KP Stable Income Fund

Transcription

1 KP Stable Income Fund Investment Objective Stable Income Fund: The Fund seeks to preserve capital while generating a stable income stream comparable to the returns of short-term U.S. fixed income securities. Investment Strategy The Fund s sub-advisor manages a diversified portfolio composed of high-quality fixed income securities; investment contracts with credit-worthy insurance companies designed to smooth market volatility; and short-term money market instruments. The principal and interest from these investments is strategically reinvested with the goal of producing a stable income stream, while maintaining a stable share value of $1. No assurances can be made that the Fund will achieve its investment goals. Although the Fund s sub-advisor recommends highly rated investments for the fund, the contracts held by the fund are not guaranteed by the U.S. government, the Trustee, the sub-advisors, the plan recordkeeper, or your retirement plan. Who Should Invest in This Fund? Investors seeking modest interest income and little fluctuation in share price. Investors seeking to preserve capital and maintain liquidity. Investors seeking a stable complement to an otherwise diversified long-term portfolio. Who Should Not Invest in This Fund? Fund Management Information Fund Expense Ratio: 0.34% Total Expense Ratio: 0.34% Fund Trustee: Fund Advisor: Plan Recordkeeper: Fund Sub-Advisors: Global Trust Company Callan Associates Vanguard Standish Mellon Asset Management Company Fund Inception Date: October 1, 2004 Risk Level December 31, 2017 Conservative Moderate Aggressive Time Horizon Short Term 5 Years 10 Years + Investment Performance Ranking (Periods Ended December 31, 2017) This chart compares the Fund s net-of-fee performance to other funds with similar objectives (in this case the Callan Stable Value Fund Universe). The number next to each bar indicates the Fund s ranking for that period. Past performance is not indicative of future results. Please see additional performance disclosures on second page. Return Ranking (77) Callan Stable Value Universe Last Quarter Last Year Last 3 Years Last 5 Years Last 10 Years KP Stable Income Fund Month Treasury Bills Average Stable Value Fund Calendar Year Investment Performance KP Stable Income Fund 3-month Treasury Bills (64) Investment Characteristics (50) (48) (53) Investors seeking long-term capital appreciation. Investors seeking to achieve a return much above the rate of inflation. Returns Portfolio Information Fund Statistics Total Assets: $1,469,126,725 Net Annualized Yield: 1.88% Average Duration: 2.97 Average Credit Quality: AA Net Annualized Yield: The current annual percent yield on the portfolio net of all fund expenses. Average Duration: An indicator of interest rate risk, this figure is related to the average maturity of the bonds held in the portfolio. Longer duration bonds are considered riskier because their prices fluctuate more when market interest rates change. Average Credit Quality: An indicator of credit risk or the likelihood that a bond issuer will default on their obligation. This figure measures the average credit rating assigned to the fund holdings by credit rating agencies. Ratings range from least risky (AAA to AA) to moderate risk (A to BBB) to most risky (BB, B, CCC, CC and C). Fixed Income Risk Profile Higher Risk Credit Risk KP Stable Income Fund Lower Risk Interest Rate Risk Please See Footnotes and Important Disclosures on Reverse Side. Powered by Callan

2 KP Stable Income Fund IMPORTANT DISCLOSURES Performance Disclosures The performance information shown represents past performance and should not be considered indicative of future results. Principal value and investment return will fluctuate. An investor s units when redeemed may be worth more or less than the original investment. Fund portfolio statistics change over time. The Fund is not FDIC-insured, may lose value and is not guaranteed by the US government, a bank, or other financial institution. Current performance may be lower or higher than the performance data cited. For performance data current to the most recent month-end, please visit your plan recordkeeper s website at or call Vanguard at (800) Figures for periods of less than one year are cumulative returns. All other figures represent annualized returns. Performance figures include the reinvestment of all coupon income. All performance is shown net of fees and fund expenses. As of