Article IV of Part Two above, if the Depositors spouse is the sole Beneficiary on the Depositors date of death, the spouse will not be treated as the Depositor if the spouse elects not to be so treated. In such event, the Custodial Account will be distributed in accordance with the other provisions of such Article IV, except that distributions to the Depositors spouse are not required to commence until December 31 of the year in which the Depositor would have turned age 7012. 12. (a) The Depositor agrees to provide information to the Custodian at such time and in such manner as may be necessary for the Custodian to prepare any reports required under Section 408(i) or Section 408A(d)(3)(E) of the Code and the regulations thereunder or otherwise. (b) The Custodian or the Service Company will submit reports to the Internal Revenue Service and the Depositor at such time and manner and containing such information as is prescribed by the Internal Revenue Service.
(c) The Depositor, Custodian and Service Company shall furnish to each other such information relevant to the Custodial Account as may be required under the Code and any regulations issued or forms adopted by the Treasury Department thereunder or as may otherwise be necessary for the administration of the Custodial Account. (d) The Depositor shall file any reports to the Internal Revenue Service which are required of him by law (including Form 5329), and neither the Custodian nor Service Company shall have any duty to advise Depositor concerning or monitor Depositors compliance with such requirement. 13. (a) Depositor retains the right to amend this Custodial Account document in any respect at any time, effective on a stated date which shall be at least 60 days after giving written notice of the amendment (including its exact terms) to Custodian by registered or certified mail, unless Custodian waives notice as to such amendment. If the Custodian does not wish to continue serving as such under this Custodial Account document as so amended, it may resign in accordance with Section 17 below. (b) Depositor delegates to the Custodian the Depositors right so to amend, provided (i) the Custodian does not change the investments available under this Custodial Agreement and (ii) the Custodian amends in the same manner all agreements comparable to this one, having the same Custodian, permitting comparable investments, and under which such power has been delegated to it; this includes the power to amend retroactively if necessary or appropriate in the opinion of the Custodian in order to conform this Custodial Account to pertinent provisions of the Code and other laws or successor provisions of law, or to obtain a governmental ruling that such requirements are met, to adopt a prototype or master form of agreement in substitution for this Agreement, or as otherwise may be advisable in the opinion of the Custodian. Such an amendment by the Custodian shall be communicated in writing to Depositor, and Depositor shall be deemed to have consented thereto unless, within 30 days after such communication to Depositor is mailed, Depositor either (i) gives Custodian a written order for a complete distribution or transfer of the Custodial Account, or (ii) removes the Custodian and appoints a successor under Section 17 below. Pending the adoption of any amendment necessary or desirable to conform this Custodial Account document to the requirements of any amendment to any applicable provision of the Internal Revenue Code
32
or regulations or rulings thereunder (including any amendment to Form 5305-A or Form 5305-RA), the Custodian and the Service Company may operate the Depositors Custodial Account in accordance with such requirements to the extent that the Custodian and/or the Service Company deem necessary to preserve the tax benefits of the Account. (c) Notwithstanding the provisions of subsections (a) and (b) above, no amendment shall increase the responsibilities or duties of Custodian without its prior written consent. (d) This Section 13 shall not be construed to restrict the Custodians right to substitute fee schedules in the manner provided by Section 16 below, and no such substitution shall be deemed to be an amendment of this Agreement. 14. (a) Custodian shall terminate the Custodial Account if this Agreement is terminated or if, within 30 days (or such longer time as Custodian may agree) after resignation or removal of Custodian under Section 17, Depositor or Sponsor, as the case may be, has not appointed a successor which has accepted such appointment. Termination of the Custodial Account shall be effected by distributing all assets thereof in a single payment in cash or in kind to Depositor, subject to Custodians right to reserve funds as provided in Section 17. (b) Upon termination of the Custodial Account, this custodial account document shall have no further force and effect (except for Sections 15(f), 17(b) and (c) hereof which shall survive the termination of the Custodial Account and this document), and Custodian shall be relieved from all further liability hereunder or with respect to the Custodial Account and all assets thereof so distributed. 15. (a) In its discretion, the Custodian may appoint one or more contractors or service providers to carry out any of its functions and may compensate them from the Custodial Account for expenses attendant to those functions. In the event of such appointment, all rights and privileges of the Custodian under this Agreement shall pass through to such contractors or service providers who shall be entitled to enforce them as if a named party. (b) The Service Company shall be responsible for receiving all instructions, notices, forms and remittances from Depositor and for dealing with or forwarding the same to the transfer agent for the Fund(s). (c) The parties do not intend to confer any fiduciary
