PRINCIPAL LIFETIME HYBRID COLLECTIVE INVESTMENT FUNDS DISCLOSURE DOCUMENT

Transcription

1 PRINCIPAL LIFETIME HYBRID COLLECTIVE INVESTMENT FUNDS DISCLOSURE DOCUMENT Information provided in this summary is as of October 3, This summary includes key information about the Collective Investment Funds 1 (each a Fund or collectively, the Funds ). This Fund description is merely a summary of, and should be read in conjunction with, the Declaration of Trust, prospectus for Funds, Inc. and the applicable Fact Sheet for each Fund. The Funds are part of a collective investment trust for which Global Investors Trust Company ( PGI Trust Company ) acts as Trustee pursuant to the Declaration of Trust, and are only available to certain retirement plans and their individual participants. PGI Trust Company has retained Global Investors, LLC ( PGI ) as the investment advisor with respect to the Funds. PGI is an affiliate of PGI Trust Company. The Fund is not a registered investment company, but the collective investment trust is regulated under the state of Oregon banking law. The Funds are designed to meet the needs of a plan participant that wants an investment option suited to the participant's particular investment time horizon and that tends to be more accepting of risk in the early years of his or her time horizon and becomes more risk-averse as he or she nears the investment goal (for example, retirement). The Funds are managed to align, over time, underlying investments with the changing risk tolerance of the associated investment time horizon. These Funds are sometimes referred as target date funds. The target date Funds offered are: Income CIT; 2010 CIT; 2015 CIT; 2020 CIT; 2025 CIT; 2030 CIT; 2035 CIT; 2040 CIT; 2045 CIT; 2050 CIT; 2055 CIT; 2060 CIT; and 2065 CIT. Objective: The investment objective of the Income CIT is to seek current income and, as a secondary objective, capital appreciation. The investment objective of each of the other CITs is to seek a total return consisting of long-term growth of capital and current income consistent with the investment strategy of an investor who expects to retire in the year identified in each respective Fund s name. Main Strategies and Risks To pursue its goal, each Fund generally invests in other open-ended mutual funds, insurance company separate accounts and collective trust funds that PGI Trust Company considers appropriate based on the remaining time horizon of a particular Fund and the expected risk tolerance of those investors associated with that time horizon. The underlying selection of investment options provides each Fund with exposure to a broad range of asset classes, which may include but are not limited to: domestic and foreign equity, investment grade and non-investment grade fixed-income, preferred securities, Treasury Inflation Protected Securities (TIPS), Real Estate Investment trusts (REITS), diversified real assets, direct real estate investments, derivatives, and fund-of-hedge fund vehicles. The Funds contain a mix of capital appreciation and capital preservation. In the case of Income CIT, the assets are invested in underlying investment options which are also intended to provide income, growth, and inflation protection. An important element of the Funds investment philosophy is the utilization of large passive or index investment option allocations within the key domestic equity and fixed income asset classes. The Funds all embody an investment philosophy based on the notion that the US equity and fixed income markets are relatively efficient and the ability to earn excess returns (or alpha ) in these markets is difficult. Furthermore, a Fund s active risk budget may be better spent investing in less efficient asset classes such as international equity, global emerging markets, REITS, diversified real assets, high yield bonds, preferred securities, and hedge funds where the probabilities of earning excess returns are greater. The Funds market or beta 1 The Collective Investment Funds were formerly known as the Trust Target Date Collective Investment Funds. Effective January 1, 2017, Global Investors Trust Company succeeded Delaware Charter Guarantee & Trust Company (d/b/a Trust Company) as trustee of the Funds.