January 1, 2011 there was a change in the Fund s legal and management structure, pursuant to which the sub-advisor assumed a nondiscretionary role, and Callan and GTC became non-discretionary advisor and Trustee respectively. The administrative expenses of the Fund have also changed over time. Past performance does not necessarily reflect the Fund s current management or the Fund s current expense level. The Fund is compared to the 3-month Treasury Bill Index, and to a universe of funds with similar objectives, in this case the Callan Stable Value Fund Universe. Performance for the funds included in this universe is shown net of investment management fees, but does not include any expenses that may be charged by plan recordkeepers. The Fund s ranking over a given time period measures the percentage of funds in the universe that generated a higher return than the Fund. For example, a ranking of 25 would indicate that 25% of the funds in the universe had a higher return than the Fund over that period. Fees and Expenses Fees and expenses will reduce the return of any investment over time. The Total Expense Ratio for the Fund represents an estimate of the total annual expenses charged to the investor expressed as a percentage of their total investment. For example, an investment of $1,000 in a Fund with a Total Expense Ratio of 0.34%, will result in total annual expenses of approximately $3.40. Expenses included in the Total Expense Ratio include (but are not limited to): investment management fees; wrap fees; sub-advisory investment management fees; and Trust, custody, legal and audit fees. An annual administrative expense of 0.05% charged by the plan s recordkeeper was discontinued effective July 2nd, Fund expenses are subject to change over time. Net Yield The Net Annualized Yield for the Fund is a measure of the annual yield of the portfolio, as of the stated date, net of all fund expenses including the recordkeeper expense. Annualized Net Yield will fluctuate over even short periods of time, and the current Annualized Net Yield may be lower or higher than the level shown on the most recent fund fact sheet. Fund Risks A stable value fund investment does not constitute a balanced investment program. It favors capital preservation over potential long-term capital appreciation. Although the sub-advisor selects highly rated investments for the fund, the principal value of the fund is not guaranteed by the U.S. government, the Trustee, the plan recordkeeper or your retirement plan. A stable value fund is designed as a low-risk investment, but you could still lose money by investing in it. The primary risks of investing in the fund are: Credit risk: The chance that an issuer will fail to pay interest and principal in a timely manner. Income risk: The possibility that a fund s income will decline as a result of falling interest rates. Because the Fund s yield is influenced by average interest rates over a period of several years, the fund s yield may remain below current market yields for prolonged periods during periods of rising interest rates. Inflation risk: The chance that fund returns will not keep pace with the cost of living. Fixed income funds typically won t keep pace with inflation during periods of rising inflation. Interest rate risk: The chance that the fund s price per share will decline as a result of rising interest rates, resulting in losses on investments made in the fund. This risk is minimized by the fact that the Fund invests primarily in investment contracts which enable the fund, under present accounting standards, to value its assets at book value. Fund Legal Structure The KP Stable Income Fund is not a mutual fund, and therefore does not have a ticker symbol or CUSIP. Rather, it is a Group Trust" within the meaning of IRS Revenue Ruling , as amended, and a bankmaintained fund under applicable securities laws. The KP Stable Income Fund is maintained by Global Trust Company, a non-depository trust company. It is advised on a non-discretionary basis by Callan Associates Inc., a registered investment advisor, and sub-advised on a nondiscretionary basis by Standish Mellon Asset Management Company, a registered investment advisor. Effective 1/1/13, Dreyfus Stable Value team transitioned to Standish Mellon, an affiliated investment advisor. The Fund is managed solely for the benefit of Kaiser Permanente employees, and only participants of the Kaiser plans can invest in the Fund. Participation in the KP