Treasurer Alexi Giannoulias sent the following letter to Bright Start investors Thursday, Jan. 29 alerting them to possible legal action against OppenheimerFunds Inc.

January 29, 2009

Dear Bright Start Account Holder:

Given the volatility the financial markets experienced during the past year, most of us watched our account balances decline despite the care with which we chose the Bright Start Program’s investments.

Unfortunately, the OFII Core Plus Fixed Income Strategy (“Core Plus”), one of the Bright Start Program’s underlying investments, has underperformed its benchmarks in 2008, causing some account holders to experience significant performance setbacks during the year.

My office is urgently working with the Illinois Attorney General’s Office to determine how the Core Plus investment was managed and what immediate action should be taken. OppenheimerFunds, Bright Start’s program manager, intends to cooperate fully with any requests for information made of them as part of our investigation.

Although only a small percentage of Bright Start participants had portfolios invested entirely in Core Plus, other portfolios experienced some degree of exposure. The portfolios that were impacted include the actively managed Choice Based Fixed Income Portfolio, the Choice Based Balanced Income Portfolio and the Aged Based portfolios (“Affected Portfolios”).

To stem further declines resulting from the Bright Start Program’s investment in Core Plus, we took action on December 4, 2008, directing all new monies allocable to Core Plus to short-term U.S. Treasuries. As of January 26, 2009, all new contributions to the Affected Portfolios that would otherwise have been allocable to Core Plus will be invested in fixed income funds managed by Vanguard and American Century. Contributions to the Affected Portfolios that were allocated to Core Plus prior to December 4, 2008, will remain invested in Core Plus to avoid locking in past performance declines. We feel that this strategy is well positioned to take advantage of current market opportunities.

I want to stress that we are addressing the Core Plus investment and that Bright Start remains a strong program and continues to offer numerous investment options.

Like all of you, I am extremely dissatisfied with the performance of the Core Plus investment, and I will work tirelessly to address the situation and will keep you apprised of further actions.

Should you have any questions, please feel free to call 1-877-432-7444.

Sincerely,
Alexi Giannoulias
Illinois State Treasurer

  
     
 
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