2 exposure in the US equity asset class is gained by investing in a capitalization-weighted combination of the S&P 500, 400, and 600 Indexes. The fixed income beta exposure is gained by investing in an unaffiliated Barclays Aggregate Bond Index strategy. These passive core allocations are expected to reduce the relative volatility of investment performance of the Funds. The Funds reflect a passive rebalancing strategy based on pre-defined asset class targets and suitable target ranges. PGI advises PGI Trust Company with respect to the percentage of Fund assets to be allocated to a particular asset class, the selection of the underlying investment options for each asset class and the target weights for each underlying investment option. Shifts in asset class targets or underlying investment options may occur in response to the normal evaluative processes of PGI, the shortening time horizon of a Fund, market forces, or Fund circumstances which indicate that changes in allocations may be appropriate. PGI Trust Company may, at any time, add, remove, or substitute underlying investment options in which a Fund invests. In recommending underlying investment options and target weights, PGI considers, among other things, quantitative measures, such as past performance, expected levels of risk and returns, expense levels, diversification of existing funds, and style consistency. In addition, qualitative factors such as organizational stability, investment experience, consistency of investment process, risk management processes, and information, trading, and compliance systems of the underlying investment option s sub-advisor are also evaluated. There are no minimum or maximum percentages of assets that a Fund must invest in a specific asset class or underlying investment options. PGI Trust Company determines whether to use cash flows or asset transfers or both to achieve the target weights established from time to time for underlying investment options. As each Fund approaches its target date, the investment mix becomes more conservative by increasing exposure to generally more conservative investment options and reducing exposure to typically more aggressive investment options. The asset allocation for each Fund is regularly re-adjusted within a time frame that extends years beyond the target date, at which point it reaches its most conservative allocation. The Funds assume the value of an investor s account will be withdrawn gradually during retirement. At that time, the Fund may be combined with the PGI Trust Company Income Fund if PGI Trust Company determines that the combination is in the best interests of a Fund and its investors. Neither the principal nor the underlying assets of the Funds are guaranteed at any time, including the target date. Investment risk remains at all times. There can be no assurance that any Fund will achieve its investment objective. The net asset value of each Fund s shares is affected by changes in the value of the securities it owns. Each Fund s performance is directly related to the performance of the underlying investment options. The ability of each Fund to meet its investment objective depends on the ability of the underlying investment options to achieve their investment objectives. The Funds are designed as "buy and hold" investments. The broad diversification of each Fund is designed to cushion severe losses in any one investment sector and moderate a Fund s overall price swings. However, a Fund s share prices will fluctuate as the prices of the underlying investment options rise or fall with changing market conditions. As with all investment options, as the values of a Fund s assets rise or fall, the Fund s share price changes. If you sell shares when their value is less than the price you paid, you will lose money. Each Fund is subject to the particular risks of the underlying investment options in the proportions in which the Fund invests in them. The principal risks of investing in a Fund that are inherent because the Fund invests in open-ended mutual funds, insurance company separate accounts and other collective investment trusts, in alphabetical order, are: Asset Allocation Risk Conflict of Interest Risk Fund of Funds Risk Target Date Fund Risk There are also principal risks of investing in the Fund that are inherent in the underlying funds. Definitions for each of the principal risks, in alphabetical order, are below in the Risk Definition section.

3 While all of the risks defined below apply to each Fund, the greater the investment by each Fund in investment options that invest primarily in stocks, the greater the potential exposure to the following risks: Equity Security Risk Growth Stock Risk Value Stock Risk The greater the investment by each Fund in investment options that invest primarily in bonds or other forms of fixed-income securities, the greater the potential exposure to certain risks, including: Fixed-Income Securities Risk Portfolio Duration Risk Securitized Products Risk U.S. Government Securities Risk U.S. Government Sponsored Securities Risk The greater the investment by each Fund in investment options that invest in foreign investments, the greater the potential exposure to certain risks, including: Foreign Currency Risk Derivatives Risk Emerging Markets Risk Foreign Securities Risk Risk Definition: The principal risks of investing in a Fund that are inherent because the Fund invests in open-ended mutual funds, insurance company separate accounts and other collective investment trusts, in alphabetical order, are: Asset Allocation Risk A fund's selection and weighting of asset classes may cause it to underperform other funds with a similar investment objective. Conflict of Interest Risk PGI may serve in the same or similar capacity for the underlying investment options. Conflicts may arise as PGI seeks to fulfill its responsibilities to the Funds and the underlying investment options. Because PGI Trust Company, PGI, and their affiliated companies may earn different fees from the underlying investment options in which the Funds invest, there may be a conflict between the interests of the Funds and the economic interests of PGI Trust Company and its affiliates. Generally, ERISA requires that these conflicts be disclosed to and approved by the plan fiduciary who selects the Funds as investments for the plan. Fund of Funds Risk. The performance and risks of a fund of funds directly correspond to the performance and risks of the underlying funds in which the fund invests. Fund shareholders bear indirectly their proportionate share of the expenses of underlying funds in which the Fund invests. Target Date Fund Risk A target date fund should not be selected based solely on age or retirement date because there is no guarantee that this fund will provide adequate income at or through retirement. The principal risks of investing in the Fund that are inherent in the underlying funds, in alphabetical order, are: Counterparty Risk Counterparty risk is the risk that the counterparty to a contract or other obligation will be unable or unwilling to honor its obligations. Derivatives Risk