duties on Custodian or Service Company (or any other party providing services to the Custodial Account), and none shall be implied. Neither shall be liable (or assumes any responsibility) for the collection of contributions, the proper amount, time or tax treatment of any contribution to the Custodial Account or the propriety of any contributions under this Agreement, or the purpose, time, amount (including any minimum distribution amounts), tax treatment or propriety of any distribution hereunder, which matters are the sole responsibility of Depositor and Depositors Beneficiary. (d) Not later than 60 days after the close of each calendar year (or after the Custodians resignation or removal), the Custodian or Service Company shall file with Depositor a written report or reports reflecting the transactions effected by it during such period and the assets of the Custodial Account at its close. Upon the expiration of 60 days after such a report is sent to Depositor (or Beneficiary), the Custodian or Service Company shall be forever released and discharged from all liability and accountability to anyone with respect to transactions shown in or reflected by such report except with respect to any such acts or transactions as to which Depositor shall have filed written objections with the Custodian or Service Company within such 60 day period. (e) The Service Company shall deliver, or cause to be delivered, to Depositor all notices, prospectuses, financial statements and other reports to shareholders, proxies and proxy soliciting materials relating to the shares of the Funds(s) credited to the Custodial Account. No shares shall be voted, and no other action shall be taken pursuant to such documents, except upon receipt of adequate written instructions from Depositor. (f) Depositor shall always fully indemnify Service Company, Distributor, the Fund(s), Sponsor and Custodian and save them harmless from any and all liability whatsoever which may arise either (i) in connection with this Agreement and the matters which it contemplates, except that which arises directly out of the Service Companys, Distributors, Funds, Sponsors or Custodians bad faith, gross negligence or willful misconduct, (ii) with respect to making or failing to make any distribution, other than for failure to make distribution in accordance with an order therefor which is in full compliance with Section 10, or (iii) actions taken or omitted in good faith by such parties. Neither Service Company nor Custodian shall be obligated or expected to commence or defend any legal action or proceeding in connection with this Agreement or such matters unless agreed upon by that party and Depositor, and unless fully indemnified for so doing to that partys satisfaction. 33
(g) The Custodian and Service Company shall each be responsible solely for performance of those duties expressly assigned to it in this Agreement, and neither assumes any responsibility as to duties assigned to anyone else hereunder or by operation of law. (h) The Custodian and Service Company may each conclusively rely upon and shall be protected in acting upon any written order from Depositor or Beneficiary, or any investment adviser appointed under Section 8, or any other notice, request, consent, certificate or other instrument or paper believed by it to be genuine and to have been properly executed, and so long as it acts in good faith, in taking or omitting to take any other action in reliance thereon. In addition, Custodian will carry out the requirements of any apparently valid court order relating to the Custodial Account and will incur no liability or responsibility for so doing. 