Stable Income Fund is governed by a declaration of trust and terms of the participation materials, which must be reviewed and signed by a Kaiser plan fiduciary in order for plan participants to be eligible to invest in the fund. About the Fund s Advisor Founded in 1973, Callan is one of the largest independently-owned investment management and consulting firms in the United States. Headquartered in San Francisco, with offices across the country, Callan provides research, education, decision support, and advice to institutional investors representing approximately $2 trillion in total assets. About the Fund s Trustee Global Trust Company (GTC) is a non-depository trust company with operations in Woburn, Massachusetts. As an independent fiduciary and fund sponsor, GTC maintains the fund and oversees all compliance related functions for the Fund including trade monitoring, pricing, performance, annual reporting and investor eligibility. Fund Profiles are produced by Callan Associates. Information is not warranted to be accurate or timely by Callan or the plan recordkeeper, Vanguard. Neither Callan, nor its content providers are responsible for any damages arising from any use of this information. For additional information on this investment, visit or call (800)

3 THE KAISER PERMANENTE COLLECTIVE INVESTMENT TRUST KP STABLE INCOME FUND OFFERING MEMORANDUM This Offering Memorandum is not intended as an offer to buy or sell securities and the Trust is not soliciting offers to buy these units in any jurisdiction where the offer or sale is not permitted

4 LEGAL DISCLOSURE THIS OFFERING MEMORANDUM AND THE FUND IT DESCRIBES IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS AN INTEREST IN A COLLECTIVE INVESTMENT FUND FOR EMPLOYEE BENEFIT TRUSTS. NO PUBLIC MARKET WILL DEVELOP FOR THE UNITS OF PARTICIPATION. THE UNITS OF PARTICIPATION ARE NOT TRANSFERABLE OR REDEEMABLE EXCEPT UPON SATISFACTION OF CERTAIN CONDITIONS DESCRIBED UNDER WITHDRAWALS. THE UNITS OF PARTICIPATION OFFERED HEREBY HAVE NOT BEEN REGISTERED WITH OR APPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE, NOR HAS ANY SUCH COMMISSION OR REGULATORY AUTHORITY PASSED UPON THE ACCURACY OR ADEQUACY OF THIS OFFERING MEMORANDUM. PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS CIRCULAR AS INVESTMENT, TAX, OR LEGAL ADVICE. THIS OFFERING MEMORANDUM, AS WELL AS THE NATURE OF THE INVESTMENT, SHOULD BE REVIEWED BY EACH PROSPECTIVE INVESTOR WITH ITS INVESTMENT ADVISERS, ACCOUNTANTS, OR LEGAL COUNSEL. NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS OFFERING MEMORANDUM, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON. THIS OFFERING MEMORANDUM CONTAINS SUMMARIES, BELIEVED TO BE ACCURATE, OF CERTAIN TERMS OF CERTAIN DOCUMENTS RELATING TO THE DECLARATION OF TRUST. FOR COMPLETE INFORMATION CONCERNING THE RIGHTS AND OBLIGATIONS OF THE PARTIES THERETO, REFERENCE IS HEREBY MADE TO THE ACTUAL DOCUMENTS, COPIES OF WHICH WILL BE FURNISHED UPON REQUEST, PRIOR TO ACCEPTANCE OF THE PARTICIPATION AGREEMENT. ALL SUCH SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY BY THIS REFERENCE. NEITHER THE ATTORNEY GENERAL NOR THE SECURITIES DEPARTMENT OF ANY STATE HAS PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING MEMORANDUM. ANY REPRESENTATIONS TO THE CONTRARY ARE UNLAWFUL. IN THE EVENT OF A CONFLICT BETWEEN THE PROVISIONS OF THIS MEMORANDUM AND THE DECLARATION OF TRUST OR PARTICIPATION AGREEMENT, THE DECLARATION OF TRUST OR PARTICIPATION AGREEMENT WILL PREVAIL. THIS OFFERING INVOLVES RISKS. INVESTORS MAY LOSE ALL OR SUBSTANTIALLY ALL OF THEIR INVESTMENT. NO ASSURANCE CAN BE GIVEN THAT THE FUND'S INVESTMENT OBJECTIVE WILL BE ACHIEVED AND ITS INVESTMENT RESULTS MAY VARY SUBSTANTIALLY OVER TIME. IN REACHING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE DECLARATION OF TRUST AND THIS MEMORANDUM, INCLUDING THE MERITS AND RISKS INVOLVED. THE FUND IS NOT AND WILL NOT BE REGISTERED AS AN INVESTMENT COMPANY UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE 1940 ACT ); THE FUND IS OFFERED IN RELIANCE UPON AN EXCLUSION CONTAINED IN SECTION 3(C)(11) OF THE 1940 ACT. CONSEQUENTLY, INVESTORS WILL NOT BE AFFORDED THE PROTECTIONS OF THE 1940 ACT. INVESTMENTS IN THE FUND ARE NOT INSURED OR GUARANTEED BY ANY BANK, THE FDIC OR ANY OTHER GOVERNMENTAL ENTITY. THE FUND IS NOT A MUTUAL FUND. THE FUND IS A GROUP TRUST WITHIN THE MEANING OF INTERNAL REVENUE SERVICE REVENUE RULING , AS AMENDED. ALL COMMENTS ARE PRESENTED AS OF THE EFFECTIVE DATE OF 12/29/2010.