4 Derivatives may not move in the direction anticipated by the portfolio manager. Transactions in derivatives may increase volatility, cause the liquidation of portfolio positions when not advantageous to do so and result in disproportionate losses that may be substantially greater than a fund's initial investment. Futures. Futures involve specific risks, including: the imperfect correlation between the change in market value of the instruments held by the fund and the price of the future; possible lack of a liquid secondary market for a future and the resulting inability to close a future when desired; counterparty risk; and if the fund has insufficient cash, it may have to sell securities from its portfolio to meet daily variation margin requirements. Emerging Markets Risk Investments in emerging market countries may have more risk than those in developed market countries because the emerging markets are less developed and more illiquid. Emerging market countries can also be subject to increased social, economic, regulatory, and political uncertainties and can be extremely volatile. Equity Securities Risk The value of equity securities could decline if the issuer's financial condition declines or in response to overall market and economic conditions. A fund's principal market segment(s), such as a large cap, mid cap or small cap stocks, or growth or value stocks, may underperform other market segments or the equity markets as a whole. Growth Stock Risk. If growth companies do not increase their earnings at a rate expected by investors, the market price of the stock may decline significantly, even if earnings show an absolute increase. Growth company stocks also typically lack the dividend yield that can lessen price declines in market downturns. Small and Medium Market Capitalization Companies. Investments in smaller companies and midsize companies may involve greater risk and price volatility than investment in larger, more mature companies. Value Stock Risk. Value stocks may continue to be undervalued by the market for extended periods, including the entire period during which the stock is held by a fund, or the events that the portfolio manager believed would cause the stock price to increase may not occur as anticipated or at all. Moreover, a stock judged to be undervalued actually may be appropriately priced at a low level. Fixed-Income Securities Risk Fixed-income securities are subject to interest rate risk and credit quality risk. The market value of fixedincome securities generally declines when interest rates rise, and an issuer of fixed-income securities could default on its payment obligations. Foreign Currency Risk Risks of investing in securities denominated in, or that trade in, foreign (non-u.s.) currencies include changes in foreign exchange rates and foreign exchange restrictions. Foreign Securities Risk The risks of foreign securities include loss of value as a result of: political or economic instability; nationalization, expropriation or confiscatory taxation; settlement delays; and limited government regulation (including less stringent reporting, accounting, and disclosure standards than are required of U.S. companies). Index Fund Investment Risk More likely than not, an index fund will underperform the index due to cash flows and the fees and expenses of the fund. The correlation between fund performance and index performance may also be affected by changes in securities markets, changes in the composition of the index and the timing of purchases and sales of fund shares. Portfolio Duration Risk Portfolio duration is a measure of the expected life of a fixed-income security and its sensitivity to changes in interest rates. The longer a fund's average portfolio duration, the more sensitive the fund will be to changes in interest rates. Real Estate Securities Risk

5 Real estate securities are subject to the risks associated with direct ownership of real estate, including declines in value, adverse economic conditions, increases in expenses, regulatory changes and environmental problems. Investing in securities of companies in the real estate industry, subjects a fund to the special risks associated with the real estate market including factors such as loss to casualty or condemnation, changes in real estate values, property taxes, interest rates, cash flow of underlying real estate assets, occupancy rates, government regulations affecting zoning, land use and rents, and the management skill and creditworthiness of the issuer. Redemption Risk. A fund that serves as an underlying fund for a fund of funds is subject to certain risks. When a fund of funds reallocates or rebalances its investments, an underlying fund may experience relatively large redemptions or investments. These transactions may cause the underlying fund to sell portfolio securities to meet such redemptions, or to invest cash from such investments, at times it would not otherwise do so, and may as a result increase transaction costs and adversely affect underlying fund performance. Securitized Products Risk. Unscheduled prepayments on mortgage-backed and asset-backed securities may have to be reinvested at lower rates. A reduction in prepayments may increase the effective maturities of these securities, exposing them to the risk of decline in market value over time (extension risk). U.S. Government Securities Risk Yields available from U.S. government securities are generally lower than yields from many other fixed-income securities. U.S. Government Sponsored Securities Risk Securities issued by U.S. government-sponsored or -chartered enterprises such as the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Federal Home Loan Banks are not issued or guaranteed by the U.S. Treasury.