16. (a) The Custodian, in consideration of its services under this Agreement, shall receive the fees specified on the applicable fee schedule. The fee schedule originally applicable shall be the one specified in the Adoption Agreement or Disclosure Statement, as applicable. The Custodian may substitute a different fee schedule at any time upon 30 days written notice to Depositor. The Custodian shall also receive reasonable fees for any services not contemplated by any applicable fee schedule and either deemed by it to be necessary or desirable or requested by Depositor. (b) Any income, gift, estate and inheritance taxes and other taxes of any kind whatsoever, including transfer taxes incurred in connection with the investment or reinvestment of the assets of the Custodial Account, that may be levied or assessed in respect to such assets, and all other administrative expenses incurred by the Custodian in the performance of its duties (including fees for legal services rendered to it in connection with the Custodial Account) shall be charged to the Custodial Account. If the Custodian is required to pay any such amount, the Depositor (or Beneficiary) shall promptly upon notice thereof reimburse the Custodian. (c) All such fees and taxes and other administrative expenses charged to the Custodial Account shall be collected either from the amount of any contribution or distribution to or from the Account, or (at the option of the person entitled to collect such amounts) to the extent possible under the circumstances by the conversion into cash of sufficient shares of one or more Funds held in the Custodial Account (without liability for any loss incurred thereby). Notwithstanding the foregoing, the Custodian or Service Company may make demand upon the Depositor for payment of the amount of such fees, taxes and other administrative
expenses. Fees which remain outstanding after 60 days may be subject to a collection charge. 17. (a) Upon 30 days prior written notice to the Custodian, Depositor or Sponsor, as the case may be, may remove it from its office hereunder. Such notice, to be effective, shall designate a successor custodian and shall be accompanied by the successors written acceptance. The Custodian also may at any time resign upon 30 days prior written notice to Sponsor, whereupon the Sponsor shall notify the Depositor (or Beneficiary) and shall appoint a successor to the Custodian. In connection with its resignation hereunder, the Custodian may, but is not required to, designate a successor custodian by written notice to the Sponsor or Depositor (or Beneficiary), and the Sponsor or Depositor (or Beneficiary) will be deemed to have consented to such successor unless the Sponsor or Depositor (or Beneficiary) designates a different successor custodian and provides written notice thereof together with such a different successors written acceptance by such date as the Custodian specifies in its original notice to the Sponsor or Depositor (or Beneficiary) (provided that the Sponsor or Depositor (or Beneficiary) will have a minimum of 30 days to designate a different successor). (b) The successor custodian shall be a bank, insured credit union, or other person satisfactory to the Secretary of the Treasury under Code Section 408(a)(2). Upon receipt by Custodian of written acceptance by its successor of such successors appointment, Custodian shall transfer and pay over to such successor the assets of the Custodial Account and all records (or copies thereof) of Custodian pertaining thereto, provided that the successor custodian agrees not to dispose of any such records without the Custodians consent. Custodian is authorized, however, to reserve such sum of money or property as it may deem advisable for payment of all its fees, compensation, costs, and expenses, or for payment of any other liabilities constituting a charge on or against the assets of the Custodial Account or on or against the Custodian, with any balance of such reserve remaining after the payment of all such items to be paid over to the successor custodian. (c) Any Custodian shall not be liable for the acts or omissions of its predecessor or its successor. 18. References herein to the Internal Revenue Code or Code and sections thereof shall mean the same as amended from time to time, including successors to such sections. 19. Except where otherwise specifically required in this Agreement, any notice from Custodian to any person
34
provided for in this Agreement shall be effective if sent by first-class mail to such person at that persons last address on the Custodians records. 20. Depositor or Depositors Beneficiary shall not have the right or power to anticipate any part of the Custodial Account or to sell, assign, transfer, pledge or hypothecate any part thereof. The Custodial Account shall not be liable for the debts of Depositor or Depositors Beneficiary or subject to any seizure, attachment, execution or other legal process in respect thereof except to the extent required by law. At no time shall it be possible for any part of the assets of the Custodial Account to be used for or diverted to purposes other than for the exclusive benefit of the Depositor or his/her Beneficiary except to the extent required by law. 21. When accepted by the Custodian, this Agreement is accepted in and shall be construed and administered in accordance with the laws of the state where the principal offices of the Custodian are located. Any action involving the Custodian brought by any other party must be brought in a state or federal court in such state. If in the Adoption Agreement, Depositor designates that the Custodial Account is a Traditional IRA, this Agreement is intended to qualify under Code Section 408(a) as an individual retirement custodial account and to entitle Depositor to the retirement savings deduction under Code Section 219 if available. If in the