5 GENERAL INFORMATION The Kaiser Permanente Collective Investment Trust (the Trust ) is a trust established under the laws of the State of Maine pursuant to a Declaration of Trust dated December 29, 2010 (the Declaration of Trust ). The Declaration of Trust provides that the Trust may be comprised of one or more separate funds referred to as Funds, and each such Fund may be further sub-divided into one or more Classes. The KP Stable Income Fund (the Fund ) is one fund of the Trust. The Fund was established by Global Trust Company ( GTC ), the Trustee of the Trust, which is a wholly owned subsidiary of Northeast Retirement Services, Inc. of Woburn, Massachusetts. GTC is organized as a Maine state-chartered non-depository trust company and, as such, it and the Fund operate in conformity with the rules and regulations of the Maine Department of Banking as they apply to collective investment of fiduciary funds. As of the effective date, Callan Associates, Inc. is the Fund s investment advisor (the Advisor ). The Fund s sub-advisor is the Standish Mellon Asset Management Company. INVESTMENT OBJECTIVE The KP Stable Income Fund seeks to preserve capital while generating a stable income stream comparable to the returns of short-term U.S. fixed income securities. MAIN INVESTMENT STRATEGIES The Fund s sub-advisor manages a diversified portfolio composed of high-quality fixed-income securities; guaranteed investment contracts ( GICs ) with credit-worthy insurance companies that are intended to smooth market volatility; and short-term money market instruments. The principal and interest from these investments is strategically reinvested with the goal of producing a stable income stream, while maintaining a stable share value of $1. No assurances can be made that the Fund will achieve its investment goals. Although the Fund s sub-advisor selects only highly rated investments for the fund, the contracts held by the fund are not guaranteed by the U.S. government, the trustee, the sub-advisors or the plan record-keeper. INVESTMENT STRUCTURE AND POLICIES In order to provide adequate liquidity, the fund has adopted a tiered liquidity structure designed to facilitate benefit responsive withdrawals by participants. In addition the Fund purchases certain Benefit Responsive Wrap Agreements from financial institutions which are designed to provide relief from market volatility. The Fund, either directly or through its purchase of alternative investment contracts, including various forms of GICs, typically invests in the following: Fixed or floating rate obligations of U.S. and foreign issuers U.S. Government, U.S. Agency and Government Sponsored Entity (GSE) debt Mortgage-backed securities (MBS) Corporate debt Asset-backed securities (ABS) Commercial Mortgage-Backed Securities (CMBS) Stable Value Pooled Funds Short Term Liquid Assets

6 PORTFOLIO RESTRICTIONS The Fund generally follows these restrictions: Maximum Sector Allocation US Treasury Securities 100% Government Sponsored Agency Securities 50% Asset-Backed Securities 50% Agency Mortgage-Backed Securities 50% Commercial Mortgage-Backed Securities 35% Investment Grade Corporate Securities 35% Short-Term Investments 25% Separate Account Guaranteed Investment Contracts 30% Traditional Guaranteed Investment Contracts 20% Stable Value Pooled Funds 10% Non-Dollar Denominated Securities 2.5% Non-Investment Grade Debt Securities 2.5% MAIN RISKS OF INVESTING A stable Value Fund is generally designed as a low risk investment, but you could still lose money by investing in it. The primary risks of investing in the Fund are: Credit Risk There is a chance that an issuer will fail to pay interest and principal in a timely manner. The Fund risks possible loss of principal if the issuer is unable to pay on or before maturity. Income Risk There is a chance that the Fund s income will decline as a result of falling interest rates. Because the Fund s yield is influenced by average interest rates over a period of several years, the Fund s yield may remain below current market yields for prolonged periods of rising interest rates. In periods when interest rates are declining, the yield of the Fund may temporarily exceed the yield of comparable investments. Such higher yield could cause increased investments in the Fund, which at then current market yields could reduce the Fund s yield to existing participants in the Fund. Inflation Risk There is a chance that the Fund returns will not keep pace with the cost of living. Fixed income funds typically won t keep pace with inflation during periods of rising inflation. Interest Rate Risk There is a chance that the Fund s price per share could decline as a result of rising interest rates, resulting in losses on investments made in the Fund. The Fund attempts to minimize this risk through investment contracts which enable the Fund, under present accounting standards, to value its assets at book value.