6 Underlying Investment Options The allocation of the Funds assets in underlying investment options as of March 31, 2017 is shown in the table below. PRINCIPAL LIFETIME HYBRID CITS Underlying Investment Option Income CIT 2010 CIT 2015 CIT 2020 CIT 2025 CIT 2030 CIT 2035 CIT 2040 CIT 2045 CIT 2050 CIT 2055 CIT 2060 CIT 2065 CIT S&P 500 Sep. Acct. S&P 400 Sep. Acct. S&P 600 Sep. Acct. Diversified International Fund Intl. SmallCap Sep. Acct. Intl. Emerging Markets Fund Origin Emerging Markets Fund Inflation Protection Fund Bond Market Index Sep. Acct. Diversified Real Asset CIT Global Real Estate Securities Fund High Yield I Fund Global Diversified Income Fund Short-Term Income Fund 10.48% 16.72% 21.34% 26.24% 30.37% 33.97% 37.07% 39.68% 41.81% 43.38% 44.45% 44.69% 41.45%* 2.95% 4.78% 6.23% 7.40% 8.69% 9.42% 10.43% 11.08% 11.63% 12.14% 12.38% 12.52% 11.50%* 1.31% 1.96% 2.49% 3.01% 3.45% 3.82% 4.14% 4.42% 4.64% 4.92% 5.03% 5.12% 4.60%* 5.52% 9.06% 10.99% 13.63% 15.83% 17.13% 17.73% 18.84% 19.76% 20.93% 21.22% 21.42% 25.00%* 0.85% 1.36% 1.70% 1.94% 2.27% 2.45% 2.63% 2.76% 2.89% 2.98% 3.03% 3.05% 3.65%* 0.49% 1.12% 1.17% 1.22% 1.20% 1.17% 1.30% 1.15%* 0.48% 1.11% 1.20% 1.24% 1.22% 1.22% 1.27% 1.15%* 7.64% 6.13% 4.74% 3.46% 2.55% 1.98% 40.41% 32.59% 31.25% 28.28% 25.87% 21.48% 18.04% 13.50% 10.30% 6.71% 4.98% 4.05% 4.50%* 2.49% 2.47% 2.44% 2.42% 2.40% 2.38% 2.36% 2.35% 2.34% 2.34% 2.37% 2.50%* 0.95% 1.34% 1.57% 1.78% 1.99% 2.21% 2.24% 2.25% 2.28% 2.50%* 3.57% 2.99% 1.94% 1.93% 1.93% 1.93% 2.00%* 9.69% 8.95% 7.84% 6.76% 5.70% 4.43% 21.13% 15.98% 10.97% 5.89% 1.50% 0.39% *Allocations for the 2065 CIT are pre-launch estimates. The final allocation will be determined at time of launch. Performance Performance information for the Funds is available on the Performance, Rates & Values page at or through another site in accordance with written notification provided to the Authorizing Fiduciary. Multiple share classes are available with varying fees. Reports At least quarterly, an unaudited report of the performance of the Fund and a statement of its capital account will be provided on the Performance, Rates & Values page at or through another site in accordance with written notification provided to the Authorizing Fiduciary. Each plan will also receive annual tax information and audited financial statements. The Trustee will file annual reports of the Fund (Form 5500) with the Department of Labor and will take commercially reasonable steps to assist plans with their participant disclosure obligations. Investment Advisor Through the Investment Advisory Agreement with PGI Trust Company, PGI provides investment advisory services with respect to the Funds, subject to the Trustee s supervision and review. Futures Disclosure The Funds are operated by PGI Trust Company, which has claimed an exclusion from the definition of the term commodity pool operator under the Commodity Exchange Act (the Act ) and, therefore, is not subject to registration or regulation as a pool operator under the Act. Investments in Collective Investment Funds are not bank deposits, are not FDIC insured, are not insured by any federal government agency, are not guaranteed by the Trustee or any affiliate, and may be subject to investment risk, including possible loss of value.