Adoption Agreement Depositor designates that the Custodial Account is a Roth IRA, this Agreement is intended to qualify under Code Section 408A as a Roth individual retirement Custodial Account and to entitle Depositor to the tax-free withdrawal of amounts from the Custodial Account to the extent permitted in such Code section. If any provision hereof is subject to more than one interpretation or any term used herein is subject to more than one construction, such ambiguity shall be resolved in favor of that interpretation or construction which is consistent with the intent expressed in whichever of the two preceding sentences is applicable. However, the Custodian shall not be responsible for whether or not such intentions are achieved through use of this Agreement, and Depositor is referred to Depositors attorney for any such assurances. 22. Depositor should seek advice from Depositors attorney regarding the legal consequences (including but not limited to federal and state tax matters) of entering into this Agreement, contributing to the Custodial Account, and ordering Custodian to make
distributions from the Account. Depositor acknowledges that Custodian and Service Company (and any company associated therewith) are prohibited by law from rendering such advice. 23. If any provision of any document governing the Custodial Account provides for notice, instructions or other communications from one party to another in writing, to the extent provided for in the procedures of the Custodian, Service Company or another party, any such notice, instructions or other communications may be given by telephonic, computer, other electronic or other means, and the requirement for written notice will be deemed satisfied. 24. The legal documents governing the Custodial Account are as follows: (a) If in the Adoption Agreement the Depositor designated the Custodial Account as a Traditional IRA under Code Section 408(a), the provisions of Part One and Part Three of this Agreement and the provisions of the Adoption Agreement are the legal documents governing the Depositors Custodial Account. (b) If in the Adoption Agreement the Depositor designated the Custodial Account as a Roth IRA under Code Section 408A, the provisions of Part Two and Part Three of this Agreement and the provisions of the Adoption Agreement are the legal documents governing the Depositors Custodial Account. In the Adoption Agreement the Depositor must designate the Custodian Account as either a Roth IRA or a Traditional IRA, and a separate account will be established for such IRA. One Custodial Account may not serve as a Roth IRA and a Traditional IRA (through the use of subaccounts or otherwise). The Depositor acknowledges that the Service Company may require the establishment of different Roth IRA accounts to hold annual contributions under Code Section 408A(c)(2) and to hold conversion amounts under Code Section 408A(c)(3)(B). The Service Company may also require the establishment of different Roth IRA accounts to hold amounts converted in different calendar years. If the Service Company does not require such separate account treatment, the Depositor may make annual contributions and conversion contributions to the same account. The Depositor acknowledges that the Service Company may require the establishment of different Traditional IRA accounts to hold pre-tax amounts and any after-tax amounts.
25. This Agreement and the Adoption Agreement signed by the Depositor (as either may be amended) are the documents governing the Depositors Custodial Account. Articles I through VII of Part One of this Agreement are in the form promulgated by the Internal Revenue Service as Form 5305-A. It is anticipated that, if and when the Internal Revenue Service promulgates changes to Form 5305-A, the Custodian will amend this Agreement correspondingly. Articles I through VII of Part Two of this Agreement are in the form promulgated by the Internal Revenue Service as Form 5305-RA. It is anticipated that, if and when the Internal Revenue Service promulgates changes to Form 5305-RA, the Custodian will amend this Agreement correspondingly. The Internal Revenue Service has endorsed the use of documentation permitting a Depositor to establish either a Traditional IRA or Roth IRA (but not both using a single Adoption Agreement), and this Kit complies with the requirements of the IRS guidance for such use. If the Internal Revenue Service subsequently determines that such an approach is not permissible, or that the use of a combined Adoption Agreement does not establish a valid Traditional IRA or a Roth IRA (as the case may be), the Custodian will furnish the Depositor with replacement documents and the Depositor will if necessary sign such replacement documents. Depositor acknowledge and agrees to such procedures and to cooperate with Custodian to preserve the intended tax treatment of the Account. 