7 Alternative Investment Risk GICs and Wrap Agreements are general obligations of the issuing financial company. If the issuing company defaults, remedies generally available to creditors may be available to the Fund. However, applicable insurance and bank regulations could adversely impact the available remedies. In some instances contract payments could be limited or delayed. In order to mitigate this risk the Fund carefully screens issuers for credit risk, but there is no guarantee that the credit rating of a given issuer will remain stable for the duration of the contract. If a contract issuer s credit rating declines, there is no assurance that a replacement will be readily available. In the case of a default or the inability of the Fund to secure a replacement contract, the Fund may be unable to achieve its goal of maintaining a stable book value per unit. GICs and Wrap Agreements can be illiquid investments. Accordingly the Fund s governing instrument sets forth certain restrictions and conditions that may apply to withdrawals from the Fund. These conditions and restrictions are discussed below. WITHDRAWALS The Fund is designed to be benefit responsive, meaning that it attempts to promptly pay at book value all participant withdrawal requests within the terms of the Withdrawal Protocols. Book value is generally the full value of a participant s contributions plus accrued interest at the Gross Crediting Rate. Typical benefit responsive requests include participant death, retirement, disability, loans, termination of employment, involuntary lay- offs and distributions pursuant to qualified domestic relations orders. Participating Plan directed withdrawals and Deemed Participating Plan directed withdrawals can be delayed by the Trustee for up to 12 months. For instance, the addition of a competing fund to the plan will cause subsequent transfers to such competing fund to be considered a Deemed Participating Plan withdrawal. See the governing trust document for additional details. TAX DISCLOSURE The following is a summary of the material U.S. federal income tax considerations that may be relevant to an investor in the Trust. Because the tax consequences of an investment in the Trust will vary from investor to investor, investors should conduct their own tax analysis. Any discussion of U.S. federal tax issues set forth in this Offering Memorandum is written in connection with the actions described in this Offering Memorandum. Such discussion is not intended to be legal or tax advice to any person and is not intended or written to be used, and it cannot be used, by any person for the purpose of avoiding any U.S. federal tax penalties that may be imposed on such person. Each investor should seek advice based on its particular circumstances from an independent tax advisor. TAX STATUS OF THE TRUST The Trust takes the position that based on Revenue Ruling , it constitutes a group trust exempt from U.S. federal income taxation under Section 501(a) of the Code. This Offering Memorandum assumes that the intended tax characterization is correct. ELIGIBLE PARTICIPATING PLANS The Fund is exempt from registration with the Securities and Exchange Commission. In order to preserve the exemption, the Fund may only accept assets of Kaiser Participating Plans that are exempt from federal income taxation under Section 501(a) of the Code by reason of qualifying under Section 401(a) of the Code. A properly executed Participation Agreement must be received by the Trustee prior to the Participating Plan s initial investment. The Fund does not accept investments from individual retirement accounts (IRAs) or 403(b) plans.