26. If the Depositor maintains an Individual Retirement Account under Code Section 408(a), Depositor may convert or transfer such other IRA to a Roth IRA under Code Section 408A using the terms of this Agreement and the Adoption Agreement by completing and executing the Adoption Agreement and giving suitable directions to the Custodian and the custodian or trustee of such other IRA. Alternatively, the Depositor may convert or transfer such other IRA to a Roth IRA by use of a reply card or by telephonic, computer or electronic means in accordance with procedures adopted by the Custodian or Service Company intended to meet the requirements of Code Section 408A, and the Depositor will be deemed to have executed the Adoption Agreement and adopted the provisions of this Agreement and the Adoption Agreement in accordance with such procedures. In accordance with the requirements of Code Section 408A(d)(6) and regulations thereunder, the Depositor may recharacterize a contribution to a Traditional IRA as a contribution to a Roth IRA, or may recharacterize
35
a contribution to a Roth IRA as a contribution to a Traditional IRA. The Depositor agrees to observe any limitations imposed by the Service Company on the number of such transactions in any year (or any such limitations or other restrictions that may be imposed by the Service Company or the IRS). 27. The Depositor acknowledges that he or she has received and read the current prospectus for each Fund in which his or her Account is invested and the Individual Retirement Account Disclosure Statement related to the Account. The Depositor represents under penalties of perjury that his or her Social Security number (or other Taxpayer Identification Number) as stated in the Adoption Agreement is correct. 28. If all required forms and information are properly submitted, State Street Bank and Trust Company will accept appointment as Custodian of the Depositors Account. However, this Agreement (and the Adoption Agreement) is not binding upon the Custodian until the Depositor has received a statement confirming the initial transaction for the Account. Receipt by the Depositor of a confirmation of the purchase of the Fund shares indicated in the Depositors Adoption Agreement will serve as notification of State Street Bank and Trust Companys acceptance of appointment as Custodian of the Depositors Account. 29. If the Depositor is a minor under the laws of his or her state of residence, then a parent or guardian shall exercise all powers and duties of the Depositor, as indicated herein, and shall sign the Adoption Agreement on behalf of the minor. The Custodians acceptance of the Account on behalf of any Depositor who is a minor is expressly conditioned upon the agreement of the parent or guardian to accept the responsibility to exercise all such powers and duties, and all parties hereto so acknowledge. Upon attainment of the age of majority under the laws of the Depositors state of residence at
such time, the Depositor may advise the Custodian in writing (accompanied by such documentation as the Custodian may require) that he or she is assuming sole responsibility to exercise all rights, powers, obligations, responsibilities, authorities or requirements associated with the Account. Upon such notice to the Custodian, the Depositor shall have and shall be responsible for all of the foregoing, the Custodian will deal solely with the Depositor as the person controlling the administration of the Account, and the Depositors parent or guardian thereafter shall not have or exercise any of the foregoing. (Absent such written notice from the Depositor, Custodian shall be under no obligation to acknowledge the Depositors right to exercise such powers and authority and may continue to rely on the parent or guardian to exercise such powers and authority until notified to the contrary by the Depositor.) 30. Depositor acknowledges that it is his/her sole responsibility to report all contributions to or withdrawals from the Custodial Account correctly on his or her tax returns, and to keep necessary records of all the Depositors IRAs (including any that may be held by another custodian or trustee) for tax purposes. All forms must be acceptable to the Custodian and dated and signed by the Depositor.
AARP Funds P.O. Box 8035 Boston, MA 02266-8035 1-800-958-6457 www.aarpfunds.com
2007 AARP Funds
ARP-CU-002-1107

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Individual Retirement Account Opening Kit

Prepare for Retirement

Experienced AARP Financial Investment Counselors

Preparing for Retirement

Planning for Your Retirement Income

Sources of Retirement Income

38.6% Social Security

The Traditional IRA

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The Roth IRA

Important issues when converting to a Roth IRA

Converting an IRA to a Roth IRA

The SEP IRA

Rolling Over Your IRA or 401(k)

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Same as Traditional IRA

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Contributions are not tax deductible

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Minimum annual distributions based on life expectancy must begin at age 70 6

Traditional IRA Deductibility MAGI** Thresholds

2008 2008 2008

< = $53,000 < = $85,000 < = $159,000

> = $63,000 > = $105,000 > = $169,000

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