8 VALUATION OF UNITS The value of each Unit is determined generally by subtracting total liabilities from total assets (after certain expenses are deducted as provided in the Declaration of Trust) and dividing the remainder by the number of Units outstanding. The Fund s assets will generally be valued at fair value as determined in good faith by the Trustee in accordance with the valuation procedures set forth in the Declaration of Trust. The Fund seeks to maintain the desired per unit value at $1.00 and the Fund will from time to time establish a gross crediting rate and will determine fair market and book valuation based on its standard valuation procedures. THE TRUSTEE The Trustee of the Fund is Global Trust Company, a Maine non-depository trust company. The Trustee is responsible for the management of the Fund, including the custody of Fund assets. The Trustee has ultimate discretion over the Fund and maintains substantial investment responsibility over the overall investment management of the Fund. Among other things, the Trustee has the power to: (i) sell, exchange, convey or transfer or otherwise dispose of any property, whether real or personal, the Trustee holds under the Trust, by private contract or at public auction (ii) invest and reinvest the assets of the Trust in any deposit account, contract, property or securities, to the extent permitted by applicable law, subject to the investment limitations of the Fund as established from time to time, and (iii) retain in cash, without liability for interest, such amounts as the Trustee considers reasonable under the circumstances, pending the selection and purchase of investments, the payment of expenses and fees or other anticipated distributions. The Trustee will, among other things, approve the Advisor s or Sub-Advisor s recommendations to invest the Fund s assets in accordance with the Fund s investment policies and may in its own discretion accept or reject any unauthorized investment transactions recommended by the Advisor or Sub-Advisor. The Trustee is also responsible for the administration of the Trust, including (i) the rendering of statements; (ii) the provision of certain accounting and recordkeeping services; and (iii) the valuation of Fund securities. INVESTMENT ADVISOR TO THE TRUSTEE To assist in the management of the Fund, the Trustee has retained Callan Associates, Inc. as its investment advisor. The Trustee has also retained Standish Mellon Asset Management Company as sub-advisor of the Fund. The Advisor and Sub-Advisor are registered as investment advisers under the Investment Advisers Act of 1940, as amended. The compensation of the Advisor and Sub-Advisor is paid from the assets of the Fund at the direction of the Trustee. CUSTODIAN The Trustee has retained State Street Bank to provide custody and accounting services to the Trust. State Street Bank is a State-chartered trust company with a principal place of business in Boston. FEES AND EXPENSES The current estimated Annual Fee for the Fund is.34%. The Annual Fee for the Fund represents an estimate of the total annual expenses required to operate the Fund expressed as a percentage of Fund assets. It includes Trustee, investment management, audit, transfer agency, record keeping and custodian fees. The Annual fee is accrued at a daily rate, based on the appraised market value of the account, as provided under the Declaration of Trust, including accrued interest and dividends. The Annual Fee does not include special fees and expenses chargeable either to a Participating Plan or the Fund.

9 PERFORMANCE DATA Performance Data for the Fund is available on your statement or any available Fact Sheets. It may also be made available to you through a specifically designated secure web-site. The Fund s total return fluctuates as a result of numerous factors. The historical total returns are not necessarily representative of the Fund s future performance. The investment strategy performance is compared to the Lipper Money Market Average, the 90 day Treasury Bill Index and the Callan Stable Value Fund Universe. No assurances can be made that the Fund will achieve its investment goals or outperform any benchmarks. ESTABLISHING AN ACCOUNT To establish an account in the Fund, a Participating Plan should complete the Participation Agreement and information form provided by the Advisor. Trustee Global Trust Company 12 Gill Street, suite 2600 Woburn, MA Investment Advisor Callan Associates, Inc. 600 Montgomery Street, Suite 800 San Francisco, CA Sub-Advisor Standish Mellon Asset Management Company 100 Pine Street, 32 nd floor San Francisco, CA 94111